How does the government fund and support UK tech startups?

The government has several funding routes for tech startups, as well as a strong support system aimed at at fostering UK tech startups.

The UK government has taken proactive steps to boost the success rate of UK tech startups, while developing an ecosystem (across public and private sectors) that is conducive of innovation.

In terms of funding, there are a range of government grants offered by the Department for Business, Energy & Industrial Strategy. The Startup Loans scheme is another initiative that also offers loans of up to £25,000 at a fixed interest rate of 6% per annum for new business ideas — this scheme provides advice on writing up business plans, along with free mentoring from business experts.

The UK is ranked as the 6th strongest startup ecosystem in the world

Innovate UK, among others, presents another funding option. Startups, like Divido, have experienced the benefits of these type of initiatives firsthand. Christer Holloman, CEO and co-founder of the company explained: “We set Divido up back in 2014, and in 2015 we were lucky enough to receive an official government backing in the form of an Innovate UK grant to further develop our platform. The support from the Innovate UK allowed us as a business to not only gain some needed investment but it also provided our business with that added validation that only a government can give.

“This is something that the UK government needs to ensure that it continues doing, particularly in the current political and economic Brexit climate. The UK fintech market has always been ahead of the curve, and now other countries have caught on and are playing catch-up so they’re getting more attention. As long as the government continues to reinforce its commitment to this sector through different funding initiatives and events, then I expect the UK and London to continue on its path to being the ultimate fintech capital of the world.”

Boosting the UK economy

‘Innovate UK is part of UK Research and Innovation, a non-departmental public body funded by a grant-in-aid from the UK government. We drive productivity and economic growth by supporting businesses to develop and realise the potential of new ideas, including those from the UK’s world-class research base.

‘Innovate connects businesses to the partners, customers and investors to help them turn ideas into commercially successful products and services. Our support is available to start-ups across all economic sectors, value chains and UK regions.

‘We have invested around £2.5 billion to help businesses across the country to innovate, with match funding from industry taking the total value of projects above £4.3 billion. And, have helped 8,500 organisations create around 70,000 jobs, while adding an estimated £18 billion of value to the UK economy.’

— Innovate UK Spokesperson.

Regarding support, ‘Tech.London offers advice on setting up in the capital, including local workspaces, events, mentorship programmes, job boards and funding tips, as part of a collaboration between the Mayor of London, investor portal Gust and lead sponsor IBM,’ writes Scott Carey and Thomas Macaulay for TechWorld, from IDG.

Mark Bembridge, CEO of Smartology, a contextual Adtech and AI firm, has experienced this support firsthand.

“Government networking events have put us in front of exactly the people we need to grow our user base internationally,” he said.

“In last year’s New York trip the Department for International Trade (DIT) lined us up with some top contacts and they also arranged for us to speak to business experts about how to go about setting up an American company. If you find these guys yourself, you’re never too sure if you’re getting the best advice, but we know we could trust the people we were put on to by the DIT.”

Startups based in London can also apply for a place on Techstars London, an accelerator providing access to investment, mentorship and collaboration with other top entrepreneurs.

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Industry insights

1. UK R&D

Melissa Snover, CEO and founder of Nourish3d, believes that tech-based companies in the UK and have an array of support from government programs. She points to, in particular, “the R&D Tax Credit incentive which gives you back money for every pound you spend on R&D is incredibly helpful in keeping the business pushing new and exciting innovations through the R&D cycle. It also supports cash flow while businesses develop new ideas which aren’t able to generate revenue yet. In addition businesses can be supported by grants from Innovate UK which has really helped my business to develop technology which we hope will have a huge impact on public health and the pharmaceutical industry in the future.

“Additionally, there are lots of incentives in the UK to encourage investment into startup businesses like SEIS, EIS and Patent Box, all of which create a more favourable environment for tech start ps to raise money and make money in the future.”

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2. SEIS and EIS

Anthony Franklin, CEO and founder of booking management platform, fibodo, echoes Snover’s view: “The government has been extremely supportive of UK tech start-ups in its creation of SEIS and EIS schemes which provide tax efficient opportunities for seed investors. This has created an environment of investment, innovation, employment, creativity and growth within the tech sector.

“In addition, the government is improving tech infrastructure with 5G rollout, increasing coverage of superfast broadband and improving education. This leads to a population that are more connected, more engaged, more skilled than ever before.”

Regarding the 5G roll out, let’s wait and see. Until 5G use cases emerge then the impact of the new digital infrastructure will be unclear. In terms of boosting connectivity (consumer facing), the initial roll out is in areas that already have high connectivity (London, Birmingham, Manchester etcetera), so the impact will not be significant.

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3. Still work to be done

Alice Bentinck, co-founder of Entrepreneur First, says that the UK is a great place to found a company, but notes that there is still work to be done.

“The UK is a great place to found a company, made all the more attractive by generous government initiatives such as the Tech Nation Visa programme. This scheme is a great offering to the world’s most ambitious and talented technologists, and any extension to the programme would be welcome.

“There is still work to be done, however, to secure the future of research funding at the UK’s elite educational institutions. This is vital if we are to retain our place as a world-leading innovator in the scientific and deep-tech sectors. We must do all we can to give access to our world-class capital to the world’s most ambitious and talented individuals. Successful entrepreneurship is not about the quantity of people who found companies, but the quality of the ones that do.”

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...

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