The final ingredient missing from Manchester’s tech success story is slowly being added, according to a prominent investor in the region.
David Smith has 25 years’ experience advising and investing in software, IT services and media companies in the region for the likes of KPMG and ran the North West Fund for Digital & Creative, precursor of the Northern Powerhouse Investment Fund.
Smith says the North West and other regions have struggled to compete with London and Edinburgh in terms of attracting investors – but that is beginning to change.
“There is plenty of investable capital around Manchester and the North of England generally, but it’s almost like an organic growth,” Smith told BusinessCloud.
“In the last few years everything has transformed – but the one thing that hasn’t changed in the landscape is funding.
“London and the South East has had loads of angels and investments, while East Anglia does okay and Scotland does really well – but everywhere else has been just like the pygmies. It’s tiny.”
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Bucking that trend, the North West Fund for Digital & Creative launched by Smith made over 40 investments into start-ups including mobile developer Playdemic, ticketing platform Fatsoma and mobile market researchers Reality Mine.
Three years ago Smith joined corporate finance house Dow Schofield Watts to put more “momentum” into their tech sector activities.
“Every conversation we had with early-stage companies in Manchester was about how they couldn’t find any money, unless it was from the NPIF,” he explained.
“We realised that there was a market failure and that it would be profitable for us to intermediate that – good for the companies and for the private investors who we act for. We also invest ourselves, shoulder to shoulder, with them.”
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Smith, who is joining Tech Manchester as a mentor to start-ups this year, is beginning to see the wider benefits for the sector. In 2017 Dow Schofield Watts launched an angel network while Manchester Tech Trust is building a similar network. He says the UK Business Angels Association is also “trying to spend more time in the regions”.
“The first time you make an investment in an unquoted business, it is very worrying and feels risky,” he said. “The second time, you get more familiar and start to feel comfortable with the process.
“If you tell other angel investors that you haven’t done it before and speak to friends and associates who have, they can share how it worked for them and offer their advice.
“There aren’t too many people in Manchester with personal experience of angel investing. But it comes with time.”
Dow Schofield Watts invests up to £500,000 into start-ups and last March completed its first investment. More recently it put £300,000 into eCommerce platform Shopblocks, which has more than 300 customers after Smith’s team helped founder Kevin Jones rearrange the shareholdings and put together a sales and marketing strategy.
“We have a huge amount of time for Kevin,” Smith said. “He’s a really bright guy and hardworking fella and absolutely deserves to succeed.
“He was left stranded as a result of the North West fund coming to a halt – he fell between two stools because the NPIF couldn’t pick him up.
“If you just put money in, there’s a very good chance entrepreneurs will fail – I’m talking about good companies and good people.
“It is in the nature of early-stage companies to fail – we just try to keep them on the straight and narrow and give them every chance of success.”