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Quarter of UK tech startups reach later stage but half struggle to scale

tech startup later stage

Nearly a quarter of UK tech companies made it to Series C or exit stage in 2021 but the UK must do more to nurture earlier stage startups, according to Tech Nation.

The tech entrepreneur organisation said that 50% of earlier-stage startups were struggling to scale beyond the seed and pre-seed stage.

Tech Nation said that these startups – particularly those in emerging sectors that have a longer time to market, such as deeptech – were struggling with low growth and investment.

Meanwhile, 54 tech companies reached the initial public offering (IPO) stage over the last decade – equivalent to 0.4% of firms going public.

In a sign that the UK’s tech market has been maturing, 37 of those public listings took place in 2021 – a record year for British tech investment and IPOs.

Among them were Deliveroo, Darktrace and Wise.

Fintech companies dominate UK tech for investment and accounted for 15% of IPOs last year.

“We know that the UK is globally renowned for its success in fintech, which dominates for IPOs, and although this is truly exciting news, we must not ignore the fact that an even larger percentage of tech companies are not seeing the same success,” said Dr George Windsor, Research and Data Director at Tech Nation.

“We must nurture the newest wave of UK tech companies, who are innovating to address important social, healthcare and environmental problems. It is imperative that we give these companies the support they need to achieve their full potential and shape our world for the better.”

Previous data show that energy tech startups have been struggling to scale. Investors cited the longer path to revenue compared to sectors such as fintech.

With deal volume down as investors tighten belts and conduct more stringent due diligence, there are signs that VCs will move to perceived safer bets such as fintech.

Swati Lay, chief technology officer at Funding Circle, said: “This research points to UK Tech’s huge potential, and the continued need to ensure fast-growing firms receive the right support at the right time.”