There are many challenges London VCs face when looking to invest away from the capital which makes it harder for them to do so.
Julian Carter is founding partner and managing director of venture capital firm EC1 Capital in London, which has invested in 18 businesses.
When he began the fund in 2012, he did decide to venture out of London, he told 老九品茶Cloud, visiting Manchester, Cambridge and Dublin.
鈥淚 realised there were probably nuggets across the country that could be found, but I found that the thing about being a VC model is that it doesn鈥檛 scale very well,鈥� he said.
鈥淲e鈥檝e a set amount of fees we can charge on the assets and management so we can only hire a certain amount of people.
鈥淚f we鈥檝e got partners, senior people, going to Leeds, Manchester, Edinburgh, trying to find deals it鈥檚 much harder to do that.鈥�
Problems also arise in the way VCs work, typically relying on contacts to pass them leads, which can be difficult if you don鈥檛 have links in a particular area.
鈥淭o try and find companies that are geographically dispersed where you don鈥檛 have a strong local network is difficult,鈥� he said.
鈥淎 lot of series A investors get deals from seed investors and so on. I can see how people think VCs won鈥檛 get on the train but it鈥檚 much harder to discover these companies, especially when you can do back-to-back sittings in London all day long.
鈥淚 think also as well with entrepreneurs, we鈥檙e trying to find people who are happy to go out of their comfort zone and get on the train themselves.鈥�
While he says businesses should not be afraid to come to London, he has no problem with them then continuing to be based elsewhere, especially because the costs are lower.
鈥淟ocal angel groups often have things pretty tied up,鈥� he said. 鈥淭here鈥檚 no other funding for these entrepreneurs to go to.
鈥淭hey go to a limited set of angel investors who often have harsher terms than normal. Na茂ve funders may be taking terms that may not be what they would get in London.鈥�
Though EC1 has done deals outside of London, including in Newcastle and Glasgow, these businesses usually have London offices and co-working space, meaning they are on hand to meet with investors.
鈥淚 think investors do like to sit in front of funders in board meetings and like to see them frequently for coffee,鈥� he said.
鈥淥ften you get more information that way. You also find that having companies closer to each other creates a network effect between the portfolio.
鈥淚nvestors like to be in front of people and not do virtual Skype calls. If you want money you get on that train and go to pitch to people in London.鈥�
The founders of used car search website Carsnip attended about 100 meetings in 18 months to raise the funding they needed – $100,000 of which was secured over the phone from a US investor – but not a penny came from London.
Pedro Madeira, head of research at Beauhurst, says that investors prefer London-based聽tech firms so they can keep an eye on the founders.
However London is not the bed of roses for tech investment that many people think it is, according to the chief executive of the Manchester Tech Trust.
There are some fantastic investment opportunities for South East VCs in the Northern Powerhouse, according to Philip Hargreaves, head of Access to Finance.
Hampshire-based Morgan Innovation and Technology began investing in medtech companies outside London after encountering funding issues for its own products.
And Leeds-based marketing automation business Force24 resorted to more traditional funding methods after failing to gain funding from VCs with a London bias.