Beyond the Capital with Midlands-based investor Midven

“Most of the money is in London,” says Tony Stott, CEO of Midven and investment director at Future Planet Capital. “We’d like people from London to come up to the West Midlands to invest more”.

The region, which has a tech sector valued at £15.3bn, has been creating new funding resources for its startups and SMEs. Last month, the West Midlands Combined Authority and West Midlands Pension Fund set in motion a new £25m SME fund, which will managed by Midven. The fund will invest in green tech, advanced manufacturing and life sciences companies.

Stott believes initiatives like these can help usher funds from beyond London, Oxford and Cambridge and into the Midlands.

“The easier it is for them to invest, the more likely they are to come out of London,” he tells UKTN.

“If they know they [can] come to the West Midlands and they have got someone who could invest alongside them, that means it’s more likely that they’ll get involved in a deal because they’ll feel that they don’t have to put all the cash in themselves and they’ll be somebody on the ground locally.”

West Midlands growth

Birmingham-based Midven was created by local entrepreneurs from Derby, Leicester and Nottingham in 1991 to address the lack of funding in the region. The inaugural fund it managed was provided by HSBC. In April 2021, Midven was acquired by growth equity firm Future Planet Capital.

The venture capital firm is also responsible for looking after the Midlands Engine Investment Fund. While the Midlands has come on in leaps and bounds for tech investment, with tech startups collectively raising more than £850m since 2020, according to Stott there is still more to be done.

“Manchester is a bit more coherent as an investment and finance centre because it’s more remote from London, whereas Birmingham and Coventry tend to be a little bit more forgotten about,” says Stott.

“There’s a hell of a lot of commercial space going up, incubator units are being built at a rapid rate.”

Areas to be watched in the West Midlands according to Stott are green technologies, such as recycling batteries and better engines for electric motors.

The strengths of the region include Lemington Spa’s game industry, which is home to the likes of Forza maker Playground Games and Assassin’s Creed developer Ubisoft, as well as its strong automotive presence.

Companies in the West Midlands can also draw on talent from a young population that have access to multiple universities, including the University of Birmingham and Aston University.

Health tech focus

An area Stott is passionate about is health tech, particularly companies that are addressing the challenges such as social care that come with an ageing population.

“Most people don’t want to be in hospital and would much rather be at home,” he says.

One of Midven’s portfolio is the software company Infinity CCS, which assist ambulance medical professional in how best to treat a patient, and then decide the best hospital to send a patient to. It is currently working with the New York ambulance service.

“People cost a lot more money when they stay in a hospital than when they’ve been looked after at home.”

VC funding drop

The VC market has plummeted from the pandemic highs, which were fuelled by low-interest rates. In the first three months of 2023, UK VC investment levels fell to pre-pandemic levels for the first time.

How is this affecting Stott and Midven’s investment approach?

“We have seen the valuations are going down slightly because there’s less money about but it doesn’t affect our appetite to invest,” says Stott. “We’re sort of keen to invest but there is less money generally sloshing about the system.

“The smaller deals which we tend to get involved with will probably carry on pretty much the same as they always have done.”

“So the economic climate now doesn’t really affect us because we’re thinking what matters is the economic climate in three, five or seven years’ time, not the economic climate today.”

Beyond the Capital, an interview series with tech investors and venture capitalists based outside of London, is published monthly. Last month UKTN spoke with Cardiff-based investor Waterspring Ventures.