Issue #215: A new dawn for North East spinouts?
Today we talk about access to finance and share the news of expanded spinout support programmes to boost North East entrepreneurs
Morning all! It may be Friday 13th but fear not, dear reader, we’ve ditched the black cats and broken mirrors. Instead you’re in for a generous helping of pure, unadulterated, good ol’ North East tech news and views. Lucky you.
In all seriousness, I feel this week could be a potentially important one for our region’s tech scene. Our top story today covers how the North East’s universities have received £4.75m, from Durham County Council and North of Tyne Combined Authority through the UK Shared Prosperity Fund (UKSPF), to work together to help strengthen business in the region. The Innovating Together - Universities in the North East (In-TUNE) partnership will effectively expand the Northern Accelerator and Arrow programmes, which help commercialise academic research.
Speaking of Arrow and future ecosystem development, I’d like to big up Mr Justin Souter who has recently been appointed as a Senior Innovation Associate to support regional enterprise activity. Good luck in your new role, Justin!
Anyway yes, In-TUNE. Such further support must be welcomed, as I was reminded of difficult sector realities this week when British Business Bank released its 2023 Nations and Regions Tracker. I have included BBB’s regional press release (second story below) for context, which typically does draw out some positives from the report and data. Yet there’s much to address here, indeed not just regarding the tech sector but our regional economy as a whole. Analysis in The national spotlight section below for anyone interested in the North East access to finance plight.
Finally I will end today on a high as I want to give a shout out to Virtual Memory Box, shortlisted in the Tech for Good category in this year’s Prolific North awards. Originally launched by Nebula Labs as a solution for South Tyneside Council to save precious memories for young people in care, the VMB is now a limited company and is expanding to other councils across the country. Thanks to Sharon for flagging that one; good luck VMB!
Now as a Digest loyalist I can practically guarantee you are safe from any bad luck this weekend; though of course I take no responsibility for any injuries sustained from, say, walking under ladders or if any birds end up shitting on you. Let’s keep looking up, Jamie
This week’s news
£4.75m programme will see North East unis working together to support startups and entrepreneurs
Tyne and Wear innovation-led cluster boosts NE equity activity
'Driverless' public transport system explored as part of Northumberland development
North East businesses secure more than £6.4m to develop new electric vehicle tech
LeoVegas gaming company creates 50 new jobs at Newcastle base
Digital design agency accelerates growth plans with investment
Features
BBC hires director of product engineering and data (at Newcastle tech hub)
The national spotlight
Continuing the discussion: Equity investment and academic spinouts
As mentioned above, British Business Bank released its third annual Nations and Regions Tracker report this week. Within the UK-wide report, academic spinouts are cited as making a large contribution to equity activity. And coupled with our own regional news this week, ie more work to enhance North East spinouts (which often have a great degree/element of technology), there is much to be buoyed about in terms of an important layer of the tech sector being acknowledged and developed. Tyne and Wear was even mentioned in the report as an ‘emerging innovation-led cluster’. All good so far.
Yet it would be wrong of me to do a sexy, like-attracting LinkedIn post telling you it’s all good, baby baby. The data suggest otherwise. You see, it’s really bloody hard being a founder in this part of the world. Yes, I know we punch above our weight in many respects. That’s testament to the people and the region. It’s incredible. Yet we have a real problem when it comes to access to finance to help scale our technology (and indeed other) businesses.
Let’s take a look at Figure 1.6 from Page 21 of the report. I genuinely don’t mind too much that the number of our equity deals depleted by 15%, between 2021 and 2022. There’s not too much fluctuation there. Though the investment value percent change, I’d say, is worrying. 60% down on per cent change is the biggest drop of anywhere in the UK.
Now I don’t know for certain but I’d posit that the large drop may be because we had a big, rare (indeed uncharacteristic) raise, eg an Atom Bank round, and that distorted trajectory. I’ve seen it so many times over the years that one big raise masked real-term ecosystem activity, in turn negating our urgency to plan and act accordingly.
There is a clear and present danger for North East tech startups, spinouts and scaleups; there isn’t enough money available for them to grow and we must do more to responsibly address that. Right now I’m not sure if this issue has the same level of awareness or acknowledgement as, say, out access to talent/skills challenge does. This is where I think I can further my efforts; as ever, I will share what I am doing and finding in the coming months as I go.
I was doing some research earlier in the week and it is a clear fact, from a regional equality perspective, that the distribution of equity funding in the UK has worsened since Covid. The South of England claiming the vast majority (72%) of investments in 2022. The NE was in the bottom three regions, claiming only 2.88%. The North as a whole only claims 12-13%.
So while we may be an emerging innovation cluster - and we should absolutely champion that - let’s be real, let’s also remember that conditions are really bloody tough. Reality is biting. I’m under no illusions that our percentages can be that of the South East; though there is much room for improvement nonetheless. We need to fight for it.