A number of regional startup ecosystems bucked global trends and increased investment rates last year, according to new research from Barclays Eagle Labs, highlighting positive gains in what would otherwise be a challenging period for the industry.
Technology investment for startups in Wales, as well as the Yorkshire and Humber regions, saw a notable increase in 2023, with Yorkshire-based companies increasing investment rates by 20%.
The increase means the region reached a new investment record, standing at £200 million.
Similarly, Welsh startups raised over £113 million over the year, an increase of 8.7% compared to the previous year.
Eagle Labs said the increase highlights improvements regarding regional venture capital investment across the country, but warned that challenges for the wider UK tech industry could continue into 2024 and beyond.
Venture capital investment levels have fallen significantly in the wake of COVID, and figures for 2023 show that funding also remains lower than before the pandemic.
The Eagle Labs report aligns closely with similar research into venture capital investments by KPMG this week, which showed that venture capital funding in London fell by more than half last year.
Other regional ecosystems, including the Scottish technology sector, also saw investment fall.
KPMG also said it does not expect the situation to improve in the next 12 months and that only companies with strong business models and management teams are likely to succeed in raising funds.
Access to finance is holding back UK startups
A key issue highlighted by the Eagle Labs report focused on access to investment opportunities for UK founders.
More than half of founders nationwide said the availability of funding is hindering growth.
Technology Minister Saqib Bhatti said research shows that although the country has a strong startup ecosystem, a concerted effort to improve funding opportunities should be a key focus going forward.
“Whether in AI, chips or bioscience, British science and technology startups are thriving across the country, and many are ripe for investment,” he said.
“We need investors to match the ambition of UK founders and back British innovation before our best investment opportunities travel abroad for the funding they need to grow.”
When looking at mergers and acquisitions, two-thirds of tech founders were optimistic about what the UK landscape meant for the next stage of their startup journey.
However, problems could arise later. Founders suggested that selling their business to an international buyer would be their preferred exit strategy, cited by 15.8%.
While this was closely followed by the sale through private equity, preferred by 15.5%, or to a UK buyer, with 14.4%, Eagle Labs said this shows that many of the opportunities for Britain's local investment could move abroad.
