The Silicon Gorge tech cluster, encompassing Bristol, Gloucester, Swindon and Bath, is a burgeoning hub of innovation, drawing in investment and world-class tech talent to the South West region. Bristol itself is home to a strong cohort of tech companies, but what is it that makes the city such a haven for entrepreneurs? We discuss the current state of Bristol’s business landscape, and how its universities, investors, and startup accelerators are nurturing early-stage companies into unicorns.
Bristol’s high-growth landscape in 2021
Currently home to 479 high-growth, private businesses, Bristol is the fourth-most-popular UK city for startups, outside of the Capital, following behind Edinburgh (622 companies), Manchester (513), and Leeds (503). The city is by far the leading hub for startups in the South West, with Bristol-based companies making up 20% of the region’s high-growth population.
Bristol’s high-growth population has a similar sector make-up to the wider UK, with Business and Professional Services, Technology and IP-based businesses, and Industrials being the most common industries in the city. But Bristol’s focus on Business and Professional Services (36%) is greater than the rest of the country (28%), with a particular emphasis on Marketing, whilst 6% of its startups operate in the Media space, compared to 4% across the UK, predominantly in TV and Film.
The city is a primary tech hub for the South West and, whilst its most common technology sector is software-as-a-service (SaaS), it’s also a hotspot for ambitious businesses operating in the chips and processors space, with the likes of Graphcore, Xmos, and Blu Wireless all calling Bristol home. Bristol is also a popular spot for cleantech startups, such as LettUs Grow and G-Volution, as well as biotech and medtech firms, like Open Bionics. Meanwhile, it’s also a hub for high-growth companies in the robotics, aerospace, and automotive industries, including FiveAI and Voltric.
Stages of evolution
The high-growth ecosystem in Bristol is relatively nascent, with just 15% of its businesses being classed as Established-stage, compared to the UK average of 28%. Instead, more than two-thirds (69%) of Bristol companies are still in the earlier stages of growth, Seed and Venture, compared to around half (51%) of all UK companies. And whilst 7% of the city’s high-growth startups and scaleups have so far exited the private market, none have done so via an IPO.
Equity investment trends
The number of announced equity fundraisings secured by Bristol companies peaked in 2014, and then again in 2019, at 34 deals and 35 deals, respectively. The value of these deals, however, has increased significantly over time, from a total of £8.34m in 2011 to an impressive £309m in 2019—thanks, in part, to Bristol-based OVO Group’s massive £200m fundraising from Mitsubishi Corporation in February that year, the city’s largest equity round to date.
Top investors backing Bristol companies
In keeping with wider trends across the country, private equity and venture capital firms are by far the most active investor type in Bristol’s startup scene. In fact, they’re responsible for 35% of announced equity fundraisings by high-growth companies in the city, since 2011—that’s compared to the UK average of 15%.
Angel networks are another very active investor type in Bristol, accounting for 7% of equity investments, compared to just 2% across the UK. In fact, the city’s leading angel network, Bristol Private Equity Club, is among Bristol’s top funders, having participated in 19 announced equity deals since launching in 2016.
Yet it’s crowdfunding platform Seedrs that tops the list of Bristol’s most prolific investors, with 44 announced equity rounds made into Bristol-based businesses since 2011. Meanwhile, its competitor Crowdcube and former tech incubator WebStart Bristol have both participated in 12 deals, just behind the University of Bristol Enterprise Fund, managed by Parkwalk Advisors, at 13.
Top-funded startups in Bristol
So far, Bristol’s biggest raiser in the equity investment market is Graphcore, with an impressive £528m worth of fundraisings, secured through seven funding rounds. The company has developed technology to accelerate machine learning innovations, with its Intelligence Processing Unit enabling artificial intelligence (AI) researchers to work on previously impossible tasks. Valued at over $1b, Graphcore is also one of Bristol’s two unicorn companies, the other being green energy supplier OVO Group. OVO Group has also completed three successful acquisitions, and raised a considerable amount of equity investment, totalling £259m, alongside two Innovate UK grants.
The list of top-funded companies in the city also includes Ultraleap, a haptic technology startup that was spun out of the University of Bristol in 2013. Previously called Ultrahaptics, the company rebranded in 2019, following its acquisition of US firm Leap Motion. To date, Ultraleap has secured £74.4m in equity investment, across five rounds, and has been the recipient of numerous innovation grants, including four awarded through Horizon 2020. It was also selected to take part in this year’s Future Fifty accelerator programme.
Brightpearl follows as the fourth best-funded Bristol startup, with £62.1m secured across eight rounds. Its cloud-based system for retailers and wholesalers automates back-office operations and can also connect to major e-commerce platforms, like Shopify. Meanwhile, University of Bristol spinout Xmos has so far raised £59m in equity funding, alongside a number of innovation grants. The deep tech company develops semiconductors for a range of industries. Graphcore spun out of Xmos in 2016.
What makes Bristol a strong startup ecosystem?
Research and innovation
Bristol is home to two leading research universities—The University of Bristol and the University of the West of England (UWE Bristol). And as a hotspot for academic research, it’s unsurprising that Bristol’s startup ecosystem has benefited from a large number of innovation grants. The city’s startups have collectively secured 280 grants since 2011, with 111 recipients, 26 of which have been university spinouts.
In fact, there are currently 31 ambitious businesses in Bristol that have been spun out of academic institutions. These spinouts represent 6% of the city’s high-growth companies, twice as many as the wider UK. This is in keeping with trends seen in other startup hubs across the country, such as Edinburgh (9%) and Manchester (5%). Of the city’s active academic spinouts, 30 were produced by the University of Bristol (and the remaining one by the University of Southampton).
Access to capital
Since 2011, Bristol-based companies have raised 613 equity funding rounds. Of these, 222 were announced, amounting to £1.21b in fundraisings, with participation from 156 funds. In comparison, ambitious businesses in Edinburgh have secured 638 announced equity investments, worth £1.01b in total. So, whilst Bristol may not boast the largest number of deals amongst UK cities, it has seen an impressive influx of capital and benefits from an average round size of £5.5m, compared to just £1.6m in the Scottish capital. Bristol and Edinburgh’s median rounds are much more similar, however, at £455k and £500k, respectively.
There are also 21 active funds currently operating in Bristol, six of which have their head office based in the city. Alongside Bristol Private Equity Club, these include Wealth Club, an investment broker for HNWIs, corporate fund Simpleweb, and impact investor iAMDigital, a partnership between Creative England and the Social Tech Trust which invests in companies increasing digital skills and inclusion in the UK (outside of London).
Accelerators and incubators
For some companies, investment may be secured through graduating from an accelerator programme. And Bristol startups are almost twice as likely to have attended an accelerator: of Bristol’s active, high-growth companies, 42% attended one of these programmes, compared to 22% for businesses across the UK.
To date, Bristol companies have attended at least 45 different accelerator programmes, including one headquartered in the city itself—the Oracle Startup Cloud Accelerator. Meanwhile, the programme attended by the most startups in the city is NatWest’s Entrepreneur Accelerator (formerly Entrepreneurial Spark) which is based in Edinburgh but has hubs throughout the UK, including in Bristol. These regional hubs provide businesses with co-working space, and access to events and a community of like-minded founders, alongside structured learning through workshops and 1:1 coaching.
SETsquared’s Innovation-to-Commercialisation of University Research (ICURe) programme is also popular in the area, with 12 attendances by high-growth Bristol companies to date. SETsquared Bristol is part of a broader national business incubator for emerging UK tech entrepreneurs. Incubators are similar to accelerators but generally supply new startups with office space or staff to help them get off the ground, as opposed to structured development programmes. Bristol benefits from a large number of these organisations.
SETsquared Bristol is based in the city’s enterprise and innovation hub, Engine Shed—a collaboration between Bristol City Council, the University of Bristol, and the West of England Enterprise Partnership. The space is also home to TechSPARK, a not-for-profit network dedicated to connecting and strengthening the region’s tech cluster. Other notable incubators in Bristol include Future Space and Launch Space (both based in UWE Bristol’s University Enterprise Zone), Pervasive Media Studio, and deep tech hub Science Creates.
The City of Bristol is an emerging powerhouse within UK tech and, with such an impressive line up of university spinouts and incubation programmes, it’s clear why. With COVID-19 accelerating the shift of tech talent away from the Capital, we expect to see a greater focus on regional hubs like Bristol in the near future, particularly from investors. In the meantime, there’s already an exciting roster of early-stage startups based in the city, and we look forward to hearing more about these future unicorns as the ecosystem matures.
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