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TECHNOLOGY SURVEY REPORT


IS TECH SUCCESS GRANTED?


Imagine a UK without mobile telephony; without the internet and email communication; without being able to pay for goods with a piece of plastic; and without microwave ovens that can cook entire ready made meals in a matter of minutes. Imagine a UK where the diagnosis of AIDS was an automatic death sentence; where television was limited to three channels and where mail was something delivered through the letter box. That was the UK less than 40 years ago. The changes have been the result of the impact of technological advances which have brought with them not only significant alterations in people‘s lifestyles but also in the development of whole new industries and commercial infrastructures


Successive UK governments have emphasised the importance of technology and innovation to our emergence from recession and successful subsequent economic growth. They have introduced a number of initiatives and measures aimed at stimulating growth in these areas.


In 2011, James Cowper, with its colleagues in the Kreston network across the UK, surveyed technology businesses to find out how they were finding the economy and whether they considered that government strategy was really focused on addressing the issues they faced.


This year, the aim of the survey was to benchmark views against the results from 2011, as well as to ascertain how contributors feel about state assistance to date.


”In our 2012 Technology Survey we polled over 2,000 technology-based businesses throughout the UK, from the earliest stage spinouts to larger companies employing over 100 people and generating revenues in excess of £20 million,” said James Cowper head of technology Sue Staunton. ”These businesses included those engaged in a range of technologies from IT and telecoms to life sciences, nanotechnology and high value manufacturing.


”Overall, the picture painted by the survey is a positive one. The UK is still considered by respondents to have great strengths in the development and commercialisation of technology with key attributes thought to be the quality of the UK‘s academic base and its entrepreneurial environment. Despite these strengths, however, the technology sector in the UK is continuing to operate in uncertain financial times.


”Amid concerns that we are heading for a triple dip recession, respondents in the technology world remain relatively positive about their businesses and the areas they are operating in. To some extent this mirrors reports that globally the technology sector has led M&A activity during 2012, outpacing the performance of other sectors with significant deals such as the Facebook acquisition of 750 patents from IBM; the Google acquisition of Motorola Mobility and HP‘s acquisition of Autonomy.”


www.businessmag.co.uk Impact of recession and funding


As last year, where respondents are feeling the impact of recession is in the difficulties in raising equity finance and the problem of generating revenues in these more challenging times.


However, despite the concerns about difficulties in raising equity funding, some 43% of respondents raised money within the past twelve months with 35% raising £1m or more.


Funds raised


Sources of funding were varied with 56% raising money from business angels and 33% from family and friends. By definition, such funding tends to be geographically localised to the company. ”It will be interesting to see if the level of funding from such sources increases over the next few years as the result of the broadening of accessibility to cloud funding,” said Staunton.


Sources of funding


Nonetheless, 65% of respondents were concerned at the ways in which they perceived investors to have changed how they evaluate investment opportunities. Equity funders are believed to be increasingly risk averse; deferring investment until later in the business lifecycle when revenues are more certain and the technology established. However, there were a few respondents who felt that some funders are looking for longer-term sustainable growth as opposed to a quick win and exit.


Interestingly, 28% of money raised by those surveyed, was from banks and there is a perceived shift in emphasis there too with respondents citing the prioritisation by banks on invoice-discounting as a funding mechanism.


Despite concerns about difficulties in raising funding, 58% of respondents still plan to raise money within the next 12 months. Planned sources of funding are sometimes combined but most popular are grants followed by business angels. Many grants are match- funded, meaning that they are only awarded


when other funds have already been raised, so they don‘t necessarily represent an alternative source of funding. Despite their apparent popularity it can be difficult to determine the full range of grants available (in part because of the broad range of sources they come from) and the application process can be off putting.


Planned sources of funding


Again, a high percentage of respondents (42%), are planning to raise over £1m with 33% looking to raise between £100,000 and £500,000. These aspirations, together with the reported success in fund raising within the past 12 months would seem to contradict the overall belief that the recession has severely impacted the ability to raise money. But it should be noted that, by definition, the survey did not reach those who were unable to spin out or start up because of lack of funds.


A number of those polled have referred to flotation as a route for funding with one of the respondents reporting that they floated on AIM in the past 12 months and 6% considering float as their probable exit from ownership of the business.


The public markets over the past few years have been a challenging environment through which to seek either funding or an exit for investors, which caused a significant shift in traditional options for technology businesses. Quite apart from limited liquidity on the markets, difficulties for technology businesses in seeking early flotation have included the sheer cost of the float process, together with the burden of compliance. In recognition of some of these constraints, the London Stock Exchange has recently announced the launch of a new niche market featuring less stringent listing terms for fast-growing companies wanting to raise funds. This is, however, not focused at those at their earliest stages.


Staff


The difficult financial environment within the UK has led a number of technology businesses to reconsider their staffing policies with the vast majority providing more flexible working arrangements, including increased levels of


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – APRIL 2013


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