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Supporting business innovation in the UK and the future outlook of early-stage investment

The Early-Stage Investment Summit in London

Following on from our recent Early-Stage Investment Summit in Manchester, we gathered together for our London summit to take a look at the wider picture for the early-stage ecosystem in the UK.

With predictions of the country entering a recession in 2023, and the cost-of-living crisis seeing inflation rocketing, it’s fair to say that there is a tough time ahead for all of us.

As presented at our London Summit by Lee Hopley from UK Finance, the Office for Budget Responsibility (OBR) is predicting that GDP, household spending, business investment and real disposable income will decrease during 2023 with unemployment expected to stay steady. 2024 should see a recovery across all areas with the exception of unemployment, which is expected to continue to rise.

This outlook is similar across the world as governments try to recover from the long-term economic damage caused by the COVID-19 pandemic.

What is the plan of action for business innovation in the UK?

Supporting innovation in the UK is key to growth and prosperity, and it’s vital in terms of improving products, processes, services and business models. It has the power to transform existing sectors and stimulate new industries.

Innovate UK, the UK’s innovation agency, supports business-led innovation in all sectors, technologies and UK regions. Its aims is to help UK businesses grow through the development and commercialisation of new products, processes, and services, supported by an outstanding innovation ecosystem that is agile, inclusive, and easy to navigate.

With priorities changing and a real emphasis on improving the quality of life for all, Innovate UK will deliver ambitious and purpose-driven programmes in four key areas:

  • Net Zero
  • Health & Wellbeing
  • Technologies
  • Foresight

Innovate UK has a £150m Innovation Loans programme that spans three years and is live now. The programme helps businesses access funding at all stages of innovation.

It is also helping investors with its continued investor partnerships programme, which includes the £80m future economy programme. Starting in January 2023, SME competitions will begin and run through to summer 2024 with the programme connecting SMEs to investors.

The Early-Stage Investment Summit in London

How can entrepreneurs/founders secure investment during a downturn?

With investors more cautious in the current climate, it’s essential that entrepreneurs and founders understand the market need for the solution they are offering. They must be able to concisely describe why their product or service can meet a genuine market need, as well as understand the timing for what they’re trying to achieve.

With the economic turmoil across the globe, entrepreneurs and founders need to plan for a longer fundraising period of around 6 to 9 months, to ensure they have adequate time to complete their round. It’s imperative to have a roadmap and a defined growth loop to ensure that the business is able to scale and attract investment when it needs to.

During the Summit in London, TechStar’s Saalim Chowdhury took the audience through ‘The Importance of Fundamentals’, and the full slide deck is available to download on his website.

What are investors looking to invest in?

It’s not uncommon for an investor to stick to investing in what they know and often an investor will invest in similar businesses. That being said, the right idea can create plenty of interest and excitement and as we saw during the pandemic, entrepreneurs and founders have shown themselves to be able to pivot.

One area that is of interest to investors right now is HealthTech. With the NHS under constant pressure following a backlog caused by the pandemic, there’s a real opportunity in this space to make significant changes that will make the lives of workers better and benefit patients too.

With more data available than ever before, and advances happening every day, HealthTech is a sector that has plenty of untapped potential. We started to see a shift during the pandemic with patients being able to access health care services via smart devices and medical professionals being able to monitor patients at home without the need to take up a hospital bed.

The Early-Stage Investment Summit in London

What is the future outlook of early-stage investment?

At the present time the biggest challenge for both investors and entrepreneurs/founders is the changing governments. During 2022, the UK has seen four Chancellors and three Prime Ministers leaving the future uncertain.

In positive news government changes to SEIS will mean that companies are able to raise up to £250k through the scheme from April 2023, £100k more than previously. Companies who are up to three-years-old will also be apply to apply for SEIS.

From the same time investors can invest up to £200k, instead of the previous amount of £100k, through SEIS.

Despite the challenges ahead, entrepreneurial appetite is recovering and businesses are proving resilient against the odds. The pandemic accelerated the adoption for new technology, particularly in digital, as we all had to change the way we live and interact with others, creating plenty of exciting opportunities.

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By UKBAA 14 Dec 2022