What’s next for the UK tech ecosystem if the biggest cheerleader bows?

Tech Nation – the organization set up to nurture the UK’s innovation ecosystem – is winding down following a government decision to withdraw grant funding. The news has caused a lot of consternation along with some cautious optimism in the tech startup and scale-up sector. So why has this happened and what awaits Britain’s start-ups and scale-ups?

First the facts as we know them. At the end of January, the UK Department for Culture, Media and Sport announced it would provide £12.09 million in grants to Barclays Eagle Labs to boost the growth of the technology sector across the country.

A few days later, Tech Nation issued a press release stating that it would close its doors and scale back operations on March 23 due to the withdrawal of funding.

This represents – to say the least – a major shift in how public funding is being used to support the UK tech sector. Over the past decade, Tech Nation has acted as a cheerleader for the innovation economy and has also provided entrepreneurs with a wide range of hands-on assistance through networking events, incubators and accelerators, sandbox offerings, and industry research. There is a general consensus that it did its job quite well.

When I spoke with Tech Nation CEO Gerard Grech just a few days after the announcement, he clearly believed that the organization has left an important legacy. “When Tech Nation (then called Tech City) was founded, the UK technology sector was still in its infancy,” he says. “The UK is now the number one tech ecosystem in Europe and number three in the world.

During that period, Tech Nation has greatly supported the industry. Many companies that are now major players in their industries — the list includes fintech, Monzo, delivery company, Deliveroo, cybersecurity company, Darktrace and travel booker Skyscanner — received support from the organization’s programs.

“About 80 percent of startups fail,” says Grech. “90 percent of companies that have gone through our programs have gone to scale. An independent appraisal says that for every £1.00 spent on Tech Nation, there is a £15.00 ROI.

Why the change

The idea behind the move is not entirely transparent. The announcement of the Department of Media and Sportst (DCMS) contained a lot of cheerful rhetoric but little explanation. In a canned quote, Digital Affairs Minister Paul Scully said: “We want to unlock the potential of the next generation of start-ups and scale-ups and boost technology companies in every corner of the country. Barclays Eagle Labs are experts in the digital industry and will help tens of thousands of technology companies and founders realize their dreams and create jobs and economic growth.”

The statement does not reveal the thinking behind the choice made to move funding elsewhere. What you can say is that Barclay’s Eagle Labs have a significant amount of experience in the startup and scale-up space. The organization was set up by Barclays Bank, in part to utilize surplus premises, and provides workplaces, accelerator programmes, incubators and educational initiatives across the UK. In addition to the government grant, it has its own resources.

A cause for concern?

But it is change and change brings uncertainty. When I called on entrepreneurs and financiers to respond to the move, there was clear concern.

For example, Ekaterina Almasque, General Partner at VC, open ocean, said: “This is a difficult day for the UK technology industry. Tech Nation was formed to lead the UK’s digital industry during the heyday of the “Silicon Roundabout”. forced to close its doors. The loss of Tech Nation will deprive current and future entrepreneurs of an important network for the UK technology industry.”

There were also questions. “With the fall of Tech Nation, it is clear that there is an agenda as to why the government has changed course, but clarity would be helpful in learning their key objectives and why this shift is happening now,” said Sarah Barber, CEO of Jenson financing partners.

But while sympathy was widespread, at least some of the responses I received suggested that the change in the support ecosystem could be positive. “Tech Nation was one of the pioneering organizations supporting the growth of the UK startup ecosystem and we along with many others have benefited from the wealth of programs and resources,” said Brian Mullins, CEO of spirit foundry. “We are sad to see the organization closing, but it presents a great opportunity for new and old players in the public and private sectors to serve our rich tech ecosystem and help homegrown innovators scale to unicorns and compete with their international competitors.”

Active support

There was also active support for the move. “Their (Eagle Lab’s) existing programs and mentoring opportunities will be expanded to a wider audience and will also add further services, including an accelerator and scale-up program. This should really support startups at scale and contribute to the overall ecosystem where a rising tide lifts all boats,” said Amanda Brock of champion open source technology, OpenUK.

Perhaps at this point all you can say is that a big change is happening. I ask Gerard Grech what he thinks should be done now. “The government wants the UK to become a scientific superpower. It wants to conquer Silicon Valley. To do that, there must be policies backed by programs. Now is a good time to create a vision to support entrepreneurs with policies to support that.” That policy, he says, could include more support for entrepreneurship, research and development and investment through the tax system. In addition, Grech says more needs to be done to encourage pension funds to invest in scale-ups.

So what does the future hold? In my next blog, I talk to Hannah Bernard and David Gowans from Barclays Eagle Labs.