‘A sad day for startups’: Industry reacts to loss of Tech Nation
The UK tech community has reacted with an outpouring of shock and sadness upon learning that Tech Nation, the entrepreneur network that has supported thousands of British startups over more than a decade, will shut down operations after losing its core government funding.
Since it was launched by then-Prime Minister David Cameron in 2010, Tech Nation has had a hand in the development of some of the UK’s most well-known startups. The list of Tech Nation-supported companies includes Revolut, Darktrace, Deliveroo, Ocado, Marshmallow, and many more.
But in January, the government officially awarded a £12m funding grant to Barclays Eagle Labs, following an open tender process and months of speculation that Tech Nation had lost out.
Just 11 days later, Tech Nation announced that without government funding – which it has heavily depended upon since launch – it is no longer able to operate.
It will cease operations on 31 March. In the meantime, it is looking for a buyer to transfer over assets.
‘It makes zero sense’
There has been plenty of anger directed at the government, which last week vowed to make the UK the “next Silicon Valley”.
“It’s a sad day for technology entrepreneurs and startups,” said Leo Cunningham, CISO at Flo Health.
Cunningham said that the decision to cut Tech Nation’s funding amid the dire economic state of the UK “sums up the current logic of the UK government”.
Cunningham said that the loss of Tech Nation’s startup support will leave the UK “at a disadvantage with other nation-states” and will “weaken UK growth for startups and incubated entities”.
He added: “Tech Nation’s return on the UK economy, showcasing cyber talent and outside investment into scaling these companies, pays for itself.”
Tech Nation has often said that it delivers a £15 return on investment for every £1 of public money it receives.
Russ Shaw CBE, founder of Tech London Advocates and Global Tech Advocates, said the UK tech ecosystem has “lost an important member of its community”.
Sarah Barber, CEO of VC firm Jenson Funding Partners, described the government’s decision as “puzzling” and called for clarity from the government.
Philip Belamant, CEO and co-founder of fintech company Zilch, a Tech Nation alumni, said the decision “makes zero sense”.
The decision to award the funding to Barclays, made by the Department for Digital, Culture, Media and Sport, comes as the government faces mounting pressure from the UK tech industry over cuts to the R&D tax credit scheme.
Richard Dana, founder and CEO of Tembo, pointed out the recent IMF forecasts that suggested the UK would be the only major economy to shrink this year.
Dana added: “The innovation economy should be at the centre of this – but the signs from the government are anything but supportive – having tightened the R&D tax credit scheme and now redirected funds from one of the tech scene’s big success stories.”
All eyes on Barclays
While Tech Nation will cease operations at the end of March, attention is now turning to its successor, Barclays Eagle Labs.
Barclays launched Eagle Labs in 2015. Today it has 34 physical incubators spread across the UK that aim to help entrepreneurs scale their businesses. Its growth programmes, include the Black Founder Accelerator and Funding Readiness.
Some have questioned why a bank that made pre-tax profits of £3.7bn in the first half of 2022 requires £12m in taxpayer funding.
“Any future government-backed scheme must build on its legacy and help ensure the UK remains a world-leading place to start a business,” said Seb Wallace, investment director at Triple Point Ventures.
“It seems strange to give a private bank Tech Nation’s government funding, let’s hope Barclays can take up the mantle and strengthen the UK’s position as a tech leader at a time when startup-led growth is going to prove increasingly crucial for the UK economy.”
Some have raised concerns that Eagle Labs’ accelerator schemes will become a fintech “acquisition funnel” for the bank. Oli Hammond, investment director at VC firm Fuel Ventures, wrote that taxpayer money is “realistically going towards customer acquisition for a big bank”.
UKTN has contacted Barclays Eagle Labs for comment.
While Barclays has attracted its share of critics, not everyone is so quick to dismiss Eagle Labs.
“While I applaud Tech Nation for the absolutely vital role it has played in nurturing many startups that have now become household names, I would urge caution before writing off what Barclays Eagle Labs can do,” said Martin Hartley, managing director of Emagine.
“It is a commercialised world where organisations are being creative and innovative, and Barclays must have done something incredibly special to win this grant, so it is only fair to congratulate them and not let their achievement be overshadowed because they are part of a large corporate.”
Ben Clark, director of Future Worlds, the University of Southampton’s on-campus startup accelerator, said that there is no doubt that Tech Nation has “made valuable contributions” to the UK startup ecosystem over the past decade.
However, he added: “Tech Nation was built to grasp the innovation mandate but focused on more advanced scaleups. To truly deliver on the UK’s hugely promising innovation pipeline Eagle Labs now needs to bridge the gap to focus on the true early-stage startups that will build the world of tomorrow.”
Tech visa uncertainty
There is now a big question mark over the future of Britain’s global talent visa, also known as the tech visa. The hugely popular scheme, created to make it easier for talented workers from abroad to come to the UK and contribute to the digital economy, was managed by Tech Nation. It is currently unclear who – if anyone – will take over running the visa scheme from April.
“Many people – myself included – could draw up a list of things we would have liked to see Tech Nation improve upon, but defunding it completely feels like a big own goal,” said Jonny Clark, head of Startup Grind. “How will Barclays support entrepreneur or global talent visa applications, which are woefully low compared to where they should be?”
John Kiely, partner and head of immigration at Howard Kennedy, which has advised entrepreneurs going through the Tech Nation visa application, said the end of Tech Nation will “come as a great concern to those considering applying for the visa”.
He described the complex visa application process which requires “three detailed reference letters from senior individuals, a personal statement and 10 supporting documents”.
Kiely added: “The Home Office has been notified of Tech nation’s plans to cease operations and Tech Nation has confirmed that their visa programme will continue in the immediate term. The immediate term is not defined, but it would be sensible for would-be applicants to submit their endorsement application as soon as possible.”
Graham Hussey, founder of Dream Factory, said: “I’m sad to see Tech Nation close down. Its legacy will live on through the hard work of the founders they’ve nurtured, but more importantly through the talented people who helped make Tech Nation great.”
Additional reporting by Robert Scammell.