Why the UK needs to decentralise its startup ecosystem

You’ll often hear investors declare that ‘talent can come from anywhere’, yet the venture capital distribution in the UK tells a different story.

London, home to only about 11% of the UK population, captured approximately 65% of total VC funding in 2023. This discrepancy suggests that access to resources, expertise, and networks is disproportionately skewed towards the capital.

This centralisation of investment isn’t limited to London. It extends to the ‘Golden Triangle’ of London, Cambridge, and Oxford, which collectively secure about 90% of all VC funding. Meanwhile, other regions like Edinburgh, Manchester, and Bristol, and especially smaller cities like York, are left grappling for a slice of this investment. This restricts the broader potential of the UK's economic landscape, stifling innovation and growth in regions outside the Golden Triangle.

A mandate for growth

The UK faces a General Election on 4th July, but it remains plagued by shaky economic figures – marked by a modest 0.6% GDP increase in Q1 2024 following two straight quarters of decline. Therefore, the mandate is clear for the incoming government: bolster economic growth and project stability.

As Downing Street looks for ways to diversify the UK’s economic prospects across the country, a wave of successful regional startups would make a real difference. However, this requires us to empower entrepreneurs through the development of local investment networks.

Building regional investment ecosystems

Regional networks such as Cambridge Angels have laid the groundwork, showcasing the impact of localised capital support, proving that with the right backing, regional hubs can foster innovation and entrepreneurship directly.

The launch of York Angels, for example, took after the example of York’s historic Merchant Adventurers – the original venture capitalists. It has highlighted how regions like York can mirror the entrepreneurial spirit and success of metropolitan hubs like London or Oxford. Just as Merchant Adventurers invested in new ships to improve trade with Europe, modern investors can build up the necessary infrastructure to make nearby startups a success.

The story of Anaplan, a startup born in a York barn, exemplifies what can be achieved outside major hubs. Anaplan grew to be headquartered in Silicon Valley and became the UK’s second tech unicorn, leaving behind an economic legacy in York, which still benefits from a significant Anaplan office and the active involvement of its founders. The economic contributions of such companies underscore the potential of regional investments to stimulate local economies and inspire further entrepreneurial activity.

Democratising access to capital

Sam Altman’s notion that "if you believe that intelligence and determination are evenly distributed around the world, then 95% of founders will be born outside the US" resonates deeply here. We can see that the disparity in funding across the UK limits potential entrepreneurs based on their geographic location. Upcoming grassroots investment networks are aiming to mitigate this by supporting startups with advice, guidance, and introductions, empowering them to compete as effectively as any startup in the Golden Triangle.

To truly democratise the entrepreneurial opportunities across the UK, it is vital that we remove barriers for those with entrepreneurial spirit and solutions to real-world problems. This strategy will not only help to balance the economic scales but also harness the full potential of the UK's distributed talent. By fostering environments where innovation can thrive anywhere, we can transform the economic landscape to be more inclusive and dynamic.

Harnessing the UK’s potential

Decentralising investment from the Golden Triangle to include the whole nation is not just about fairness; it’s about leveraging untapped potential and stimulating economic growth across the UK. The success of networks like Cambridge and York Angels serves as a blueprint for what can be achieved when investment reaches beyond traditional hubs. Let's reshape our investment strategies to reflect the true distribution of talent across our nation, ensuring that funding, like talent, can indeed come from anywhere.