North East Tech less reliant on government cash

| John Davis

Our data shows that the North East tech scene is becoming less and less dependent on government funding.
Gov-backed_vs._non-government_backed_actual_amounts.pngIn 2015, companies within the North East tech sector completed more deals and secured more investment than any year since 2012. The number of fundraisings increased from 41 in 2012, to 53 in 2015. Investment totals also grew from £11.2m to £16.6m respectively.

Looking at where the money’s coming from, we can see that government-backed investment has fallen from 65% of all investment into North East tech, to just 34% in 2015. The percentage of all government-backed fundraisings has also fallen from 46% to 34%.

Gov-backed_vs._non-gov-backed_.png

What we’re seeing, then, is far more private money going into North East tech companies. In fact, non-government-backed investment has more than tripled between 2012 and 2015.

So what’s behind this trend? Well, perhaps the North East has been overly reliant on government backing in the past. It’s difficult, though, to discern whether this is because there was a dearth of private funding, or whether government funding was more accessible.

But this trend does seem to indicate a positive change. While 2014’s drop in government investment might indicate government funds coming to the end of their cycles, or at least stepping-away, it could also illustrate how government backing of North East tech companies may have succeeded in unlocking equity finance from private sources. This might be due to government funds de-risking the market, or simply generating hype around North East tech.

We’re also seeing a similar general trend in the North East’s neighbouring regions: the North West, and Yorkshire and Humber. In both, the reliance of tech firms on government funds is also falling. However, compared with London, and the South East, the North is clearly still quite reliant on government backing. During 2015, just over 3% of all tech deals in London were government-backed, while in the South East that figure was as small as 1.5%.

Pedro Madeira, our Head of Research, says: “You need to keep investing during the hard years so when the good ones come round you can benefit from them. North East tech was supported by public money at a time of need and now is well placed to benefit from the current golden age of equity investment.”

It seems the North East’s tech sector is on the right course, with an increasing volume of non-government backed money being pumped into the space. If government funds can continue to provide support for equity investment into the region, then we could see more tech start-ups securing greater amounts of private investment.