Tech North UK Investment Index 2007

2016 was a record year for investment in Northern tech companies with a total of £326.9m invested, according to the first Tech North Investment Index report.
The future of the tech sector in the North of England is looking positive based on these findings.
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invested North Deal Tech Tech North year growth fund Pitchbook Tech North
2016 was a record year for investment in Northern tech companies with a total of £326.9m invested, according to the first Tech North Investment Index report.
The future of the tech sector in the North of England is looking positive based on these findings.
About manojranaweera

invested North Deal Tech Tech North year growth fund Pitchbook Tech North
<p>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
1
* 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
1551
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
8
Source: Pitchbook, Tech North March 2017
2
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
3
Capital Invested by Deal Type
4
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
5
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)
7
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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