A new report from Nesta, a foundation that promoted innovation in the UK, claims that UK-based technology companies suffer from a lack of venture capital that puts them behind their US-based counterparts. UK firms suffer from a lack of capital that puts them at risk of poor performance, while funds suffer from lacklustre earnings.
The report focuses on the returns achieved by UK-based venture capital groups in comparison to those achieved by US-based competitors. UK firms have continued to earn less from their investments than their US-based rivals, Nesta claims, resulting in an investment environment that gives US start-ups a major advantage.
A major reason for the divergence in funding outcomes is the UK’s slower market for IPOs and acquisitions. The UK’s total venture capital investment was measured at £2.3 billion in 2012, compared to a total of £41 billion in American investment – an incredible difference that, using per-capita data, puts the UK far behind the US.
Industry insiders claim that UK-based firms suffer from a perception of growth as being limited by the country’s smaller population, with start-ups often failing take global focuses on growth in favour of UK-based marketing efforts. Most of the UK’s top technological innovators are foreign companies, investors have claimed.
Another issue is the geographical presence of most technology companies, with the vast majority of funds situated in Northern California. UK-based firms could benefit from the rise of America’s East Coast funds, which have increasingly been investing in UK and European technology firms over West Coast American counterparts.
Despite the large gap in funding for start-ups and returns for investors, the outlook is fairly bright for UK-based tech firms. London’s reputation as a centre of technical innovation is growing to match its global financial prowess, making it a target city for an increasing number of international technology investment firms.
