Tech North Investment Index:
2007 - 2016
Investment in Northern tech businesses is at a 10-year high but will the growth
in investment keep pace with the ambitions of the tech entrepreneurs?
Investment in Northern tech
businesses at a 10-year high
2016 was a record year for
investment in Northern tech
companies with a total of £326.9m
invested*. This represents a rise of
1,551% from £19.8m in 2007, with
the most significant growth taking
place in the past three years.
More deals were done in 2015 however, with
93 deals to 2016’s 74 deals. The biggest jump
in capital invested from one year to the next
was seen in 2014 when the figure jumped from
£23.7m in 2013, to £169.6m in 2014.
Nevertheless, 2016 was a promising year for
the sector, as Tech North’s head of investment
strategy James Bedford notes: “It’s encouraging
to see the 1,551% growth in investment finance
going into Northern tech companies over the
last 10 years, and even more encouraging to see
that last year was the best year to date. The fact
that more than half the top angel and VC deals
were done in the last two years indicates an
improving investment ecosystem.”
According to Tim Dempsey, managing partner
at Manchester-based investment firm Epiphany
Capital, the findings signal a significant
opportunity for the region“This research shows
that we’ve been hitting peaks for three years
running, in relatively new sectors. It won’t be
long until the North’s biggest deals include
major Series B and C rounds from global
venture brands.” he adds.
Capital Invested and Deal Count
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* according to data sourced from Pitchbook
In the past 10 years
investment has risen
1,551% from £19.8M in
2007 to £326.9M in 2016
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Key Findings
in Numbers
The most significant
growth has been in the
past 3 years
3
2016 was the strongest
year for total capital
invested at £326.9M
2016
2015 was the strongest
year for total deal
count, with 93 deals
totalling £232.8M
93
The top 8 deals over
the past 10 years were
all private equity
growth/expansion
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Source: Pitchbook, Tech North March 2017
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What’s behind this growth?
For Dempsey, the findings are reflective of growing ambition
in the North. “The North’s ambition has suddenly skyrocketed
and that’s attractive to major London and European investors.
More and more tech companies want to capitalise on the
infrastructure, talent pool, cost-efficiency and quality of life that
the North offers - these are a lot more important now London
is pricing itself out of the market and the venture sector is
growing,” he explains.
Alasdair Greig of Newcastle-based venture capital firm Northstar
Ventures agrees that there’s been a shift in ambition in the
region. “Not only have we seen a significant increase in the
demand for venture capital from regional entrepreneurs, but
more importantly, there has been a significant rise in the quality
and level of ambition of businesses being built here. Founders
now know that they don’t need to relocate their business to the
US or to London in order to access finance and support from
experienced investors, or to attract the scale-up talent they need
to grow,” he explains.
Deal Count by Region
5 biggest deals in
the past 10 years
1. Atom Bank £135m pe

growth/expansion 2015
2. The Hut.com £101m

PE growth/expansion

(acquisition financing) 2016
3. The Hut £100m pe

growth/expansion 2014
4. Chess £50m PE growth/
expansion 2014
5. Trustmarque Solutions

£43m pe growth/expansion
2013
But access to finance remains an issue, James Bedford notes, “The North’s digital ecosystem is still
at an early stage but it has huge potential. This potential will only be satisfied if the ambitions of the
entrepreneurs are matched by an ambitious investment ecosystem. The recent growth is promising
but investment is still seen as a key issue by Northern tech companies in surveys conducted for the
Tech Nation 2016 report.”
Source: Pitchbook, Tech North March 2017
5 biggest VC deals in the past
10 years
1. The Hut £19.4m later stage VC, 2010

(acquisition financing)
2. The Hut , £13m, later stage VC, 2012
3. Performance Horizon, £10.8m, 2016,

later stage VC, series C
4. The Hut, £10m, later stage VC, 2010
5. VirtenSys, £9.67m, 2009, series C
5 biggest Angel deals in the
past 10 years
1. Fruitful Finance, £5m, 2015
2. MPD Group, £2m, 2015
3. 360 Studios, 1.04m, 2016
4. Living Lens Enterprise, £1m, 2015
5. Wakelet, £1m, 2014
Note: Some deals are double-counted
due to pitchbook data labelling
A growing digital ecosystem
The fact that a digital ecosystem is in the making is also a significant factor in this growth, adds
Greig. “In the North East alone we have hubs like Campus North, world-class accelerators like
Ignite, and a wealth of support for the tech industry via organisations like Dynamo and Digital
Union. There has also been substantial growth in the region’s innovation infrastructure, with
universities offering increased support for spin-outs and entrepreneurs. The fact that these
institutions are well networked with the region’s business community means startups are able to
access finance and support more easily, and at an earlier stage than before.”
The same is true for the North West and Yorkshire and Humberside. A growing number of co-
working spaces such as SpaceportX (Manchester), Launch 22 (Liverpool), Futurelabs (Leeds),
Electric Works (Sheffield) and C4Di (Hull) means that founders and startups are more connected
than before. Furthermore, accelerators such as Dotforge, Ignite and Entrepreneurial Spark allow
promising early-stage startups a platform to test their ideas, improve their products and access
funding to develop their business further.
Dominant deal types
The top eight deals over the past 10 years were all private equity growth or expansion deals,
including the £135m secured by Durham-based Atom Bank. This deal was the largest over the
past 10 years and one of two significant raises for the company in recent times, after which they
announced a further £83m raise in March 2017.
For Greig it’s encouraging that the top deals of the past decade were all growth funding. “As an
early-stage investor we know that one of the major challenges facing startups in the North is access
to later-stage development finance. That private equity firms are now recognising the opportunities
offered by tech and digital businesses in the North is encouraging, and we hope that more
investors focus on the growing entrepreneurial talent here over the next 10 years.”
The largest number of deals over the 10-year period were either early or later-stage VC deals, with
the largest VC deals being The Hut (£19.4m, £13m, and £10m), and Performance Horizon (£10.8m).
It’s not just newer companies seeking to grow rapidly with investment finance, Bedford notes.
World-renowned Wakefield games studio Team 17 began life in 1991 and recently secured £16.5m.
It’s also promising to note that the North’s tech sector appeal is extending beyond the UK too, as
Hugh Campbell of GP Bullhound notes. “We are seeing significant investment interest not just from
the local private equity community but also from investors around the world such the US, China
and Japan. This has been complemented by strategic investment interest with the likes of Halfords
and others making minority financial investments in exciting digital companies based here.”
Source: Pitchbook, Tech North March 2017
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Capital Invested by Deal Type
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Capital Invested by Industry Vertical
Source: Pitchbook, Tech North March 2017
Capital Invested by Industry Vertical (2007 - 2016)
Number of Deals by Industry Vertical (2007 - 2016)
Source: Pitchbook, Tech North March 2017
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Regional differences
The North West leads for number of deals
over the 10-year period with 48% of all deals
recorded, with the North East at 28% and
Yorkshire and the Humber at 24%.
Where the money comes from - Top 10 Investors
(by number of investments)
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Company in Focus
Cocoon
Leeds-based smart home security
startup Cocoon was founded
by a team with three successful
Northern UK exits worth +£20m.
The team self-funded to start and
then raised $250K from Indiegogo
in 2014, later securing +£2.82m
from Aviva Ventures, Breed Reply &
founders in 2015 and 2016. They’re
now fundraising on Crowdcube to
support expansion into retail and
the US. According to their head
of marketing Colin Richardson,
raising funds in the North of
England hasn’t been easy.
“We’ve found it almost
impossible to raise funds
from investors in the North
of England. Aviva and Breed
Reply (hardware-focused
IoT fund) both based in
London, have invested
£2.4m in Cocoon in 2015.
Both have followed on their
investment in our current
round on Crowdcube. Most
of the investment funds have
their offices in hubs like
London, New York or Silicon
Valley. There is a significant
lack of funders outside of
the capital and it is hurting
the startup economy of the
North, but with Tech North
championing businesses
and funding outside of the
capital this is beginning to
change. A key advantage
of being in the North is that
a hardware company like
ours stands out locally, it
means that local press and
business people champion
us, something that wouldn’t
happen amongst the
noise in London. We’re big
believers in the power of the
crowd, having launched on
Indiegogo, so we decided
to open our latest round
of funding to the public
via Crowdcube. This is a
different approach than
we’ve taken in the past to
raising funds, but it’s our
hope that we’ll gain a large
number of fans as well as
the capital we’re raising to
grow the business further.”
Future growth
The signs are positive for the tech sector in the North of England based on these findings. But more
is needed to improve the investment landscape for tech businesses here if the sector is to reach
its full potential, as highlighted in Tech North’s proposal to government for a pan-Northern co-
investment fund.
Bedford explains: “The proposal has kick-started cross-departmental discussions in government to
try to solve the issues surrounding raising investment. It is hoped that the government recognises
the need to harness the growing ambitions of both entrepreneurs and investors to help rebalance
the economy and improve productivity in the North. The overall picture is increasingly positive but
we know that the investment ecosystem must continue to strengthen if we are to grow the tech
sector to its full potential.”
About this report
Disclaimer
The data in this report was sourced from
Pitchbook and is intended to offer a guide on
trends in the digital technology sector in the North
of England. It is intended for general information
only and may not include every digital technology
deal in the region. The data includes all companies
listed under the ‘IT Industry’ category on Pitchbook,
excluding ‘semiconductors’. The data also includes
companies listed under these verticals: 3D printing;
adtech; agtech; artificial intelligence and machine
learning; audiotech; autonomous cars; big data;
cleantech; cyber security; e-commerce; edtech;
ephemeral content; fintech; healthtech; internet
of things; marketingtech; mobile; nanotechnology;
robotics and drones; SaaS (software as a service).
The data was then manually cleansed to remove
any companies not classed by Tech North as a
digital tech company. The data includes all VC
stages, private equity growth/expansion, and
‘corporate’ deals. It does not include M&A deals,
IPOs, liquidity or buyout deals.
This report is published for general information
only. Although high standards have been used
in the preparation of the information, analysis,
views and projections presented in this report, no
responsibility or liability can be accepted by Tech
North for any loss or damage resultant from any
use of, reliance on or reference to the contents of
this document.
1. Northstar Ventures (Newcastle)
2. Enterprise Ventures (Lancashire)
3. The North West Fund (Warrington)
4. Finance Yorkshire (Barnsley)
5. YFM Equity Partners (Leeds)
6. Creative Capital Fund (London)
7. Ignite (Newcastle and Manchester)
8. Dotforge (Sheffield, Manchester, Leeds)
9. Rivers Capital Partners (Newcastle)
10. IP Group (London)
“The previous JEREMIE funds, utilising European
funding, heavily influence the top 10 with
several JEREMIE investors divided between the
sub-geographies, reducing competition for
investment-hungry startups. It is great to see
the influence of the two primary accelerator
programmes, Ignite and Dotforge, on the
list, proving that private investors still have
an appetite despite the dominance of public
funds.” Bedford comments.
Contact Us
Richard Gregory
Director of Tech North
richardg@techcityuk.com
Vicki Shiel
Head of Content
vicki@techcityuk.com
James Bedford
Head of Investment Strategy
james@techcityuk.com
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