Where angels don’t fear to tread: Entrepreneurial hotspots developing throughout the UK

Business Insights

Startups are the lifeblood of the UK economy and despite a turbulent year politically, the country’s startup ecosystem is in rude health. This is the second year we have produced our State of the Angel Investment Nation ‘health check’ report and encouragingly we have seen an impressive increase in pitch ideas and more angels than ever willing to back British startup businesses. Angel investing is a vital way startups gain funding to support their growth at the seed funding stage. It is therefore a good barometer of the future health of the economy.

Northern ideas powerhouse

One of the most encouraging aspects of the data, taken from more than 125,000 UK registered businesses looking for funding and 35,000 investors, is the rapid development of entrepreneurial hotspots across the UK. There has been much talk about the 'Northern Powerhouse', and we are certainly seeing a vibrant startup culture beginning to challenge the previous dominance of London and the South East.

London still remains responsible for 37% of all pitch ideas, although its market share was slightly down. The South East is number two. However the North West is number three, up 10% year on year and closing the gap fast. The North West is the home of thriving tech centres in Manchester and increasingly Liverpool, with nimble digital businesses springing up in a supportive business environment. In the fast growing Internet Of Things (IOT) sector Manchester is now considered number one in the country.

Meanwhile the North East had the fastest growth overall in the country, up 29%. There have been several accelerator programmes set up in the region, so it is encouraging to see a burgeoning scene take root. There has also been impressive growth in other parts of the country. There was 25% growth in pitch ideas in the West Midlands, with East Anglia up 26%.

Property tops pitch list

In terms of sectors property tops our list for pitch ideas. Entertainment is the second, followed by technology. Overall there were 10% more pitches over the past 12 months from startups looking to attract investors. As well as looking at what sectors entrepreneurs are focused on, our report also analyses the keyword searches of investors and what they are interested in backing.

Attracting angel investors

Encouragingly there is a good fit between entrepreneurs looking to raise finance and angel investors’ keyword searches. Along with topping the pitch list, property was also the second most used keyword for investors. This is largely because it is a sector offering good returns based on an easily understood concept and a good addition to most investment portfolios.

Unsurprisingly ‘Technology’ was the top search term used in 2019. The rise of AI and machine learning with applications across so many industries has meant that many new startups have some form of digital technology at the core of their value proposition.

The prevalence of industry terms like ‘agrotech’, ‘insurtech’ and ‘fintech’ speak to this connection between specific industries and the overarching dominant industry technology is fast becoming. While technology and software continue to attract investor interest, in other areas we are seeing entrepreneurs and investors further apart.

Fashion fades

Passion areas like food or fashion are of more interest for budding entrepreneurs than they are for dispassionate investors looking to make a profit. While fashion and beauty remains the fourth most popular category for pitch ideas, it is just 17th on the list for investors. The decline of the High Street has been well reported and this has been magnified by a loss of interest in fast fashion among younger consumers. Investors have been following the signs and voting with their wallets.

Sustainability sells

However one area where we are really seeing an alignment of ideas and investment is in sustainability. With climate change centre stage in Davos recently, we have seen a stunning rise in interest for sustainable businesses. Searches for ‘Renewables’ have rocketed by 34 places to be the 14th most searched for term. Meanwhile ‘greentech’, unheard of even a couple of years ago, is now the 19th most popular keyword, up from 47th last year. Many of the most exciting businesses we have raised for over the past year have had sustainability at their core.

With the urgent need to tackle climate change and move to net zero carbon this is an encouraging sign for the future of the planet as well as an exciting business opportunity.

The Top 10 Sectors for Pitches:

    1. Property

    2. Entertainment

    3. Technology

    4. Fashion

    5. Food

    6. Software

    7. Hospitality

    8. Retail

    9. Professional Services

    10. Education

The Top Keywords for Investors:

    1. Technology

    2. Property

    3. Mobile

    4. Robotics

    5. Software

    6. Electronics

    7. Computers

    8. Products

    9. Residential property

    10. Finance

James Badgett, co-founder of Angel Investment Network