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In March, I talked about investment – you can read it here. I thought it worth doing an update as we’ve had some exciting news recently.
Earlier this month, our friends and active collaborators (they really couldn’t be more supportive of the local ecosystem) Tech Nation presented latest investment figures for the UK, which showed some significant levels of investment in Bristol compared with the rest of Europe. They put up a slide which said that in 2018, Bristol saw the highest level of investment per capita in Europe, outside of Oxbridge, Dublin and Berlin. Given that Oxbridge isn’t a place, I think that puts Bristol in front for the UK. The slide can be found in this article – though other data we’ve seen doesn’t quite stack up with that. Not far off, mind. Anyway, there’s a lot going on and the latest news is that there’ll be a multi-million pound investment fund dedicated to the South West. We’ve also heard a rumour that a national investment firm is setting up office in Bath.
That’s the good news.
At a recent get-together of actors involved in the West of England scaleup ecosystem, an investment professional commented that the £50k – 500k investment gap has existed since 1929! We assume that’s accounting for inflation. He said that the ecosystem in Bristol operates similarly to the London market but is light on angel groups. His view was that 81% of companies that ask for funding don’t get what they need, and that financial education is below 50%. Nationally there appears to be a lack of ambition, though it is seen as stronger here than some other regions. We’re light on wider leadership and NEDs (Non-Executive Directors) and only 15% of investment cash originating in the South West stays here. That’s the lowest in the country and likely contributes to a lack of NED support. Bristol is considered to be stronger than the rest of the South West with respect to investment activity, but even so, there’s work to do.
Why this 15% figure? Is it the lack of opportunities, lack of visibility of the opportunities, a perception that “I have to go to London to invest” without bothering to look locally? That networks are stronger in the capital than locally? Is it a mismatch in risk appetite of local investors to the stage of local investment opportunities? We suspect it’s a mixture of those, and more.
Our next endeavour to try and help fix these is our latest invention, The Investment Activator that went public in July. With our partners TechSPARK, we have designed a 2-year pilot (Jan 2020 – Dec 2021) which will see an Investment Activator recruited for the region. This person will become the go-to lead for those seeking investment and those looking to make investments – they will run the Quarterly Investment Briefing events/newsletters and also the Silicon Gorge pitch events. We are aiming for a 50:50 private/public sector funding mix and we are very close to securing that. Thanks to all those who have demonstrated support with their wallets so far – but there’s room for more! As soon as the ‘deal’ is closed, that will become public and the Investment Activator recruited.
It is clear we need more active angel investors, investing locally and intelligently. It’s angels who typically take the brunt of the risk with early stage businesses, and for those investee businesses which need follow-on funding (as is frequently the case in technology businesses) the angel can easily get a rough deal by being diluted, financially and in terms of influence, by institutional investors. Bristol, and the West of England, is dominated by B2B (business-to-business) companies and that leads, typically, to longer time-to-market and longer time frame before investors see a return on their investment.
As we have more local investment successes, more local ‘new money’ is created and that is more likely to be invested locally because the investors and entrepreneurs understand the local market better than those who have not been active, and that money is usually ‘recycled’ into the local ecosystem. That’s good, but there’s just not enough of that to really kick-start investment activity around here. Our new Investment Activator should help with that.
However, I had a very interesting conversation with a serial entrepreneur and angel investor a couple of months back. We discussed this problem of angels’ money being tied up in investments for too long and he took away the idea of creating a culture whereby VC funds coming in to Series A funding rounds, routinely buy out at least some of the early stage (seed) investors, to release the capital back into the ecosystem. Morally, that’s the right thing to do: the VC taking over the risk ‘journey’ of the investment from the seed investor. It’s also in the VC community’s long-term interest: the quicker the high-risk capital goes back into early stage investments (with experienced angel investors) the greater the quantity and quality of the deal flow, in the longer term. That would make a big difference – not least in encouraging more angel investors to take risks, as there’s a greater likelihood of getting their money out earlier.
Perhaps that’s being too optimistic – but if there’s anywhere to try new things – it’s around here. Wouldn’t you say so?
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