Research has shown that 66% of UK investors are looking beyond large cities such as London and Manchester to find companies to invest in.
The poll, conducted by Norstat for angel investment growth marketplace Connectd, showed how investors no longer feel restricted by location when choosing companies to back.
Startups tend to cluster in large cities, whether its San Francisco in the US or London in the UK.
While the Connectd poll has a small sample size of 100 entrepreneurs and 100 angel investors in the UK, it reflects a trend accelerated by the pandemic.
The rise of remote working has seen many employees based at tech companies move away from cities. This has supplied more local talent to these areas and made it easier for young companies to set up outside of cities, which often come with higher operational costs.
Tech Nation figures from 2020 show that while London accounts for a fifth of all those employed in the tech sector, nationally there has been an increase of 40% in the past two years.
In particular, there has been a growing UK trend of tech companies opening offices in places such as Bristol, Cambridge and Manchester that pre-dated the pandemic.
Startups from Manchester such as Charco Neurotech and Sphere Fluidics recently raised £7.4m and $40m respectively.
Bristol-based interface tech startup Ultraleap just secured £60m in funding, demonstrating how investors are splashing the cash outside of London.
Reflecting the change in working practices, 46% of investors feel there’s no need to meet in person for meetings. While 65% of investors are on track to witness returns grow or remain the same compared to pre-pandemic, 35% said they had seen a decline in returns.
On the flip side, 43%of entrepreneurs said they would have spent more time searching for investors during their journey and 43% also said they would change their source of investment.
“Deal sizes are increasing, and the amount of funding rounds are decreasing despite the restrictions imposed by the pandemic,” said Roei Samuel, founder of Connectd. “Efficiency is pivotal for investors right now; they do not want to be stuck on calls or in rooms with startups that simply aren’t a good fit for them.
“Equally, it is a complete waste of time for an entrepreneur to engage with an investor that wouldn’t offer them the right kind of engagement for their business, so more must be done to close this gap.”