Tech Nation recently published their latest report on the state of the UK tech sector in 2020. While the global pandemic has had a modest impact across the board, there are significant signs of strength and resilience in UK tech, boding well for a strong 2021 and beyond. Indeed, UK tech businesses are among the best in the world at attracting investment. We look here at some of the conclusions of the report, and how intellectual property – IP – considerations could help when seeking investment.
“UK tech VC investment is third in the world, hitting a record high of $15bn in 2020 in the face of challenging conditions.”
VC – venture capital – investment in the UK tech sector is bettered only by the US and China. The level of VC UK investment reflects confidence in the technology, the businesses, and in the ability of the UK to support those businesses onwards to growth and profit. Within 2020, the quarterly investments in UK tech businesses also rose, boding well for 2021. Globally, health, transport and fintech have been the sub-sectors leading the way; in the UK fintech is leading.
The Tech Nation report considers sub-sectors of “tech”. One of which, “deep tech”, shows particularly interesting performance. Briefly, deep tech is science- or engineering-based technology solutions and the businesses that develop and commercialise them. Deep tech tends to have longer development timescales, and can be contrasted with, for example, app development. Deep tech includes areas such as advanced materials, artificial intelligence, robotics, photonics and quantum computing. Ordinarily deep tech also includes biotech but the Tech Nation report has not included biotech within its analysis. Tech Nation identify deep tech as exhibiting dominant rates of expansion of investment: 2020 saw a 17% increase in investment in UK deep tech. This is the highest rate of growth seen globally across deep tech. Surely a sign of the health of this sector in the UK.
Government initiatives to both improve the UK’s climate credentials and boost the economy are clear to see, for example through the green industrial revolution plans. It’s reassuring to see via the Tech Nation report that the private sector and investors are also taking up the mantle of addressing climate change. Investment in UK “Impact tech”, which includes green technology, is shown to have increased by 160% since 2018. The US shows a comparatively modest 15% increase in the same timeframe.
Contribution to the economy
Not only are tech companies gathering investment but they are delivering value too. The report shows that, since 2016, the total value of the start-up and scale-up economies in the UK has increased steadily from around $200bn in 2016 to nearly $600bn in 2020. Furthermore, the total GVA (gross value added) from the tech sector to the UK economy has grown between 6-8% for each of 2016 to 2018. Taken together, these numbers demonstrate a significant and delivering UK tech economy.
Seeking investment and the role of IP
The report generally focuses on investment in tech from angel investors in start ups to later A, B, C, and mega-round investment stages. Investors at all stages seek attractive propositions. Most investors aim for a financial return on their investment, either through profit shares or through future sale or IPO. Selecting businesses for investment is a challenge. Which propositions are the right ones? Which propositions are going to deliver the best return? Which propositions are unlikely to generate any return?
When answering these questions and making investment decisions, an investor will do their due diligence. They will assess and investigate the business to understand the business model, the future, and the strengths and weaknesses. Part of that due diligence, particularly in tech, may be around IP. IP belonging to the business in question and IP belonging to competitors may be assessed. Does the business have a focused and commercially relevant IP portfolio to brace the business model? An IP portfolio can demonstrate clear transferable and exploitable assets, beyond the leadership and the workforce. Does the business have any awareness of risks they might face from competitor IP? An appreciation of these risks, even when there ultimately does not seem to be any significant risk, could be a strength for any business seeking investment (see more in our blog Why building and nurturing an IP culture in your business is important).
If you would like to understand how IP can help your business to grow, and to improve investment prospects, feel free to contact us at any time.
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