More than 140 UK tech founders, executives and investors have signed an open letter to the government raising concerns over the “alarming” reports that entrepreneur network Tech Nation is set to lose its public funding to Barclays.
The letter, organised by tech advocacy group Coadec, called for government-backed support to be “grounded in the startup ecosystem” and “not looking to ride on its coattails”.
In September it emerged that Barclays Eagle Labs had secured a £12m grant put out to a competitive tender process by the Department for Culture, Media and Sport (DCMS).
Reports that Tech Nation is set to lose out to the startup incubator division of a multinational bank were met with criticism among members of the UK tech community.
The extent of that backlash has now become clearer, with UK tech heavyweights including Founders Forum’s Brent Hoberman, Seedrs co-founder Jeff Lynn and Wise co-founder Taavet Hinrikus among the signatories.
Other signatories include the founders of Babylon Health, Zilch, Cervest and Plend, along with senior management at VC firms such as Backed and Fuse Capital.
“We support the evolution of our ecosystem, and the help startups need has changed over the past ten years,” the letter said. “But we are concerned that this change risks throwing out the baby with the bathwater – and in this moment of crisis, the message this sends about what government thinks of the sector is damning.”
The open letter comes amid a worsening macroeconomic outlook that has already resulted in tech layoffs, declining startup valuations and dwindling funding availability. The signatories called on the government to continue supporting startups in the long term in areas such as visas and overseas promotion.
A spokesperson for Barclays Eagle Labs declined to comment on the letter and said it is awaiting the formal outcome to be confirmed by DCMS.
Gerard Grech, CEO of Tech Nation, told UKTN that the growth network is “hugely appreciative of the support the Coadec letter demonstrates and [Tech Nation is] in agreement with its sentiment”.
Grech added: “Tech Nation’s model, offering, experience and network places us uniquely at the beating heart of the UK scale-up scene, to provide coordinated ecosystem support.”
A DCMS spokesperson said: “We want the UK to be the best place to start and grow a tech business and the Digital Growth Grant continues our support for the industry. The successful grant recipient will be the best organisation or organisations to drive tech sector growth across the UK while ensuring value for taxpayers. No final decisions have been made.”
Tech Nation funding gap
While there is no final confirmation yet, losing the Digital Growth Grant would create a notable funding shortfall to Tech Nation, which had relied on guaranteed government support for the previous six years.
Approximately 75% of Tech Nation’s revenue comes from government grants, with the DCMS funding comprising a significant portion of that. Tech Nation will continue to receive DCMS funding until March 2023, after which it is set to lose out on £6m a year for two years. Company filings show Tech Nation expects to “maintain a sufficient cash balance” to meet financial obligations should it lose the DCMS grant.
Tech Nation was first launched in 2011 and created in its current form in 2018 by the merger of Tech City UK and Tech North. It says that every £1 of government funding returns £15 into the British economy and that 95% of the 4,000 companies it has supported over the last eight years have gone on to scale, compared to the industry average of 80% of startups collapsing within their first five years.
Barclays launched Eagle Labs in 2015. Today it has 34 physical incubators spread across the UK that aim to help entrepreneurs scale their businesses.
Eagle Labs says it has supported over 6,900 businesses through its growth programmes, which include the Black Founder Accelerator and Funding Readiness. Alumni of its programmes have gone on to raise a collective £1.9bn in external funding, according to Barclays.