It has been revealed recently that the UK needs to be better at funding tech start-ups if it is going to create successful digital and creative businesses. As part of the BBC’s tech talent coverage, it has been unveiled that the UK is ‘appalling bad’ at funding tech start-ups.
Neil Woodford, leading fund manager, has said that investors need to take a long term view when backing new technology start-ups in the UK. He went on to say; “We have been appallingly bad at giving those minnows the long-term capital they need,”
This latest investigation by the BBC will be looking at whether the UK is able to compete in the global technology industry. So far, the findings have suggested that the UK is a magnet for entrepreneurs, with a third coming from abroad. However, our small technology companies are not receiving the funding they require to grow.
According to Mr Woodford, and other funding managers, tech entrepreneurs from the UK are not managing to turn their promising starts into leading global companies. For a few years now, it has been argued that a digital skills shortage and difficulties raising finance have been to blame.
It seems that the latter is the most appropriate cause however, as tech entrepreneur and former advisor to David Cameron, Rohan Silva, has suggested. He blames the lack of funding available, which helps start-ups grow, as this is the most difficult to come by in the UK at the moment.
In contrast, the initial start-up money is quite readily available, as Silva told the BBC recently; “There we’ve really made a big difference in the UK. We’ve created the world’s most generous tax breaks for that kind of investment.”
Gaining the cash to help a business scale up is what is proving to be a big challenge. Although, businesses are getting off the ground, it is their growth which is stagnating, due to a lack of money available to fund their further development.
Woodford feels that UK investors are only thinking in the short term for these business so they do not seem able to support them fully. Rohan Silva feels that the government could have an important part to play; “There is a big role for government in providing a bunch of that funding, particularly when it comes to research in the laboratory and helping that go to market,”
However, others have argued the UK’s entrepreneur’s relief is to blame, as it gives a lower capital gains tax rate to directors when they sell their company. Whereas, others feel our universities aren’t being supportive enough to push innovations forward so the UK can have tech success the size of Apple, Yahoo and Google.
Whoever is to blame for the lack of funding affecting our tech start-ups, it is clear a lack of investment for these companies is what is really hurting them. The only way to help them succeed is to invest in them so our digital sector can grow the creativity available in the UK can blossom.
You can find out more about obtaining finance for small and medium sized businesses on our dedicated webpage.