The North West has everything needed to incubate the tech businesses of tomorrow. How can you unlock its promise and attract investment in your business?
We’ve got all the ingredients to build venture scale businesses in the North West. But startups and scaleups are struggling to find investment and grow. Just 38% of companies set up in Manchester in 2015 were active five years later.
So, how can you take your business idea from potential to success?
The environment for venture scale in the North West
I should start by clarifying what I mean by a venture scale business. It’s a young business that drives technological innovation, creates employment, and expands globally to deliver outsized investment returns that can be recycled back into innovation.
The North West offers a fantastic environment in which these businesses can flourish. There are skills from our leading universities on the doorstep. And there’s interest from investors too. In Manchester, the North West boasts the UK’s leading city of tech outside of London. The city experienced substantial growth in investment from 2019 to 2022, with investment levels peaking at £278 million in 2022.
Of course, the uncertain economic outlook has made it a daunting time to be an entrepreneur. The headlines over the last year or so have painted a bleak picture of the state of tech startups and venture capital funding across the globe. Persistently high interest rates have made investors more risk-averse and selective, and many startups have continued to struggle to raise money as funding levels dropped last year.
Set against this backdrop, it’s encouraging to see venture capital investment in the North West remain robust. Yes, the region’s investment value was improved by a few significant deals. But the underlying levels of venture capital activity are stable and point to sustained investor confidence in the North West economy.
Raising equity – a full-time job
How do startups and scaleups attract this funding?
The answer is to be a brilliant business. True, but not very helpful. At least not until you start to unpick what it takes to be a brilliant business. You need to identify the metrics you need to double-down on to make sure you stand out in a crowded market.
Making a strong case for growth potential will no longer do it on its own. Investors want to know that you’re profitable. They’re interested in businesses with sticky customers and repeatable growth. Having market traction is gold and it helps massively in your fundraising.
Building your business case and raising funds is time consuming and can easily become a full-time job. That can distract you from the all-important task of running your business and impact growth. It can become a vicious cycle – focus on business, can’t get funding; focus on raising funds, can’t run business.
Three tips for raising first equity
Here are three tips that will help you as you seek to raise your first equity:
- Be clear on your unique selling point and your investment needs
You need to be able to articulate to investors what your business does, how it stands out from the competition, and why now is the right time for investment. Create a plan for how much equity you want to raise, what you’ll do with the capital and what outcomes it could deliver. Be clear on where the risks might lie too.
- Choose your investors wisely
Look for investors that share your values, and match your stage, size, sector and growth plans. Understand your investors’ operations, people and decision-making criteria. And find out how they raise capital, and how they make money. You’ll need them to support you on your journey, so make sure you’re aligned from the beginning.
- Know your exit strategy
Decide what a good exit looks like for you and who your ideal buyer would be. You don’t have to sell the business, but you must give equity investors a clear route to the returns they’re seeking.
We’re hopeful that 2024 will be a great year for innovation and growth for the brilliant businesses we meet daily in the North West.
If you want to learn more about the potential for venture scale businesses in the North West and how you can raise equity, check out our report: ‘Wiring the North West for Venture Capital Growth’.
And if you’d like more insights like this and to network with other startup and scaleups, why not join our Emerging Giants community on Beyond.
