By Simon Green, CEO Innovation SuperNetwork
Last week, I was part of a panel discussion at the Connected Investing event run by UK Business Angels Association and Innovate UK. The panel, which was expertly hosted by James Bedford from Tech Nation, highlighted some important points that I think are worth sharing more widely.
Conversations about investment, especially about venture investment in technology businesses, tend to focus exclusively on how to create the next Google or Facebook. It would obviously be great to create the next big digital platform in the North of England but this exclusive focus means we are overlooking much more current and potentially more impactful opportunities.
James asked the panel what we felt were the emerging investment trends in the North, particularly what sectors we saw as being exciting opportunities for the next few years. Jen Hartley from Invest Newcastle talked about the ageing innovation work in the region, which is starting to generate investable businesses through initiatives like the Ageing Innovation Accelerator programme we run with the National Innovation Centre for Ageing, Northstar Ventures, Newcastle City Council and Aging2.0. Ian Wilson from Mercia talked about businesses in engineering and particularly “industry 4.0”, where the convergence of digital, manufacturing and engineering creates new spaces for innovation. There was very little talk about consumer tech businesses and I think it’s worth having a think about why.
The panel discussion included a question about the strengths of the region. The EU compiles a biannual Regional Innovation Scoreboard, which highlights the relative strengths of regions with regards to innovation performance. The 2019 Scoreboard indicates that the North East of England is doing pretty poorly in terms of the overall level of investment in research and development and in the creation of wholly new concepts (as evidenced through levels of filings for IP protection). The region though is very strong on collaborative innovation and in converting innovation into revenue from new products and services. The 2019 data shows that these trends are even more pronounced than in previous years. The way I interpret this is that we are really good in the region at incremental, iterative innovation in established industries (like manufacturing). This relative strength shows through in the kinds of investment opportunities we see.
Our panel explored this further and I particularly enjoyed the comment from Yvonne Gale (CEO at NEL Fund Managers) that she was really interested in meeting the most boring of businesses. Boring businesses are those with solid track records, recurring revenue, low risk profiles and established teams. These businesses might not be of interest to a big London-based tech fund but they are the ones that can grow quickly, generate employment in the region and sustain repayments to investors.
Building on this, it was good to hear from some of the out of region attendees at the event share their opinions. Nigel Walker (Head of Innovation Lending at Innovate UK) was strongly encouraging us to build on our strengths and continue to focus on the ‘boring’ businesses to achieve regional success.
Having reflected on the panel discussion afterwards, I think the points raised are hugely important from a regional perspective. Looking at the annual Ward Hadaway Fastest 50 awards, the overwhelming majority of fast-growing businesses in the region each year are in traditional industries. Instead of bemoaning this fact, we should embrace it.
We could spend a lot of our time and resources, hoping to build the next Google. Instead, let’s celebrate the boring and invest where we can make the most impact.