Investment starvation could stall startup innovation | IT PRO
Many experts predict the tech investment market will remain strong in the year ahead, although valuations could start to drop if market sentiment weakens due to macroeconomic trends such as inflation and higher interest rates.
“If stagflation becomes entrenched we may see more private investors forced to support their existing portfolios,” says Helen Oldham, founding board director at NorthInvest. “However, as long as the UK tax benefits exist in early-stage investment, we believe there will be an appetite.”
There may be a lot of uncertainty in today’s world, but the general consensus is this shouldn’t stop tech entrepreneurs from pushing forward with their business ideas.
It’s important to remember “the UK has the strongest venture and growth capital funding ecosystem in Europe,” says Mark Howard, joint head of technology, media and telecommunications at law firm Charles Russell Speechlys. This is “supported by tax approved investment schemes such as EIS and SEIS, and the VCT market. We also have the AIM market – Europe’s largest growth company public market.”
Where should early-stage startups start looking?
The key advice from both investors and entrepreneurs is that tech startup founders should be proactive and continuously build out their networks.
Marta Krumpinska, head of Google for Startups, recommends they always look for opportunities to meet other founders – even if from a completely different sector – as everyone who’s started their own business has experience to learn from. Tech entrepreneur Indy Gregg, founder and CEO of Wedo, meanwhile, advises shopping far and wide for the right investor for your startup, saying there are investors “literally everywhere”.
“There are some really great networks online like the UK Angel Investment Network and Connectd where you can search and be matched with angel investors. There are a lot of family offices and early-stage venture capitalists out there as well – and there’s always the crowdfunding approach. This can be costly, but also helps drive users.
“Startups can also consider alternative funding approaches such as NFTs, initial coin offerings, startup lending platforms and grants.
“Another way of raising investment is to share some equity with key team players,” she continues. “There are pros and cons to raising capital – you’re giving up a piece of your company in return for either money or human capital. Human capital is what you need to attract in order to achieve goals and be ready for scale. It’s rare to find a startup founder who’s built an empire on their own.”
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