Tech on the Tyne
Newcastle's tech ecosystem at a glance
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Contents
JUMP TO A SECTION THAT INTERESTS YOU
Foreword
Newcastle tech ecosystem overview
Industry data snapshot
Strengths & challenges / Startups to watch
North East ecosystem
Startup profiles and key investors
ESG and Newcastle's tech sector
What next for tech on the Tyne?
Thanks to our sponsors
Introduction by our sponsors
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As we navigate a complicated and evolving global context, most, if not all economic strategies will talk about the importance of digital adoption and growing the number of tech and creative businesses in the economy. After all, recent events have accelerated digitisation in all our lives. The North East is rapidly being recognised as a vibrant region that is achieving this goal – creating the right conditions for innovative and cutting-edge tech businesses to locate and grow here and with a growing reputation as an international hub of digital and tech expertise. In 2021, the region saw the highest levels of inward investment outside London with Newcastle recording a record year of investment from international tech companies. The region ranked top for inward investment of tech companies – with disruptors like Monstarlab, Credera, Thoughtworks, Version One and Arctic Wolf adding to an existing cluster that generates over £2bn in revenue and employs close to 35,000 people in over 3,500 creative and digital businesses. At its heart Newcastle too is thriving, as one of the country’s top smart cities and home to both the National Innovation Centre for Data and National Innovation Centre for Ageing. It is the strength in depth of the wider digital ecosystem that is driving our success including a rapidly growing gaming cluster and leading companies like Sage PLC, Ubisoft, and the BBC Tech Hub to name but a few. To ensure the continued success of the region, we are working together with public and private sector partners, to make sure we have the right people with the right skills. Our universities alone are growing a future pipeline of talent with over 67,000 STEM students. We believe working together in collaboration holds the key. We know supporting the digital sector will drive wider regional transformative change, helping people age well, getting us to net zero quicker and creating a new, inclusive economy with improved access for all. Our collective actions will ensure the North East remains a great place to start-up, scale-up, invest, innovate, collaborate and grow.
Womble Bond Dickinson (WBD) is delighted to be part of this report as we believe that technology and data are significant contributors to growth and opportunity. Technology and data are key growth areas for the UK economy but the North East digital sector is really seen as demonstrating strong potential. This is great news as it will bring innovation, collaboration and job creation to Tyneside and the wider region. As the region now boasts one of the fastest growing tech clusters in the UK, and has recently also been recognised as an emerging fintech cluster, this is a region which is undoubtedly one to watch. It is also a region which firmly has its sights on being a centre of excellence for cybersecurity. This report is an ideal opportunity to identify how this potential can be nurtured further, and take the burgeoning Tyneside tech sector to even greater heights by attracting more innovation, investment and talent. With North East roots that span over two centuries, WBD is thrilled to continue supporting the region through our involvement in this report, which provides crucial insights into the North East's capabilities and potential.
Caroline Churchill Partner Womble Bond Dickinson
Newcastle is one of the fastest growing regional economies and is at the heart of one of fastest growing tech clusters. There are more than 50,000 registered businesses in the city region which include some renowned global brands. The city is a UK Science City and boasts a £92m investment programme into the Newcastle and Gateshead’s 80 hectare Accelerated Development Zone. That’s why we’re excited to sponsor this report – a chance to help showcase Newcastle’s innovative, high growth tech ecosystems. Tyneside is home to numerous thriving digital and tech start-ups and university spinouts covering sectors including FinTech, MedTech, software development, cyber security, gaming, e-commerce and data analytics. I may be biased but I think the people of Newcastle are some of the most innovative in the UK – the lightbulb, water purification and the windscreen wiper were all invented in Newcastle. Now we’re leading the way in technology. Today, business and technology innovation are inextricably linked and the rapid pace of technological change is one of the biggest challenges facing industry executives. This change is coming from some of the innovative businesses located right here in Tyneside.
Stephen Hall Office senior partner Deloitte in Newcastle
The North East is continuing to attract an array of high-growth and dynamic digital businesses that are genuinely transforming how we think about and interact with technology. That’s why we’re delighted to see UKTN shine a spotlight on the region. Tech on the Tyne reminds us what makes this part of the world such an attractive proposition for people, businesses and investors. In the past 12 months alone, we’ve secured inward investments from as far afield as Japan, Ireland and the US, which demonstrates the enduring appeal of the North East as a place to land and expand an international business. Looking ahead to the future, it’s important that we continue to foster the right conditions for business innovation and growth in the region while at the same time deploying some of the new technologies our companies are creating in a way that positively impacts both people and the planet. We believe the best way to do this is to leverage the region’s unique spirit of cooperation, togetherness and friendship that makes the North East one of the most inclusive business communities to be part of.
Dawn Dunn Digital and Tech Sector Lead, Invest Newcastle, part of Newcastle Gateshead Initiative
Dr Henry Kippin Chief Executive, North of Tyne Combined Authority
Newcastle has established itself as a leading light within the UK tech ecosystem. The city is home to a growing community of exciting, high-growth tech companies, including numerous well-known brands. Across the North East as a whole, technology firms boast a turnover in excess of £2bn, employing over 30,000 people in more than 3,500 businesses, according to Tech Nation. Newcastle itself benefits from having the highest proportion of STEM and computing students in the country, as well as the UK’s National Innovation Centre for Data. Supported by an increasing number of tech hubs, communities and accelerators, the future of Newcastle’s tech sector looks bright. The city is recognised for the strength of its fintech community – with the likes of Sage, Bottlepay and Singletrack based on Tyneside – along with several other emerging sectors, such as gaming and climate tech, which are attracting talent and investment into the region.
KEY SECTORS
LEADING BRANDS
COLLEGES & UNIVERSITIES
SKILLS BOOTCAMPS
HUBS, COMMUNITIES & ACCELERATORS
• Fintech • Cybersecurity • Gaming and eSports • Immersive technology, AI and VR • Medtech and healthtech
• Sage • QuantuMDx • Bottlepay • Haystack • Arctic Wolf • Opencast Software • Thoughtworks
• The National Innovation Centre for Data • Tech Talent Engine • Sunderland Software City • Version 1 Digital Academies
• Newcastle University • Northumbria University • Newcastle College • North East Futures UTC
• Ignite North East • Newcastle Helix • Dynamo North East • Digital Union • Northern Accelerator • Innovation SuperNetwork • CyberNorth •Floe •Startup Grind x Newcastle Upon Tyne
Go to Section 2 - Tech entrepreneur view of Newcastle
FOREWORD
As we navigate a complicated and evolving global context, most, if not all economic strategies will talk about the importance of digital adoption and growing the number of tech and creative businesses in the economy. After all, recent events have accelerated digitisation in all our lives.
February 2023
Produced in partnership with City Road Communications
The tech entrepreneur view of Newcastle
In November 2022, UKTN commissioned an independent survey among 50 technology business leaders in Newcastle to capture their views on what it is like to start and scale a tech company in the city. Carried out with leading market research agency Censuswide, the quantitative study provides a snapshot of what the city does well, what could be improved, and how Newcastle’s tech sector is evolving. Here’s what the data shows.
What are Newcastle's strengths and weaknesses as a tech hub?
More than nine out of ten (94%) managers and leaders within Newcastle-based technology businesses believe it has become more attractive to start a tech company in the city over the past five years. Almost two in five (38%) strongly agree with this view, with a further 56% saying they somewhat agree.
Strongly agree
38%
Somewhat agree
56%
Neither agree or nor disagree
6%
Somewhat disagree
0%
Strongly disagree
It has become more attractive to start a tech business in Newcastle over the past five years
However, the digital skills shortage remains a pertinent issue in the region, as it is across much of the UK. Only two thirds (66%) of respondents think there are enough prospective employees with digital skills in Newcastle.
Newcastle has a sufficient number of workers with digital skills for businesses
26%
40%
12%
22%
The vast majority (90%) of tech business leaders in Newcastle believe there are enough support networks across the region. Just 2% disagree with this view.
There are enough business support networks in the region
50%
8%
2%
When quizzed on what they think is lacking in the region that is hindering the success of their business, it emerged that funding (62% identified this as something that the region lacks) was the most pertinent issue, followed by access to talent and events and networking opportunities (both 44%).
We asked Newcastle’s tech leaders which sectors are thriving on Tyneside. Deep tech (technologies based on science and engineering), fintech, sustainability, health tech and consumer tech are all considered to be performing very strongly.
What sectors are flourishing?
Go to section 3 - Strengths & challenges / Startups to watch
62%
44%
32%
24%
Funding
Talent
Events/ Networking
Affordable office space
Public transport
Innovation hubs
What is most lacking in your region?
54%
36%
18%
16%
52%
70%
72%
58%
Deep tech
Fintech
Sustainability
Consumer
Healthcare
How strong or weak do you think your regions tech sectors are?
Very strong
Somewhat strong
Newcastle tech: Strengths & challenges / Startups to watch
Tech leaders in the Tyneside area are overwhelmingly positive about the region’s potential, with UKTN research showing that 94% believe the city has become a more attractive place to start a business in recent years. In fact, Newcastle has frequently ranked as one of the top destinations in Europe for foreign direct investment. But what are the key ingredients underpinning the strength of the sector, and what are some of the challenges standing in the way of Newcastle’s tech scene excelling further still? Here we take a deeper look at the strengths of Newcastle’s tech sector, as well as some of the challenges it is facing.
Strengths
Challenges
Support networks
Culture & collaboration
Access to talent
From Newcastle Helix to Dynamo North East, the city is well served by incubators, accelerators and professional networks. In fact, 90% of UKTN survey respondents said there are enough support networks in the region. These networks play a crucial role in helping sub-sectors flourish, says Dawn Dunn, senior inward investment manager (Digital and Tech) at Invest Newcastle. “The success of these specialisms can be attributed to the support networks and local infrastructure which nurtures nascent tech companies,” she says
The public sector is playing a role too. In 2019, the government and Newcastle University provided £30m in funding to launch the National Innovation Centre for Data (NICD), based out of the Helix centre and with a mission to equip organisations with the right skills for the data-driven digital age. Dunn adds: “Organisations like Dynamo North East, the Innovation SuperNetwork and Ignite’s accelerator programme provide training and funding which, coupled with assets such as the state-of-the-art VR production facility at PROTO and innovation district Newcastle Helix, make for an ideal testbed for developing new technologies.”
Culture & Collaboration
Tyneside locals, known as Geordies, have a reputation for being outgoing and friendly. Many professionals cite this as an asset for Newcastle’s tech ecosystem because it helps cultivate an open and collaborative culture. There is a sense of pride in seeing other local businesses thrive that is not commonly found in other UK regions. “It's often said that people are genuinely warm and friendly in this part of the world and it’s true,” says Leaf founder and CEO Gilbert Corrales. “This extends to business, with people always happy to help where they can or introduce you to people in their network.” This has resulted in countless private sector partnerships. In December 2022, Gateshead technology firm Advantex supported fellow North East startup Portico Doors by providing digital connectivity and technology services.
Another partnership, between Canadian IT business CGI and inward investment agency NewcastleGateshead Initiative, is providing local people with high-value digital roles in the North East, based out of CGI’s office space in Newcastle Helix. Cooperation extends beyond British shores. Public and private sector partners from Newcastle gathered in Barcelona for the 2022 Smart City Expo World Congress to showcase Newcastle’s smart city credentials. This culture of collaboration is echoed by Robinson, who says this welcoming mentality is “something that I think is quite special about this region”. She adds: “The tech community in Newcastle is very cohesive, with businesses working closely together. And there is a view of all businesses wanting to be successful and wanting to support each other.”
A strong talent pipeline is crucial for the success of any city. It is regularly cited as one of Newcastle's key strengths, thanks to its numerous high-ranking universities in and around the city providing a flow of graduates. More crucially, Newcastle has the highest proportion of STEM and computing students in the country – degrees that are often well-suited for tech roles. “We've got a lot of universities in our local area,” explains Jo Robertson, tax director, Deloitte. “These universities are quite focused on providing courses and programmes that create graduates who are perfect for the tech community to then employ and keep within the local area.”
Caroline Churchill, partner at Womble Bond Dickinson, adds: “We’ve got great universities, and we’ve got a strong culture of research and collaboration. We have around 40,000 graduates a year in the region and we have a really high proportion that leave university with a STEM qualification.” Jonathan Grubin, founder of SoPost, echoes these points: “There's a lot of talent here, good universities and a growing staple of tech companies that are key to any ecosystem. I think we're going to see a lot of growth in the coming years, particularly as more companies consider whether their teams really need to be in the same place.”
Connectivity
All businesses require funding, especially high-growth tech startups. According to the Levelling Up Tech Power League, tech startups in Newcastle raised a record £86m in 2021. However, the data consistently shows that London attracts the lion’s share of venture capital – frequently 80% or more of the entire UK funding pool. In 2021, London-based startups raised £18.6bn, dwarfing Newcastle and all other UK cities. Newcastle-based tech leaders surveyed by UKTN found that access to funding was the most common challenge, with 62% responding that it is lacking. Dunn says this imbalance means funding “often doesn’t filter down to the startups that need it most.” “Historically, this has been a missed opportunity because there are so many talented people with brilliant business ideas graduating from the world-leading universities we have in the city, some of whom end up leaving the area to take their tech solutions to market,” she explains. “However, things are changing and there is a significant number of venture capital and private equity firms who are realising the potential of entrepreneurs in this part of the world.”
Jonathan Sharp, director of technology, media and telecoms at Deloitte UK, echoes this point. For businesses of all stages, Sharp says, there are a lot of high-quality funds operating across the North of the UK and Newcastle. Connectivity into the market and the ability for companies to find the right funds can be challenging, he adds, highlighting that a large proportion of PE and VC capital is sourced from London. As such, companies spend a disproportionate amount of time in the capital fundraising, when a suitable solution might be closer to home. All this comes amid a wider tech downturn that has resulted in mass layoffs at the world’s biggest tech companies, including Meta, Microsoft and Google. Funding is expected to become more challenging for tech companies across the whole of the UK due to economic headwinds such as rising interest rates, soaring inflation and a looming recession.
CONNECTIVITY
Newcastle is located in one of the outer-most parts of England, making it reliant on a robust transport network to connect it with other cities. A poorly connected city creates barriers to doing business and deters companies looking for a new city to expand to. Newcastle is well connected to other countries by an international airport, but some say its roads and train links to the capital and other northern cities could be improved. “A lot of the levelling up conversation tends to be focused around Manchester and connecting it to London, and you hear much less about connecting Newcastle to London,” says Robertson. “We do have great links already, but the quicker we can get that train line, the less likely it is that businesses in Newcastle are going to feel that they need to move to London.” Sharp adds that the road network – particularly the A1 – requires attention; something that could better connect Newcastle with other Northern tech hubs like Leeds and Manchester.
But it's not just transport connectivity that’s crucial for businesses. Fast broadband and mobile connectivity such as 5G are must-haves for modern businesses. However, the UK as whole struggles to connect rural areas. This is a problem faced by remote workers and businesses based outside of the city centre, says Churchill. “We need to have a region that’s properly connected, whether it’s transport infrastructure or making sure there’s enough tech connectivity, she says. “We should be looking to improve our 5G and broadband connectivity. We’re a very diverse geographical region, so we really struggle with just simple connectivity.” One organisation addressing the connectivity challenges is Stellium Data Centre Services. It operates the largest purpose-built data centre campus in the UK, based in Newcastle, and provides connectivity services for fintech, energy, media and other sectors. The North of Tyne Combined Authority’s 5G programme is also supporting efforts to improve digital connectivity in the region
Newcastle tech startups and scaleups to watch
Bottlepay Company mission Facilitates the buying and selling of Bitcoins Year Founded 2019 Total funding £14.4m
Settld Company mission Digital service for dealing with death-associated admin Year Founded 2020 Total funding £800,000
Atlas Cloud Company mission Managed services and cybersecurity for IT firms Year Founded 2010 Total funding £4.8m
Leaf Grow Company mission Digital marketing for ecommerce businesses Year Founded 2014 Total funding £4.3m
Sportfin Company mission Impact funding for sports clubs Year Founded 2021 Total funding N/A
Atelerix Company mission Designing and developing cell storage technologies Year Founded 2017 Total funding £1.7m
Aircards Company mission Building web-based AR and VR experiences Year Founded 2020 Total funding N/A
Grid Finder Company mission Esports platform that helps racers to find virtual motorsports and simulator races. Year Founded 2020 Total funding £625k
QuantuMDx Company mission Medtech company designing diagnostics solutions Year Founded 2008 Total funding £75m
Kani Payments Company mission Providing Saas solutions for fintech transaction reporting Year Founded 2018 Total funding N/A
SoPost Company mission Digital marketing firm that facilitates sampling campaigns for brands Year Founded 2012 Total funding £1.6m
Whyaye Company mission Providing digital transformation strategies for brands Year Founded 2019 Total funding N/A
Go to section 4 - North East ecosystem
Another partnership, between Canadian IT business CGI and inward investment agency NewcastleGateshead Initiative, is providing local people with high-value digital roles in the North East, based out of CGI’s office space in Newcastle Helix. Cooperation extends beyond British shores. Public and private sector partners from Newcastle gathered in Barcelona for the 2022 Smart City Expo World Congress so showcase Newcastle’s smart city credentials. This culture of collaboration is echoed by Robertson who says this welcoming mentality is “something that I think is quite special about this region”. She adds: “The tech community in Newcastle is very cohesive, with businesses working closely together. And there is a view of all businesses wanting to be successful and wanting to support each other.”
From Newcastle Helix to Dynamo North East, the city is well served by incubators, accelerators and professional networks. In fact, 90% of UKTN survey respondents said there are enough support networks in the region. These networks play a crucial role in helping sub-sectors flourish, says Dawn Dunn, senior inward investment manager (Digital and Tech) at Invest Newcastle. “The success of these specialisms can be attributed to the support networks and local infrastructure which nurtures nascent tech companies,” she says.
The public sector is playing a role too. In 2019, the government and Newcastle University provided £30m in funding to launch the National Innovation Centre for Data (NICD), based out of the Helix centre and with a mission to equip organisations with the right skills for the data-driven digital age. “Organisations like Dynamo North East, the Innovation SuperNetwork and Ignite’s accelerator programme provide training and funding which, coupled with assets such as the state-of-the-art VR production facility at PROTO and innovation district Newcastle Helix, make for an ideal testbed for developing new technologies.”
All businesses require funding, especially high-growth tech startups. According to the Levelling Up Tech Power League, tech startups in Newcastle raised a record £86m in 2021. However, the data consistently shows that London attracts the lion’s share of venture capital – frequently 80% or more of the entire UK funding pool. In 2021, London-based startups raised £18.6bn, dwarfing Newcastle and all other UK cities. Newcastle-based tech leaders surveyed by UKTN found that access to funding was the most common challenge, with 62% responding that it is lacking. Dunn says this imbalance means funding “often doesn’t filter down to the startups that need it most” “Historically, this has been a missed opportunity because there are so many talented people with brilliant business ideas graduating from the world-leading universities we have in the city, some of whom end up leaving the area to take their tech solutions to market,” she explains. “However, things are changing and there is a significant number of venture capital and private equity firms who are realising the potential of entrepreneurs in this part of the world.”
FUNDING
The North East powerhouse: Strengths of the surrounding ecosystem
Assessing the relative strengths and opportunities of Newcastle’s tech ecosystem is impossible without also considering those of surrounding areas. The city benefits from having multiple North East tech communities in close proximity – namely, Sunderland, Durham, Northumberland and Middlesbrough. The collective strength of tech in the North East plays an important part in attracting talent and investment to the region, as well as fuelling the development of a wider support network, including accelerators and incubators. Here is a look at the tech ecosystems neighbouring Newcastle.
The historic site of Durham is perhaps best known today for its university and 17 colleges that are spread across the city. Durham University sits in the top 200 in the world, according to The Times Higher Education rankings. Many of the university’s students and graduates go on to launch businesses in the city, ensuring a steady flow of tech startups. Tech businesses in Durham benefit from a number of support networks and organisations, such as the Durham City Incubator, a fully-funded accelerator programme for Durham-based business owners and entrepreneurs; and NETPark – the North East Technology Park at Sedgefield, County Durham – which is one of the fastest growing science parks in the UK. This has helped several notable startups thrive in Durham, including challenger bank Atom.
Durham
“We believe the North East is a great place to start a business and has great potential as a UK tech hub,” says Edward Twiddy, chief customer officer, Atom Bank. “When we started Atom, one of the most telling questions we had to face was whether we would be able to sustain our business as we grow in the North East. This was not to do with technology, it was all about people. The perception was that the talent pool was not large enough. However, it’s clear that the region is brimming with talent, ideas and opportunity, and through collaboration tech entrepreneurs can prosper together.” Networking platform NetKnoWho, taxi and private hire app taxigoat and messaging app ChatPro are other Durham tech businesses to watch.
Like Newcastle, Sunderland has an industrial past, with strong roots in the mining and shipbuilding industries. But in the past two decades, it has emerged as a thriving tech hub, home to exciting digital businesses and a robust infrastructure for supporting and nurturing startups. Sunderland ranks among the UK’s top smart cities, resulting in a significant focus on inward investment in tech connectivity businesses. For instance, the city’s IoT and 5G accelerator programme was launched in October 2022 by Sunderland City Council, in partnership with global communications infrastructure provider BAI Communications and leading tech sector support organisation Sunderland Software City (SSC), which has since merged with Dynamo North East.
SSC is also behind Tech Startup Sunderland. Also launched in late 2022, the programme is designed to increase the number of new tech businesses setting up in the city. Tombola, the UK’s largest online bingo provider, is based in Sunderland, while indie games developer Coatsink is also headquartered in the city. Employers in the city benefit from the flow of tech talent coming out of Sunderland College and The University of Sunderland.
Sunderland
Northumberland
Renowned for the beauty of its coastline and countryside, Northumberland has also been developing a vibrant tech scene over recent years. Unsurprisingly, agricultural, forestry and maritime technology sit at the heart of it. From software companies to businesses specialising in robotics and drones, Northumberland’s well established rural and marine industries are creating opportunities in affiliated digital sectors.
For example, Blyth-based Tharsus, a designer and manufacturer of advanced machines and robots, is one of the fastest growing technology companies in the UK. Nearby, at the Energy Central site at the Port of Blyth, Osbit specialises in the supply of tailored equipment and engineering services for challenging offshore projects. Despite being a largely rural area, Northumberland benefits from its transport links, being close to Newcastle Airport and the Port of Blyth, which includes a rail loading facility for access to UK freight rail. The North of Tyne Combined authority has been investing in Northumberland and the surrounding areas to improve the digital infrastructure and connectivity.
“The North East is punching above its weight when it comes to immersive technology, a strong subsector of the ecosystem which is brimming with opportunity right now. “Characterised by a large number of established videogame companies and growing community of immersive developers, we’re amplifying this activity at PROTO: Europe’s first centre of emerging technology and ImmexCity: a pilot programme to catalyse the startup and scaleup potential of operators in this space.”
“The North East is a region with fantastic energy and creativity and has a strong track record of attracting and retaining tech skills and talent – in most part because of the quality of life it offers in comparison to other tech hubs like London. “The challenge lies in the way the North East is positioned outside of the region itself. I don’t believe it’s yet known widely as a ‘tech hub’, but there’s no reason why it can’t be. The North East represents a far better geography for us to build a tech-enabled business in terms of value and the offer to employees.”
“The technology sector in the North East is vibrant. Building up from the region’s strong university base, we are becoming a hub for startups, scaleups and inward investment from businesses outside the region looking to access our skills base. “Our opportunity is to keep supporting these businesses to attract, hire and train the best talent locally and nationally, helping to ensure the North East continues to build a strong reputation as an attractive home for some of the most innovative businesses in the UK.”
Ashmita Randhawa Head of Innovation, Digital Catapult North East Tees Valley
John Healey Investor, BGF
Adam Jacobs Founder, Gateshead-based Bloom Procurement Services
Go to section 5 - Startup profiles and key investors
Middlesbrough
Middlesbrough is located in Teesside, a built-up area around the River Tees between County Durham and North Yorkshire. Like many other North East towns and cities, Middlesbrough has strong roots in heavy industry that have evolved into a thriving digital ecosystem. Driving growth and innovation in the town are tech players like Applied Integration, an industry 4.0 company; Animmersion, a 3D effects company; Double Eleven, a video game developer and publisher, among many others. Middlesbrough is home to Animex, the UK’s largest festival of animation and computer games. Tees Valley is also where the Centre for Digital Trade and Innovation – the world’s first hub dedicated to accelerating the digitalisation of international trade – is based.
Another key innovation site in Middlesbrough is TeesAMP, a 34-acre site for advanced manufacturing companies. The town is further boosted by the Teesside Freeport, one of the first to be awarded the tax and secure custom zone status by the government. At the heart of Middlesbrough is Teesside University, which has a strong reputation for both business and technology related degrees. More recently, the university has set up a presence in the heart of London’s tech startup scene, striking a partnership with tech campus Here East to nurture the next generation of tech talent.
Founded in 1982, Mercia is a proactive, specialist asset manager focused on supporting regional businesses to achieve their growthaspirations. Mercia Fund Managers – the part of the business that provides loans and equity investment for SMEs and technology firms in different regions – opened its first office in Newcastle in 2018. It has been an active investor in tech companies in the North East for a number of years. Last year, Mercia took part in a £3.1m investment round for Newcastle-based Notify Technology. Haystack, a Newcastle-based digital recruitment platform for tech roles, raised £500,000 last year from the North East Venture Fund (NEVF), which is managed by Mercia and supported by the European Regional Development Fund.
Mercia Asset Management
Newcastle tech spotlight: Startup profiles and key investors
Key investors in the North East
Startup spotlights
SoPost is a data-driven marketing scaleup that has built a platform to facilitate product sampling campaigns. Headquartered in Newcastle, SoPost partners with brands looking to grow their customer base by sending product samples. SoPost handles the digital sampling campaign, the postage and packing of the products, and provides data insights to the client. The scaleup works with brands like L’Oréal, Estée Lauder, Cadbury, and Hellman’s to promote new product launches and raise brand awareness.
SoPost: Newcastle's data-powered product sampling platform
SoPost’s business model was inspired by the drop-off in customer footfall for brick-and-mortar shopping locations. It’s founder, Jonathan Grubin, saw the benefit of brands handing out samples at supermarkets and shopping centres and noted that in the digital age, the practice was dying. The real difference SoPost claims to bring compared to traditional sampling, though, is the company’s data capabilities. The scaleup uses existing consumer data to tailor sample campaigns to specific target customers, with the goal of boosting conversion rates. As well as targeting customers, SoPost feeds back data insights from the campaign to the client to better understand its successes and shortcomings. The company was founded in 2012 by Grubin, who initially explored the possibility of a “social post” startup to post items to people without knowing their addresses. While Grubin pivoted away from the original concept for SoPost, he credits the early work done by the company as laying the groundwork for the success it has found more recently.
From its humble beginnings in Newcastle, SoPost has since expanded to an international enterprise, serving customers in Europe, North America, and Asia. The company has grown rapidly over the last two years, having brought its total funding to more than $2m and expanding its headcount to 75 across its offices in Newcastle, London, New York, Paris, and Berlin. SoPost has received financial backing from the North East Development Capital Fund, a localised investment fund supported by the European Regional Development Fund and managed by Maven Capital Partners. Other supporters include Northstar Ventures, The Sandpit, and Tech Nation. “We've experienced a lot of growth over the past few years, and we're really focused on extending our lead in e-sampling,” Grubin says. “We're building the future of product sampling and everything we're doing is focused on ensuring that our technology delivers extraordinary results for a customer and that SoPost continues to be a great place to work.”
Learn more
Leaf Grow: Digital marketing, made smarter
Leaf Grow is a digital marketing for ecommerce business based in Newcastle upon Tyne. It was founded in 2014 as Leaf Music, initially to help musicians engage with and monetise their fans. In 2019 it pivoted to become a marketing company providing an automation platform for performance marketing. Its proprietary platform includes tools and bots designed to help clients “save time and make smarter decisions”. Its technology is used by brands including GoCompare, FootAsylum, and Snug Sofas. Leaf’s tools were used by Bear Grylls’ management and production company to turbocharge return on ad spend by 7x.
Throughout its journey, Leaf has been supported by entrepreneur growth network Tech Nation. Its Costa Rican founders were able to settle and build their business in the UK thanks to the Tech Nation visa scheme. Gilbert Corrales, CEO and founder of Leaf, has watched Newcastle’s tech scene grow. “It’s a great place to live and work in, with cost of living and quality of life comparing favourably to many other UK cities,” Corrales says. “The city is already home to a growing number of tech and tech-enabled companies and since the pandemic we’ve seen a lot of tech talent relocate or move back to the North East. “This, coupled with great universities, means tech businesses like Leaf have a strong talent pool on their doorstep. Transport links are also good to Europe, London and the rest of the UK.”
Leaf has been supported by the Ignite programme, and Campus North, alongside the Newcastle Gateshead Initiative. It has raised more than £4m in funding, but Corrales says funding opportunities for Newcastle-based tech startups is still limited compared to other parts of the UK. “On the flip side, a huge amount of funding and investment still goes to London and the South East with local funds having limited firepower as businesses grow,” Corrales says. “Despite the positive progress I mentioned earlier, more could be done to encourage students from the city’s universities to see Newcastle as a place to build their careers rather than heading south when they graduate.” Corrales also believes there needs to be a better balance struck between bringing larger companies into the area and “nurturing or attracting startups”. “We’d like to see more or a balance between the two to create a ‘flywheel’ for the region with startups and established players benefitting from each other,” he says.
BGF provides patient capital investments to businesses in Newcastle and across the North East of England. It takes minority stakes in the startups it invests in and provides both initial and follow-on funding. BGF has invested £80m in 11 early-stage businesses across the North East since 2011 and has a balance sheet of more than £2.5bn. With 16 offices across the UK, including a presence in Newcastle, BGF is well positioned to invest in the North East’s high-growth startups. In 2021, it made a £14m investment into Bloom Procurement, a Gateshead-based independent marketplace for the public sector to buy and manage contracts.
Maven is a UK private equity and investment firm. It provides essential capital and expertise to help businesses unlock their potential. Founded in 2009, it has a track record of supporting a range of transaction types, including management buyouts, growth capital, buy and build projects, equity value release and pre-IPO financing. Since opening its offices in Newcastle in 2017, Maven has invested over £30m in ambitious businesses across the North East region that operate across a range of sectors, including technology, manufacturing, engineering and bioscience. It has been involved in many funding rounds for tech businesses in Newcastle, including a £4.1m investment in human resources software provider Oak, £1m for fintech platform Pockit, and £750,000 for marketing tech firm SoPost.
NEL Fund Managers is an employee-owned fund management company, committed to strengthening the local North East economy by providing tailored funding solutions to SMEs across the region. Founded in 1989, the company is responsible for managing two elements of the £120m North East Fund supported by the European Regional Development Fund – the £9m North East Small Loan Fund and the £18m North East Growth Capital Fund. NEL Fund Managers completed its busiest ever year in 2022 after making investments in regional firms worth a total of almost £5.9m across 62 different investments.
Conviction is a privately backed, multi-stage investor in post revenue, high growth B2B SaaS companies. It is one of the most active and largest direct global venture capital groups. Founded in 2017 by Andrew Jenkins and Newcastle businessman Jeremy Middleton CBE, the group is comprised of high net-worth investors and family offices. Conviction was named ‘Best New Entrant to the Ecosystem’ at the UK Business Angels Association Investment Awards in 2019. Conviction has invested into North East-based Atom Bank and Newcastle’s One Utility Bill.
Conviction Investment Partners
NEL Fund Managers
Maven Capital Partners
BGF
Go to section 6 - ESG and Newscaste's tech sector
Jonathan Grubin SoPost Founder
Gilbert Corrales Leaf Grow Founder
Founded in 2004, Northstar Ventures is a key player in the North East investment ecosystem. Its Innovation Fund invests up to £500,000 into North East businesses, while its Social Investment Fund invests £10,000 to £1m into social enterprises and charitable organisations. Its portfolio companies include marketing tech platform Leaf, chemotherapy treatment firm LightOx and virtual reality treatment startup XR Therapeutics. In January 2023, the early-stage investor participated in a £3.25m funding round for employee volunteering platform OnHand. The Newcastle upon Tyne-based VC firm looks for mission-based founders and targets market such as healthy ageing, the future of work and climate tech.
Northstar Ventures
ESG and Newcastle’s tech sector
Environmental, social, and governance (ESG) is a prominent topic in every industry, not least technology. If tech businesses are driven by a desire to innovate and create a better tomorrow, then it stands to reason they are ideally positioned to lead the charge on ESG. Where sustainability and climate change are concerned, this is important. The tech industry currently accounts for 2% to 3% of global emissions, according to the UN, and that figure is likely to rise as the proliferation of digital devices, products and services continues at pace. In Newcastle, ESG is already firmly on the agenda in both the public and private sectors. In April 2019, Newcastle City Council declared a Climate Emergency. In doing so, it made the commitment to create a new Climate Change Strategy with the aim of achieving Net Zero status by 2030.
“We used to be a region that had environmentally detrimental activities such as fossil fuels and mining,” explains Caroline Churchill, partner at Womble Bond Dickinson. “That’s been flipped on its head now with a region that is focusing on ESG, making sure we’re looking at those cleaner, greener technologies.” She points to the “more socially progressive and environmentally conscious” generations coming out of universities as being a driving force for this change. “People who bring that mindset with them from university into the tech sector will focus on things such as green tech areas and will hopefully make the region leaders in that space.”
ESG comes into focus
Tech businesses in the region share this commitment. UKTN’s survey of 50 tech leaders in Newcastle posed a question on priorities for 2023 – without exception, every respondent said ESG was either very important (56%) or somewhat important (44%) to their business this year. Jonathan Sharp, director of technology, media and telecoms at Deloitte UK, notes: “ESG is super important to the businesses that we speak to. It's on every tech company’s agenda. Tech businesses genuinely want to make a difference, and to make a positive impact on society that is really strong in the North East.” Dawn Dunn, senior inward investment manager (Digital and Tech) at Invest Newcastle, adds: “It’s no secret that digital businesses play an integral role in the fight against climate change, both from an educational perspective in encouraging end users to make better choices and in the way they use and store data, which can be incredibly energy intensive if not managed properly. Not just tech firms but all companies must prioritise the ESG agenda if we are to avert the worst effects of climate change.”
Meaningful change
Taking action
Social issues, not just sustainability
The onus is on tech businesses to address ESG in a measured and meaningful way. Studies suggest that doing so will prove important to their ability to reduce overheads, recruit, fundraise and acquire customers. Paul Lewis, chief customer officer at job listing site Adzuna, said recently: “Jobseekers are in the driving seat of today’s labour market and demanding more from employers … For many, sustainability credentials are essential requirements when choosing a company to work for.” Similarly, a 2021 survey of individual investors from Workiva revealed that approximately 70% of respondents believe businesses have a responsibility to demonstrate ESG performance to investors, with Gen-Z and younger millennial investors (18-34 year-olds) the most demanding around ESG credentials.
Tackling carbon emissions and the proliferation of greener technology is central to the tech sector’s ESG focus. However, social issues are equally important. “As the industry has grown and become a major employer in the region, issues around diversity and inclusion have come to the fore,” explains Dunn. “It’s important for tech companies to create workplaces where people from all backgrounds can thrive. We live in a world where end users have different needs, and that diversity of representation needs to be ‘baked in’ from the design stage to the board room table.”
Whatever the motivation or policies, ESG is clearly a key priority for Newcastle’s tech businesses. From reducing their carbon footprint through to encouraging diversity and improving employee wellbeing, and engaging with their local community, the question is what actions can and will companies take. Looking to the coming months and years, here are three prominent ESG trends for Newcastle’s tech businesses to monitor: 1. The implementation of more rigorous standards and reporting – tech companies will need to prove their ESG credentials to governments, investors, employees and customers. Quantifying ESG data, such as measuring carbon footprints, is often cited as one of the key challenges. 2. New and improved HR policies – formalising ways of improving diversity and inclusivity. This will have implications for tech products and services, too; diverse workforces are important in solving pertinent industry issues, such as bias in AI, rising and more sophisticated cyber threats and the development of an anti-racist metaverse. The North of Tyne Combined Authority's Good Work Pledge, which recognises organisations that are working towards providing 'good work', is one example of practical steps that can be taken. 3. The move towards more sustainable technology – greater use of renewable energy sources and environmental friendly materials.
Go to section 7 - What next for tech on the Tyne?
Newcastle and its neighbouring areas have taken great strides over the past five years, playing a key role in establishing the North East as one of the UK’s fastest-growing tech hubs. But where does the city go from here?
There will be shared challenges with the rest of the UK that lie ahead for tech businesses in Newcastle. These include potential shortages in funding and talent, as well as the macroeconomic trends that continue to test companies’ finances. In the short to medium term, rising inflation and interest rates, plus a looming recession, are creating difficult economic headwinds.
There will be shared challenges with the rest of the UK that lie ahead for tech businesses in Newcastle. These include potential shortages in funding and talent, as well as the macroeconomic trends that continue to test companies’ finances. In the short to medium term, rising inflation and interest rates, plus a looming recession, are creating difficult economic headwinds. UK technology investment dropped 22% in 2022. Moreover, access to funding emerged as the feature most lacking from Newcastle tech ecosystem, with 62% of tech business leaders based in the city citing this as an issue. Similarly, access to talent is a nationwide issue; one Newcastle is not immune to. Over two fifths (44%) of our survey respondents feel there is a lack of talent to hire.
Evidently, these are two barriers that tech businesses in the region – individually and collectively – will need to overcome if growth is not to be curtailed. That said, as noted earlier in this report, Newcastle benefits from having the highest proportion of STEM and computing students in the country, along with numerous reputable universities and colleges. The fact only 44% of tech leaders based in the city feel there is a lack of talent is perhaps telling – nationwide, 81% of UK managing directors say a lack of digital skills is negatively affecting their company.
New technologies and trends
Looking ahead, many within Newcastle’s tech scene will be closely monitoring the latest digital trends that could create new opportunities. “We are witnessing a new wave of technological innovation that many are calling web3 and the opportunities for North East companies to be part of this wave are significant,” says Dawn Dunn, senior inward investment manager (Digital and Tech) at Invest Newcastle. “We must be able to move quickly and adapt to a rapidly changing landscape, the boundaries between different tech verticals are becoming blurred and the speed of innovation greater.”
Greater collaboration
Local politics will also play an important part in facilitating collaboration in Newcastle and the North East. There are plans to bring the LA7 area – Newcastle, Gateshead, North Tyneside, Sunderland, South Tyneside, County Durham and Northumberland – together under a newly created combined authority. This would be headed by a metro mayor and could unlock up to £4.2bn in local funding from central government. For Jo Robertson, tax director at Deloitte, the coming years will see the public and private sectors working closer together to allow tech in Newcastle to thrive. She says: "I do think that we will see the greater collaboration between the North East local authorities. It's something that's been on the agenda for a long period of time. It has actively improved over recent years and I think there is a genuine desire across all the different local authorities to work on that and make it practically better.”
Navigating economic and ESG challenges
As with last year, in 2023 the cost-of-living crisis and rising interest rates will likely present financial challenges to many tech businesses. Double-digit inflation simultaneously diminishes customers’ spending power and increases organisations’ overheads. Meanwhile, the Bank of England’s hiking of the base rate impacts the amount businesses can borrow as well as the repayments of some of those with debt. Elsewhere, ESG is certain to remain a prominent subject in the coming years – tech businesses will need to plan their strategies carefully. These are pertinent challenges that Newcastle’s tech companies will likely encounter in the coming years. However, the city’s many strengths, as highlighted in this report, provide plenty of reasons to be optimistic about the future. While Newcastle is strong in areas like fintech and gaming, there is a growing appetite to embrace tech for good in the city and in the North East.
Building on strong foundations
The growth of the tech sector in Newcastle and the North East has been remarkable. The strength of its reputation, infrastructure and support networks means the foundations are in place for more success in the future. “I’m really optimistic about the region’s prospects,” says Caroline Churchill, partner at Womble Bond Dickinson. “It’s a region that doesn’t shout enough about how good we are, and the drive we have for collaboration and innovation. And if you’ve got all of that going, plus people wanting to make the region the best it can be, then it’s in a great place to succeed.” However, there can be no shying away from the fact that tech businesses globally are facing testing economic conditions. London continues to dominate the UK’s tech industry for both funding and the number of tech businesses. For all of Newcastle and the North East’s progress, there is no room for complacency. The ongoing support of investors, advisors and services providers, under the umbrella of greater local collaboration between the surrounding regions, will prove crucial in ensuring this success is realised and that tech on the Tyne continues to both flourish and level up.
Part of the NewcastleGateshead Initiative (NGI), Invest Newcastle drives and delivers economic growth in Newcastle, Gateshead and the North of Tyne. It secures capital investment, works to attract new businesses, and create jobs. It helps businesses to locate, expand and thrive through a bespoke range of services. It champions the region and its strengths on a national and international stage, promoting Newcastle as a city to collaborate, innovate and thrive. Since it was established in 2013, Invest Newcastle has supported over 250 companies to relocate or expand, helping to create and safeguard more than 14,000 jobs.
A multi-disciplinary, international law firm with strong roots in the North East of England, Womble Bond Dickinson (WBD) is proud to promote the North East as a prime location for businesses to locate, grow and prosper. Our mission is to help stimulate a culture of innovation to assist inward investor growth, whilst supporting and sustaining the local economies in which they choose to locate. WBD has a team of specialist digital lawyers in the region who live and breathe the North East and understand what makes it tick. This offering is strengthened by our national and international reach and expertise. We regular advise businesses that lead the way in innovation, ranging from worldwide leaders in software, electronics and communications to emerging entrepreneurs. Our transatlantic team of technology lawyers offer a comprehensive spectrum of legal services to support our clients in anticipating and tackling organisational challenges, build operational resilience, minimise data risks and cyber threats, and shape their technology infrastructure to navigate complex regulations in an evolving global environment. The largest law firm in the North East, Womble Bond Dickinson also sits amongst the Top 20 UK law firms and is ranked top 200 globally for revenue. In the UK, WBD has more than 120 partners and around 450 lawyers based in seven major cities across the country. In the US, WBD boasts 23 offices. The firm’s reach also extends to Europe where it has a strategic partnership with Redeker Sellner Dahs, and through the Lex Mundi network, WBD can offer clients access to counsel in more than 120 countries.
Deloitte UK is a leading professional services firm – one of the largest in the UK and part of a global network spanning 150 countries and territories. The firm is made up of 20,000 professionals, with a wide range of specialist skills, who our clients rely on to help them with programmes and projects that are critical to their success. In Newcastle we employ over 250 people who hybrid work from the firm’s first ‘future of work’ office near the Quayside. Whether it’s digital transformation expertise, sustainability know-how, cyber skills or financial advice, we help clients in the public, private and third sectors meet challenges big and small. Our breadth of expertise is one of our biggest strengths; we bring together teams with a range of skills – in areas like digital technology, M&A, tax and consulting – to apply to our clients’ most complex challenges. As part of the Deloitte network, we share best practice and solutions as part of an international community, but we pride ourselves on making an impact that matters in our local community.
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