Scaling up is ‘the real struggle’ for tech firms, says Mercia boss

Scaling up, not starting up, is now the biggest challenge for technology businesses, according to the head of one of the UK’s most active tech investors.

Speaking to representatives of over 200 tech businesses, investors and advisors at Celebrating Tech 2017 in Manchester this week, Mercia Technologies PLC chief exec Dr Mark Payton said more needs to be done to stimulate growth in the UK’s tech sector.

He pointed out that while the UK is among the best in the world for creating startups, it ranks just 13th in its ability to scale them.

The problem, he explained, was down to a lack of “patient capital” – especially for firms outside London.

He said: “Scaling up is the real struggle. Rather than holding businesses back, we need to work with the owners to build value over time.

“That doesn’t mean five years, it may take seven to 15 years to create a sustainable business. More capital is now becoming available for early-stage businesses, but finding scaleup funding is still very difficult.”

Dr Payton continued: “However the issue is not simply with funding at different stages, there are also significant challenges for tech business located outside of London.

“Around £3bn of investment capital is deployed in London and the South East but as you go further and further towards the North, the amount decreases dramatically. This isn’t a reflection of the quality of ideas, but the lazy way in which capital is deployed.”

Speaking further, Dr Payton said he believes one of the biggest changes the technology sector has seen is the quality of the people it now attracts.

He commented: “High-calibre managers used to shy away from early-stage businesses but that has changed, as experience from our own portfolio shows. We are now building some very impressive management teams and boards on our portfolio companies.

“While the political focus is moving away from globalisation towards a more local agenda, in the era of Trump and Brexit, I am confident that the young UK entrepreneurs coming through will grab the opportunities and find ways to benefit from the disruptions ahead.”

Mercia invests in tech businesses based in the Midlands, North and Scotland at every stage of development.

The firm, which acquired venture and growth capital provider Enterprise Ventures in March last year, employs 63 people across six offices in England and Scotland.