The UK鈥檚 post-COVID-19 recovery will be driven by the nation鈥檚 agile technology companies and founders.听
That was the view at听叠耻蝉颈苍别蝉蝉颁濒辞耻诲鈥檚听recent virtual event on the post-lockdown funding landscape.听
Jenny Tooth OBE听is CEO of the UK 老九品茶 Angels Association, which听represents 18,000 investors including angel networks, syndicates and individual investors, among others, and is crucial to the funding cycle for early-stage start-ups finding their way.听
鈥淎ngels are experienced people and can offer strategic advice and help: it’s a huge supply chain听for听Series A听investment,鈥� she told the audience.听鈥泪t provides听vital information support as well as money.听听
鈥淢ost angels听have a听decent–sized portfolio and have been really focusing on those businesses听rather than new investments as听they’ve already invested money,听time听and听energy on those businesses.听听
鈥�They听have been really rolling their sleeves up听to听help those businesses: how听can they continue to acquire customers? Can they听still keep听that visibility in the market? How can they continue to hit growth milestones while听reducing costs where necessary?听
鈥淭hey have听also听given听them听extra cash,听helping them have听a听longer runway until the听next piece of funding comes along.听So many of them have been there and done it and survived听past听crises.鈥�听听
Watch a rerun of the event below
Tooth believes that technology firms are in a better place than others in traditional sectors.听听
鈥淪ome amazing solutions and innovations have come forward during this time,鈥� she added. 鈥淲e’ve seen everything from healthcare through to HR, skills, education, transport, logistics;听and also听new deep tech and data.听听
鈥泪 think those businesses will be seen by the angels as very attractive going forward and being able to serve a post-COVID kind of economic recovery.鈥�听
Tooth has been meeting with the UK government to advise on how to help build a successful post-pandemic funding pipeline.听She says听entrepreneurs outside the 鈥楪olden Triangle鈥� of London, Oxford and Cambridge have faced the greatest challenge in recent months.听
鈥淭he capacity听for听investing in tech is very concentrated in London听and听the听South听East听鈥撎�it‘s still more than 65%,鈥� she said. 鈥�Many of the听businesses outside the 鈥楪olden Triangle鈥�听also didn’t meet the criteria, for example, for听鈥�future funding鈥�, because they didn’t have听the听拢250k equity already raised.听
鈥淭here are fantastic entrepreneurial opportunities, particularly tech businesses, for investors in the North. That’s a very big focus of my work with government and the British 老九品茶 Bank.听听
鈥淭here’s huge potential for our industry to make an impact – and I see building angel capacity as key to this as well.听Entrepreneurs in the regions haven’t got to get on the train to come down to London [any longer].听
鈥�Women have also been bringing forward the most tremendous innovations during COVID. They are very flexible, very adaptable, very resilient, very multitasking听鈥撎�and听I听actually think听those are going to be fantastic qualities that we’ll be looking for.听
鈥泪’m incredibly keen that we can change that landscape, helping women get their fair share of money.鈥�听
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Hugh Campbell (above)听is co-founder of听GP Bullhound,听a leading provider of transaction advice and capital to tech entrepreneurs around the world听which has just announced a fresh 鈧�125m fund to accelerate growth-stage businesses in the software industry.听
Headquartered in the UK with nine global offices,听its current investments include Klarna, Believe,听Revolut, Unity,听HackerOne, Glovo,听RavenPack听and Interactive Investor, while听recent exits include Spotify, Slack,听LeoVegas听and Quixel.听
鈥�The UK remains the top destination for capital and for buyers across all of Europe.听I don’t think that’s changing anytime soon, whether it’s to do with the pandemic or Brexit,鈥� said Campbell.听听听
鈥�We’ve got this fantastic research base, both within larger organisations, but also across the universities that are continually pumping out innovative new ideas.听We’ve听also听got a very established financial investor ladder, all the way from angels and the tax breaks all the way through to private equity, and of course, the public markets with the London Stock Exchange.鈥�听
Fast-growing听language app听Busuu, based in London and with more than 100 million users worldwide, is one of the investments announced by GP Bullhound during lockdown.听
However听Campbell said being unable to meet founders face-to-face has been tricky.听
鈥�[In normal times] we might typically听have a Manchester team flying to Berlin to help make an investment, or听a Berlin team听flying to听Paris, so it’s been very challenging to really get that sense of opportunity听and听the real human side听of听the businesses,鈥� he said.听鈥�The investments we have made are with founders we听met pre–lockdown.听听
鈥�The most successful technology companies in the UK have been businesses reaching out across the world听and听growing internationally听– and听[coronavirus]听has been听a real throttle on that sort of expansion.鈥�听
On what his firm would be looking for as lockdown is eased and beyond, he said:听“We’re听focused on businesses that are benefiting from lockdown, if that’s the politically correct way of saying it:听EdTech, digital health听鈥撎�particularly听nutrition听鈥� and听businesses associated with home networking听such as听data warehousing听and听the cloud.听
鈥淲e鈥檙e also keen on听short–term trading. We听want to know听not how听a business听traded last year;听not how they traded in January;听not how they traded in February;听but how they traded in April, May and last week.听That’s听absolutely critical.听
鈥淭he more听companies听hold that information back, the more difficult it will be to extract money from investors.鈥�听
Both听Tooth and Campbell advised start-up founders to be realistic about the funding听amounts they are听seeking.听Meanwhile听the picture painted by听Henry听Whorwood (below), Head of Research & Consultancy听at听Beauhurst,听was not entirely bleak.听
Beauhurst听is a database of the UK’s high-growth companies.听Its听weekly reports on the impact of COVID-19 on tech investment听are seen听as听a听good barometer of the health of the overall start-up and scale-up ecosystem.听
鈥淲e look at every single equity investment that private companies in the UK receive听–听from the first 拢10k raised from friends and family through to 拢100m growth rounds they might do 10 years later. It shows the appetite of investors for UK private companies as an asset class,鈥� he explained.听
鈥淭hings are not as bad as they could have been. The amount invested has been听about half compared to the same time period in 2019, while听we’ve seen a fall of about 30% in the number of deals done. That is ultimately pretty good, given the overhaul of everything across the economy during lockdown.听听
鈥�However听some of that is due to existing momentum in the pipeline of deals which were already being discussed just as we went into lockdown. There are fewer deals being done which began when the investor met the company virtually during lockdown 鈥� so we could see that momentum fall away.鈥�听
He says first–time rounds听into early-stage start-ups听– as opposed to follow-on 鈥榬unway鈥� funding –听have听fallen more steeply.听
鈥淭he deals that are happening are very much听鈥�wait and see鈥� –听small amounts to tide听these companies over.听So that gives听some听optimism听that听there is still that pipeline being nurtured听so听they can听then hopefully, as we approach normality, get听more investment.听听
鈥泪f they don’t, there will be a much larger problem further down the line for professional investors and, and ultimately, for all of us.鈥�听
So how does the current crisis compare with the deflation of the 鈥榙otcom bubble鈥� around 2000 and the post-2007 recession?听
鈥淭his economic crisis is not a normal one,鈥� said听Whorwood.听鈥�It’s not comparable to the听financial crisis or the dotcom bubble bursting because it’s deliberately induced and has a purpose.听听
鈥�All the levers that have been applied to听’cause‘ this economic crisis can be relieved at once听so,听in theory, it should be听a听V-shaped听recovery [where the economy bounces straight back].听
鈥�However听we don’t听really听know as we’ve never been in this听situation before: it’s not only about the legislation and the control, it’s about听how听consumer sentiment听rebounds听and things like that.鈥�听
Campbell added: 鈥�The key thing that I learned from the recession in 2000,听when we started our business,听and听the financial crisis in 2008 is that they do come to an end.听听
鈥淭he key is听to keep mentally strong and stay creative during these very challenging times.听Everybody has different ways of doing that.听But it is temporary.鈥�听