Springboard to Funding #15 - Tracking the NI Deals

Added Tuesday, December 11 2018

In innovation circles there is a common perception that ‘all the money’ goes to London and the South East. And there are some strong facts to back this up, however until recently there were no definitive figures to track the NI deals.

HMRC figures for the widely used Enterprise Investment Scheme tax relief show £5.5m invested in 2016 here in higher risk companies, a good measure for innovation. Yet London got £964m which combined with the South East totalled nearly £1.3bn. And this only includes UK taxpayers, not international investment.

Figures from the UK Business Angel Association show almost 2/3 of all investment is in the South East.

Adding some overseas figures, one report shows Silicon Valley investment in the UK surpassed £1 billion, with the majority of this going to companies operating in the ‘Golden Triangle’ of Cambridge, London and Oxford. 

And it’s interesting to note that both the British Business Bank and Innovate UK have recently and separately announced schemes to bolster angel investing – but specifically restricted to helping investment outside London and the South East.

So, clearly there is a lot of money going south as it were.

But just how much do we get here in NI? Figures are available but none cover the whole piece. Invest NI publish what their companies receive. The British Venture Capital Association and its Irish equivalent both publish figures, but are incomplete depending on which (or both) organisations funders choose to join.

Now step in Catalyst Inc, where I work. We decided to generate and publish our own figure, but uniquely covering all (and I do mean all) investment into innovative companies in Northern Ireland. And lo and behold the answer in 2016 was, cue drum roll, £32.8m.

How, I hear you ask, can we be so sure we’ve got this right? Well the answer lies in our unique position as a trusted, independent, third party. After we’ve done the desk research we then go and talk to the lawyers. Remember they know every deal, even those where the funding has come from outside NI, but of course they are bound by confidentiality. However they can look at our figures and comment and correct them, provided they trust us not to publish the details. 

So we get to the real figures in a way that our English colleagues tell us would be impossible over there.

And what do these figures show us?

In knowledge economy companies there were 54 deals at an average size of £607k. However averages can be deceptive. Dig deeper and you find that 34 of these deals were for below half a million pounds. And, while there were 12 deals of £1-5m, there were none above this. And only 5 investors wrote a cheque of over £1m.

However 40% of investment came from outside NI, which is encouraging.

And when you look a little deeper you find that roughly £15m comes from the NI funds supported one way or another by Invest NI, £8m is from private sources (angels) and £10m is from non-NI institutional investors.

The question is, what has to change? Well, this depends on where we want to get to. One answer to this, crowd sourced and now part of the widely respected Knowledge Economy Report, suggests £90m of risk capital deployed annually by 2030. If you accept this target, and some feel it is too low, then where do the extra funds come from?

With the best will in the world, it seems unlikely that INI will be able to increase their funds – perhaps even the opposite. One might believe that angel investing might say double in this period. But this still leaves a gaps of approximately £50m which can only come from institutional money ie venture capital firms, from outside NI.

So that’s where the focus must lie. Which is good news for me since that’s pretty much my job description. It was also the reason for bringing in 20 UK VCs to see what was happening in the space in NI based around the major Invent Awards dinner in October.

There is much still to do. 

Alan Watts is the Director of Capital Match at Catalyst Inc 

For more information about Capital Match or to contact Alan, go to capitalmatch.catalyst-inc.org