It's been an impressive five years for the UK technology and enterprise industry. From the establishment of Tech City to the development of world-leading accelerator programmes, and the international success stories of businesses like Deep Mind, Asos, Zoopla, CSR and Shazam, it is no secret that Britain has become a leading light in entrepreneurship.
This past month saw the launch of Lord Young’s report into the state of small businesses between 2010 and 2015. As the Prime Minister’s enterprise adviser, he is uniquely placed to evaluate the evolution of the UK’s small business ecosystem since 2010 – and the results speak for themselves. In the past five years, we have seen 760,000 new small businesses launch, bringing the total number to 5.2m across the country.
While the results of Lord Young’s report clearly represent great news for the UK’s enterprise ecosystem, these numbers will come as no surprise to those working in the sector. We have long known how much high growth businesses contribute to the economic strength of the UK. In fact, research conducted by Octopus and the Centre for Economics and Business Research last year showed that, despite making up just 1 per cent of the total UK business stock, these companies generated an incredible 36.2 per cent of the UK’s economic growth in 2014. What’s more, these businesses were responsible for an astonishing 68 per cent of total employment growth that year.
This trend is also illustrated by recent numbers from the Angel CoFund – since launching in 2011, the government-backed fund has co-invested in 53 companies, which have gone on to employ 848 people. These figures clearly show the disproportionately positive impact that investment into high-growth small businesses can have on the UK’s economy.
Lord Young’s report is generous in its praise of angel investment in the UK and the role angel syndicates and government-backed initiatives like the British Business Bank and the Angel CoFund play in supporting this ecosystem. The opening up of seed investment opportunities has certainly played a crucial role in the successes seen over the past half a decade. That said, the UK is also increasingly known for its later stage investors, in particular at the venture capital stage.
The development of the UK’s enterprise scene has coincided with the coming-of-age of London’s venture capital industry. According to London & Partners, London-based technology businesses raised $1.4bn of venture capital in 2014, 20 times more than raised in the capital just four years ago. Of course, this is just a snapshot – London venture capitalists are investing in businesses across the rest of the country as well.
One reason for this boost in venture capital activity is that the UK as a whole is leading the way in technology and business creation like never before. Back in 2013, technology blog Tech.eu worked out that, of the 94 startup accelerators across Europe, 33 were in the UK, all working to help support and develop game-changing businesses. I would wager there are even more now.
Much of this activity can be attributed to the huge focus the coalition has placed on technology since 2010. For one thing, the government has overseen the development of Tech City UK and now the birth of TechNorth, but there has been plenty of further activity. As pointed out by the Policy Exchange Technology Manifesto in June 2014, for example, last year the UK became the first G20 economy to implement compulsory computing lessons for 5-16 year olds nationally. This dedication to digital talent building will play a vital role in the UK’s economic future. Then there are the investment schemes; Enterprise Investment Schemes (EIS) have been around since 1993, but it was the coalition in 2012 that introduced the Seed EIS, which has played a crucial role in helping the earliest stage businesses get off the ground. This diverse range of factors combines to create a fertile ground for entrepreneurship, and the subsequent businesses coming through provide plenty for UK venture capitalists to be working with!
Another notable change for me has been the difference we are seeing in terms of European businesses coming to London to raise funds – take the Lithuanian founders of YPlan or Sweden’s Behaviosec, for example. In the second half of last year, Octopus invested in Uniplaces, a high-growth Portuguese business that specifically chose the UK as the best place to raise its Series A round. It seems to me that the myriad of factors around venture funding, technology talent, government support and the community, are combining to create an entrepreneurial energy that is difficult for other countries to compete with.
It has certainly been a phenomenal five years for the UK’s technology, enterprise and investment communities, and I for one look forward to reminiscing in a further five years on the industry’s continued success. For now, the numbers and evidence provide a clear conclusion: in 2015, you need to be coming to the UK to build a world-class business.
George Whitehead is the venture partner manager at Octopus Investments, and chairman of the Angel CoFund.