As a Manchester United fan, few things have put more of a smile on my face than watching our revival under club legend Ole Gunnar Solskjaer. His willingness to champion talented young stars and allow them the freedom to express themselves on the pitch has set the team on a winning path.
What I would give for the same ethos to be applied to the northern technology industry. The region has every reason to believe that it can become a global hub of start-up innovation. And yet, we remain bogged down in tired old debates about the Northern Powerhouse, central government and city devolution – we must cast them aside and liberate the North’s entrepreneurial spirit if we are to create an evolving ecosystem.
Philip Hammond made admirable pledges last Autumn to “fire up the Northern Powerhouse and put fuel in the Midlands Engine”. However, the Chancellor simply cannot be the visionary that inspires a generation to become innovators. Instead, a broader church of founders, funders, institutions and corporates must champion northern tech in a way that inspires talent and attracts investment.
The groundwork for many aspects of this project has been laid. Crucially, the North is already home to a prodigious talent pool. Greater Manchester alone is home to four universities with a student population of almost 100,000, while the city has a rich history as a centre for computer science – Alan Turing joined the Computing Machine Laboratory at Manchester University in 1948 and laid the foundations for the groundbreaking department of computer science established in 1964.
The challenge for the region has consistently been retaining the graduates nurtured by northern universities and technical centres. For decades, a substantial proportion of this talent has been lured away to London every year. We must, therefore, seek to create an environment where the energy and innovation of talented young people can be harnessed to build dynamic businesses.
To do this, we need to work with what we already have, identify the north’s existing specialisms and strengths, and champion the freedom of these industries to innovate and invest in entrepreneurial companies.
The region can lay claim to a thriving network of corporate and financial institutions that already contribute to the northern economy. From homegrown firms such as the Co-operative in Manchester and First Direct in Leeds to global banks, such as RBS, State Street and Barclays – the region is awash with corporate headquarters.
The north has also begun to lay the seeds of a startup revolution. Take financial services: Beringea recently led a £9m investment in AccessPay, a corporate payments platform founded in the centre of Manchester. However, the nascent fintech industry of the north has yet to reach critical mass. Only Atom Bank, the Newcastle-based digital lender, has reached vast scale and international recognition with rumours now circling of an acquisition by BBVA, the Spanish banking giant.
A substantial barrier to the growth of the north’s fintech startups has been the relative lack of funding available for the region’s digital businesses. Data recently released by Pitchbook and London & Partners, the mayor’s promotional agency, threw into sharp relief the disparity in investment between the capital and the rest of the UK: London’s technology companies captured 72 per cent of the total £2.5bn raised by British tech firms in 2018.
This is a remarkable imbalance that must be addressed. It is simply not the case that London is creating three-quarters of the digital businesses worthy of investment in the UK. Northern tech is making progress with data from KPMG finding venture capital firms invested over $49m (£37.5m) into the region’s startups between July and September 2018, up by nearly $10m (£7.7m) from 2017. However, we need to double down on accelerating this growth in investment for the region to thrive.
Capital follows talent. Therefore, our objective of channelling investment into the northern digital economy will only be achieved by encouraging young talent to thrive. Which brings us back to Manchester United. Old Trafford, the club’s home, is known as “The Theatre of Dreams”, where young footballers can aspire to make their names and become global icons. This is the approach that we must bring to the northern technology industry.
Recent announcements from Amazon and Channel 4 that they will be launching major headquarters in Manchester and Leeds respectively will undoubtedly help in drawing in talent. With the BBC and a host of other influential organisations based in Media City in Salford, the beginnings of a shift in the balance of graduate pulling power between London and the north may be gaining traction.
We must also begin to think laterally about sources of funding for northern startups. For example, the established network of corporates across the north could provide co-investment capital for growing businesses across the region. The corporate venturing model is well established among the likes of Cisco, Salesforce and Amazon, and could easily be replicated by large regional businesses with knowledge of the region and keen to support the ecosystem to fund a future generation of northern superstars.
This shift in focus need not be over-complicated. We must champion the north’s unique qualities, attract and retain talent, and consider the funding ecosystem for scaling businesses. Perhaps then we can build northern tech’s theatre of dreams and inspire a cohort of startup icons.
Marc Shirman is investment director and northern lead at Beringea