I was just as perplexed as others within the wider tech ecosystem by the government’s decision to strip Tech Nation of the £12m Digital Growth Grant and award it to Barclays Eagle Labs. For a government that recently reiterated its desire to become the “next Silicon Valley”, withdrawing funding from Tech Nation shows its approach to UK startup policy takes one step forward and two steps back.
Born out of the Silicon Roundabout tech boom in London, Tech Nation has been an integral part of the UK’s startup ecosystem for over a decade. Its forced closure is not just the loss of an organisation that, from the start, was designed as a non-profit to help support the UK’s tech ecosystem, but also many years of building up the human and social capital.
The decision is made all the more puzzling following the government’s recent focus on promoting the UK as a nation of innovation. The increase to the SEIS investment cap, announced during Kwasi Kwarteng’s ‘not so mini budget’, will let entrepreneurs raise more money in less time when it comes into effect this April.
This cannot be overstated: entrepreneurs will now have to spend less time fundraising, and more time doing what they do best – building a business. Add to this the government’s decision to increase public funding in R&D to £20bn and there are clear examples that the UK’s startup ecosystem is very much front and centre.
Conflict of interest
The fundamental problem here with awarding Barclays the £12m Digital Growth Grant is, in my view, a conflict of interest. The UK is a world leader in fintech and well ahead of its European rivals when it comes to securing VC investment. In 2022, the UK was behind only the US once again as a fintech hub, and raised more than all of the next 10 European countries combined.
Yes, Eagle Labs has been a supporter of successful UK fintechs, but this is government money. We have some of the biggest names – Revolut, Monzo – here in the UK and giving Barclays, a competitor, potential access and insight to the next generation of fintech companies just doesn’t add up.
To put this into perspective, would you put Volkswagen in a position where they had exclusive access to all the up-and-coming startups in the battery tech space? No. This looks to me like a conflict of interest and I’m sure some of the UK’s leading fintech businesses would be inclined to agree with me.
The early-stage game needs as much collaboration across many brilliant channels – including Eagle Labs – as possible. But to me, the government’s decision has been to focus on one channel and stick with that. This is a restrictive approach when it should be increasing the number of opportunities and including more of the UK’s great minds to find solutions to the challenges we face.
Value for money
The government said Barclays represented “the best value of taxpayers’ money as the full grant will be allocated to the UK tech ecosystem”. Given that 95% of the startups from Tech Nation’s accelerator programmes moved to next-stage funding and more than a third of UK tech unicorns have been linked to a Tech Nation programme, I’m intrigued to know what the government thinks good value is for taxpayers. It has contributed £600m of gross value add to the UK economy since 2014 and a £15 return on every £1 invested in Tech Nation by the UK government, which seems to me to be a healthy use of taxpayer money.
With the closure of Tech Nation, we’re not just losing an industry hub, but an important research house. Its research has been invaluable in drawing attention to some of the underlying issues within the tech industry. Recent research drew attention to the fact that women account for only 26% of the UK tech workforce.
It’s important to remember that this institution was not there simply to back UK startups, it was an important tool that challenged the industry and highlighted what changes need to be made. I fear the government may have overlooked this key aspect of Tech Nation’s work, and Barclays’ ability to fill this important void.
We need more institutions like Tech Nation. Barclays’ Eagle Labs is in itself a great platform that helps startups attract funding. Why did the government not simply continue to fund Tech Nation, whilst offering additional money to Eagle Labs? That would be two steps forward in creating the next Silicon Valley.
Sarah Barber is the CEO of Jenson Funding Partners.