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London has long held the crown as England’s main “hub” of early-stage investment opportunities. Yet what about the rest of the UK? With so many eyes on the capital, it is easy to miss some of the exciting startups thriving elsewhere. In this article, we focus on the North.
Below, find out why other parts of the UK can offer investors key routes to diversify their early-stage portfolios. We also include some interesting case studies which you may wish to explore. We hope these insights are useful and inspiring!
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The early-stage ecosystem in the North
The North of England is arguably one of the most diverse parts of the UK. From the Lake District to the Peak District, Manchester, Sheffield, Liverpool and Leeds, the North is a rich heritage of culture. Not only that, but it is a region bustling with early-stage potential.
Just before the pandemic hit in March 2022, the UK government pledged to increase public investment into Research & Development (R&D) by at least 40% across regions outside of London and the South East. The “Levelling Up” whitepaper pointed to areas such as the North and the Midlands as key targets for additional funding.
Three new Innovation Accelerators were announced – with Greater Manchester one of the pilot members set to receive a share of £100 million in new government funding, between 2022-25.
Some interesting trends are emerging in the Northern ecosystem. In particular, the 2020 Covid pandemic spurred a huge shift to digital for meetings, pitch events and other key business activities. Despite the damage of the pandemic, one benefit is that this shift has made the North more accessible to investors.
In terms of sectors, there is a great deal of early-stage variety in the North. Yet there are some notable themes. For instance, the global focus on sustainability has spurred a strong “profit for purpose’ presence in the region. Other interesting niches include fintech, HRtech, data science, artificial intelligence (AI) and healthtech.
Northern case studies
There are many examples to choose from. Yet, below, we will offer a handful of different, stand-out startup stories. Firstly, we have Hive HR from Newcastle. The company offers a unique “employee voice platform” – complete with “dedicated occupational psychology support” to help create better workplace environments.
The company secured £1.2m in funding for its employee engagement Software-as-a-Service (SaaS) platform in 2019. With the global cloud services market continuing to grow in 2023, with little sign of slowing down, there is plenty of road ahead for such business models.
Wordnerds is another unique early-stage company in the North. The business provides rapid, easy-to-understand analysis of customer feedback. Using a “linguistics-first approach to AI”, Wordnerds can help brands unearth previously unseen ideas and issues in their data. This, in turn, provides solid real-time data to help brands make better management decisions.
A final case study is Atom Bank in Durham. A great example of a rising Northern fintech, Atom Bank is challenging traditional banking models across the UK with its “digital banking” approach. In 2022, it received £30m from BBVA, Toscafund and Infinity Investment Partnero to fuel its lending and growth capacity.
Looking ahead in 2023-24
The North has moved even further away from many of its persisting stereotypes in 2023. Not too long ago, many of its areas were powerhouses for the industrial revolution. Today, it is stepping further into services – particularly those driven by digital innovations such as AI.
This is great news for local talent, founders (both existing and up-and-coming) as well as investors who are looking at the region. Of course, big questions and challenges still remain. Looming on many people’s minds is HS2. Will the high-speed railway ever finish? If so, will it pull net investment employment away from the North – or, push them towards it?
In the meantime, many thriving “sub-ecosystems” are growing in the early-stage landscapes of Northern cities. Example components include Manchester Angels, Northern Gristone (which targets academic spin-outs) and the not-for-profit NorthInvest.
If investor readers have not given the North thought for a while, perhaps now is the time to reconsider its place as a potential diversifying region in your portfolio. Indeed, with many startups and workers already relocating there from London, many people are starting to notice its value for entrepreneurship and building a home.
Think how much cheaper office space and overheads are in the North. Yet the customers of startups in the region are not necessarily limited to local areas, where spending power is lower compared to London. The world of smartphones, Web3, AI, machine learning and big data is breaking down such geographical barriers.
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