All Change: Where Next For The U.K. Tech Ecosystem As Its Greatest Cheerleader Bows Out?

Tech Nation – the organization created to nurture the United Kingdom’s innovation ecosystem – is to wind down following a government decision to remove its grant funding. The news has generated a considerable amount of consternation coupled with some cautious optimism in the tech startup and scaleup sector. So why has this happened and what lies in store for Britain’s startups and scaleups?

First, the facts as we know them. Towards the end of January, Britain’s Department of Culture Media and Sport announced that it was giving £12.09 million in grant funding to Barclays Eagle Labs in order to “turbocharge” the growth of the technology sector across the country.

A few days later, Tech Nation issued a press release saying that due to the withdrawal of grant funding, it would be closing its doors on March 23rd and winding down its activities.

This – to say the least – represents a major shift in the way that public funding is used to support Britain’s technology sector. For the last ten years or so, Tech Nation has acted as a cheerleader for the innovation economy while also providing entrepreneurs with a broad range of practical assistance through networking events, incubators and accelerators, the provision of sandboxes and sector research. There is a general consensus that it has done its job pretty well.

When I spoke to Tech Nation CEO Gerard Grech just a few days after the announcement he was clear in his view that the organization has left an important legacy. “When Tech Nation (then called Tech City) was established, the U.K. tech sector was in its infancy,” he says. “The U.K. is now the number one tech ecosystem in Europe and number three in the world.

During that period, Tech Nation provided a huge amount of support for the sector. Many companies that are now major players in their industries – the list includes fintech, Monzo, delivery company, Deliveroo, cybersecurity business, Darktrace and travel booker, Skyscanner – received support from the organization’s programs.

“Around 80 percent of startups fail,” says Grech. “90 percent of the companies that have gone through our programs have gone to scale. An independent valuation says that for every £1.00 spent on Tech Nation, there has been an ROI of £15.00.

Why The Change

The thinking behind the move is not totally transparent. The announcement from the Department for Media and Sport ( DCMS) contained lots of upbeat rhetoric but little in the way of explanation. In a canned quote, Digital Minister Paul Scully said: “We want to unlock the potential of the next generation of start-ups and scale-ups and boost tech businesses in all corners of the country. Barclays Eagle Labs are digital industry experts and will help tens of thousands of tech firms and founders to achieve their dreams and create jobs and economic growth.”

The statement doesn’t reveal the thinking behind the choice made to move the funding elsewhere. What you can say, however, is that Barclays Eagle Labs have a considerable amount of experience in the startup and scaleup space. Established by Barclays bank, in part to utilize redundant premises, the organization provides workplaces, accelerator programmes, incubators and educational initiatives across the UK. It has its own funding in addition to the government grant.

A Cause For Concern?

But it’s change and change generates uncertainty. When I put a call out to entrepreneurs and funders for reaction to the move, there was obvious concern.

For instance, Ekaterina Almasque, General Partner at VC, OpenOcean, said: “This is a difficult day for the UK tech industry. Tech Nation was founded to spearhead the UK’s digital industry during its “Silicon Roundabout” heyday. So it’s a troubling sign of the times that this body – which has overseen growth programs for start-ups, digital academies, and international expansion efforts – has been forced to close its doors. The loss of Tech Nation will deny current and future entrepreneurs an important network for the UK tech industry.”

There were also questions. “With the fall of Tech Nation, it’s clear there’s an agenda as to why the government has changed course, but clarity would be useful to learn their key objectives and why this shift is happening now, says Sarah Barber, CEO of Jenson Funding Partners.

But while sympathy was widespread, at least some of the responses I received suggested that the change in the support ecosystem might be a positive thing. “Tech Nation was one of the pioneering organizations to support the growth of the UK startup ecosystem and we along with many others benefitted from its wealth of programs and resources, “ says Brian Mullins, CEO of Mind Foundry. “We are sad to see the organization close but it does present a big opportunity for new and old players in the public and private sector to serve our rich tech ecosystem and help homegrown innovators scale into unicorns and compete with their international competitors.”

Active Support

There was also active support for the move. “Their (Eagle Lab’s) existing programmes and mentoring opportunities will be expanded to a broader group and also will add further services including an accelerator and scaleup program. This should really support startups at scale and contribute to the overall ecosystem where a rising tide lifts all boats,” says Amanda Brock of open source technology champion, OpenUK.

Perhaps the most you can really say at this time is that a major change is taking place. I ask Gerard Grech what he thinks needs to happen next. “The government wants the UK to become a science superpower. It wants to take on Silicon Valley. To do that there must be policy backed up with programs. Now is a good time to set out a vision to support entrepreneurs with policies to back that up.” Those policies, he says, could involve increased support for entrepreneurship, research and development and investment through the tax system. In addition, Grech says more should be done to encourage pension funds to invest in scaleup companies.

So what does the future hold? In my next blog, I’ll be talking to Hannah Bernard and David Gowans of Barclays Eagle Labs.