Innovation centre Plexal calls on industry leaders to spend to save startups
The government has pledged to spend 1/3 of its budget with SMEs and has also introduced schemes such as CBILS, BBLS and the Future of Fund to support startups during the pandemic, but as government support eases and investors continue to be cautious about funding early-stage startups, many startups are already struggling to stay open. A new campaign from Plexal, the innovation centre and coworking space owned by clients of Delancey, places the responsibility for saving startups at industry’s doors.
Spend to Save, which launches today, is aimed at encouraging industry leaders and large private sector organisations to spend their budgets with startups by giving them contracts or awarding them with pilots.
It follows Plexal’s support for the Save our Startups campaign, which called on the government to act early on in the pandemic to protect Britain's entrepreneurial future.
Plexal has published an open letter to industry, which can be found here. It argues that if industry doesn’t support startups at this point, large organisations in the private sector could suffer from having an innovation deficit years down the road as early-stage startups won’t be able to survive without enough cashflow or contracts.
But in an antidote to the traditional open letter, Plexal is not asking for industry to add signatures. Instead, Plexal’s managing director Andrew Roughan says: “So we’re not asking you to lend your signature to this open letter. Adding your logo to our website won’t make a difference, but spending your budget with startups sooner rather than later will.”
The challenge facing startups
Research from Plexal and Beauhurst has found that over 1,400 British tech startups have filed for administration, liquidation or dissolution since lockdown began. Its analysis showed that September featured the highest number of startup deaths in a month in the last ten years, with 274 fast-growth companies filing for administration, liquidation or dissolution.
The most recent data shows that VC funding into startups is 20% lower than the same period in 2020. The figure is even lower for early-stage startups, which are experiencing a 51% reduction in funding as investors become more risk-averse and shore up existing portfolios.
The figures come from Plexal and Beauhurst’s ongoing analysis of nearly 30,000 startups and high-potential companies (firms that have attracted equity or venture debt funding) to understand investment activity since UK lockdown began on 23 March. The latest figures in full can be accessed here.
Andrew Roughan, managing director of Plexal, commented: “Britain is home to some of the most innovative university spinouts, startups and scaleups in the world, and large organisations depend on those companies to help them solve their challenges. It’s imperative that industry plays its role, along with the government and investors, to support our startups.
“If startups aren’t able to gain contracts and pilots now, we could see less investment in research and development, contracted job growth and more startup closures – all of which will have a terrible impact on the UK economy and industry’s ability to source ideas and innovation. This is about survival, for large and small organisations alike.”
