Kevin Beales knows just how difficult it can be for entrepreneurs in the North to catch the eye of London investors.
Beales built The Test Factory, an online test and exam company based in County Durham, using regional funding and sold it to GL Education in 2014.
For his current business, a tech firm using artificial intelligence to help companies improve the performance of their sales team, Beales hopes to secure investment from further afield. He is one of 30 entrepreneurs at a pitching event at the Bank of England, hosted by Innovation SuperNetwork North East England, an initiative to improve opportunities for entrepreneurs, which is part-funded by the European Regional Development Fund.
“There’s definitely a north-south divide,” Beales says. “Businesses need that regional funding at an early stage to get onto the London gravy train. But the cycle is insular: people go from regional funding to more regional funding. The North has been really bad at going along that journey from regional funding to London funding.”
Regional inequality is expected to grow starker as European funding dries up after Brexit. The four fastest-growing regions over the next three years will be London, the South East, the South West and the East, according to December figures from consultancy firm EY. While 46 per cent of research funding available in the UK goes to Oxford, Cambridge and London, the figures for overall investment are even more severe.
“Seventy per cent of investment goes to London, Cambridge and Oxford, even though many ideas come from other parts of the UK,” says Jenny Tooth, chief executive of the UK Business Angels Association, a co-host of the pitching event.
Each of the 30 entrepreneurs get one minute to pitch to a sea of blue suits and brown shoes at the Bank of England, while investors scribble notes in the margins of the programme.
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Peter Lillie from Middlesbrough presents a black and orange sportswear “skin” to the room, made out of recycled fishing nets and plastic bottles. His company, Presca, needs £1m in equity investment to start manufacturing ethical and customisable cycling, running and triathlon gear in-house.
He’s up against Ralph Thoburn from Sunderland, whose company, G&H Security, needs £307,000 for TRAK-IT, a collar and implant for pets that allows them, he claims, to “talk to the vet”. David Dally from Warrington presents Evie, a fertility pump that slowly releases sperm to a woman’s cervix from a device strapped to the leg like a holster. He’s seeking £1.5m.
A different medical business called Hospify has caught the eye of investor James Foster, the transaction and investment lead at Accelerated Digital Ventures.
Hospify, a hospital messaging app, was co-founded by James Flint in Clitheroe, Lancashire. Flint explains that Hospify is “reinventing chat for a new era of data compliance” while creating a European-wide data platform for doctors and nurses. “If you know anyone in a hospital who wants to get off WhatsApp tell them to come and see me,” Flint says.
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“The timing is right, the tech is there, and the problem exists already,” Foster says of Hospify. He says these pitching events are vital for funds like his, a digital venture capital fund where all the staff work remotely. “It empowers people to come down to the City and shout about what they’re doing. People are so focussed on doing something, it would take a long time to research investors in London, contact them, book a meeting room. It’s the same for investors. It’s hard to jump off the page.”
Amanda Lyne is the 27th entrepreneur to pitch. She is the managing director of Cheshire-based business ULEMCo, which specialises in converting engines to run on hydrogen. She is also one of only two female entrepreneurs at the event.
“I am surprised – I wouldn’t say this is reflective of gender diversity within the industry,” Lyne says in the mixing event afterwards. Entrepreneurs stand by printed boards bearing the names of their businesses, chatting to more than 100 investors. The organisers stopped advertising to investors when they had 120 signed up, fearing they would be oversubscribed.
Lyne has been doing venture capital and equity events for 15 years, but still finds the environment intimidating. She has watched many of the brightest women in her industry slip into side-careers in consulting or freelancing: “I think they got fed up with it – the corporate environment – and continuing to justify yourself.”
“My heart sinks when I get the applications,” says Estelle Banks, executive director of the Innovation SuperNetwork. “We do try to encourage as many women as possible.” The Network has secured some funding to look into unconscious bias among small and medium businesses when recruiting.
“Women founders are not an issue. It’s just when scaling up, it’s male dominated,” Banks says. “The language and the environment is aggressive. It puts people off.”
Pitching to a room full of investors is not for the fainthearted. Just ask Jamie Rawsthorne, founder of a university chatbot called UniChat. His pitch was initially rejected, so he called up Innovation SuperNetwork and said he would be in London on pitch day anyway, if the organisers would let him attend. Then when another business dropped out, he got a spot. “We want to meet as many people as possible,” Rawsthorne says. “The biggest barrier is not knowing people, and it’s much harder to know people in the North.”
As European funding dries up and disparities get starker, businesses may increasingly rely on events like this one to reach outside the regions. “I don’t think any of us would kid ourselves that it’s a level playing field out there,” says Lea Paterson, director of independent evaluation at the Bank of England, which seeks out entrepreneurs from the north of England and reports back on its findings.
Paterson says the Bank recognises the importance of growing capital to improve productivity, which has been in the doldrums since the financial crisis. “There’s not much we can do at the Bank on a regional level by setting monetary policy,” she says. “But we can support what’s going on in this room.”