How do you raise funding if your tech startup is not based in London?
London, fintech and money. They're three amigos aren't they?
A winning combo of location, sector and investment, affording the best exposure to startup capital and markets.
Right?
Not quite. Last year, more was invested in UK tech and fintech outside of London than anywhere else in Europe. And thousands of tech firms are finding competitive funding and startup costs outside the UK capital. But how much is being invested elsewhere?
£4.4 billion outside the Big Smoke to be precise
One fast-growing fintech that secured a valuable form of funding outwith London is Encompass Corporation, a company which is part of the £4.4 billion boom. It offers Know Your Customer (KYC) automation software for the banking, finance, legal and accountancy sectors. Comittted to RegTech, the firm is running a seminar on the new innovation, and will be speaking at the Business Information Industry Associate (BIIA) annual conference panel on RegTech this year.
Roger Carson, its co-founder, explains why other UK regions are a magnet for tech startups.
He enthuses: “The wealth of UK tech talent, generous incentives and tax breaks by the UK government, plus generous funding schemes from many UK cities have contributed to tech hubs emerging in Cambridge, Oxford, Scotland, Birmingham, Leeds, Glasgow, Cardiff and elsewhere.”
This, he believes, has contributed to making the UK an attractive proposition for tech and fintech startups and investors alike, with many delivering huge growth of M&A activity in the UK’s tech sector over the past few years. And this is now made even more possible thanks to the new specialist Royal Bank of Scotland Entrepreneurial Spark fintech hub in Edinburgh.
Likewise, the UK can prove the ideal launch pad for breaking into the North American market, the holy grail for any tech entrepreneur, he reasons.
But it’s not all a bed of roses, reckons Roger. He says: “The challenge is getting a tech or fintech startup off the ground in the first place. As someone who’s secured significant funding in Scotland, what advice would I give to tech startups looking to secure crucial investment outside of the M25? And what are the benefits of being located in other regions or along with London?”
It’s not just what you know, it’s where you go…
With the costs of setting up in London quite steep for many young companies, other cities are not only considerably competitive, but offer attractive financial incentives as well.
Roger adds: “The UK’s large number of university towns and cities enables startups to benefit from a well-educated workforce. For us, Glasgow was ideal both for the programmes offered by Scottish Enterprise and the Scottish Investment Bank and the local talent. Plus, Scotland is a market in itself.”
What do investors look for?
Investors look to startups that are in ‘hot’ areas – such as cybersecurity or financial crime, he says. They like something trendy, exciting and innovative, he believes, adding they want to see people building a business that can execute a plan to achieve rapid growth and ultimately returns.
“When applying for incentives or funding, don’t just focus on what a city or location can do for you, it’s imperative to look at what you can give back to the city,” Roger says. "Government backed-investor schemes, especially, will look more favourably on funding applications that create high value jobs which contribute to the local area as well as foster young talent.”
Scottish Enterprise (SE) and the Scottish Investment Bank (SIB) can provide financial support for fintechs and tech firms to grow – from providing business support to providing access to talent, opening up jobs aligned to future-focused industries.
When considering potential investors, Roger says to look at the track record of who they have invested in and if they have had successful exits: this ensures they are usually like-minded and to find out if they have had success in similar business areas in the past.
Is time on your side?
Factor in the time-frame, as securing investment can be a time-consuming process, he points out. If you are a fast-growing technology company, be prepared that others don’t always work at your pace, he stresses, and can’t always take commercial decisions as quickly as you can.
Roger sums up: “Finally, if you think you have a really good idea, but can’t get people to invest, then it’s probably time to refine the idea – even the most successful businesses have to refine their business models. Most importantly, don’t give up as once you get your initial idea right, the opportunities are endless."
(Roger Carson)
What to find competitive funding outside of London?