Carsnip raised £2m in funding - but not a penny from London
The founders of used car search website Carsnip attended about 100 meetings in 18 months to raise the funding they needed - $100,000 of which was secured over the phone from a US investor.
Yet not a single penny of the £2m they raised over five rounds came from London, leading them to believe their geographical location gave them a disadvantage in the eyes of the capital’s investors.
“I spent a lot of last year in back-to-back meetings in London, staying in hotels and travelling back up to Nottingham, and I got questions like ‘are you based in London?’ or ‘are you going to move to London?’” chief executive and founder Alastair Campbell told BusinessCloud.
“I’ve spoken to experienced investors since who told me that the reason we didn’t get that investment was because we’re not in London.
“Even if they’re interested in the idea we have, we’re not there, which means it’s harder for them to see us face-to-face on a regular basis.”
Campbell is not alone in his experience. BBC technology correspondent Rory Cellan-Jones spoke about the notion of ‘trainophobia’ among venture capitalists when he appeared at a North West tech event earlier this year.
This, he said to the audience at Manchester Town Hall, referred to an apparent fear of getting on a train and leaving the capital to make investments elsewhere, and was damaging the technology industry in other parts of the country.
Campbell believes VCs in London are reluctant to hold Skype meetings, meaning they want the businesses they invest in to be closer to them.
“There’s also a myth that the best talent is in London because that’s where the money is,” he says. “Our US investor couldn’t care less where we’re based because they have a more flexible culture for investing over there.
“The thing is, if you’re going to be in London you’re going to need twice the capital because costs are higher, which means VCs will be risking more on the same business.”
BELOW: Flick through the Q2 2017 edition of BusinessCloud's interactive digital magazine