Kate Rimmington, from Wales Tech Week creator Technology Connected, explores why Wales is a source of untapped potential for investors, and what budding entrepreneurs can do to win funding.
Welsh companies receive a disproportionately low amount of investment, according to economic researchers Beauhurst.
That means high-potential entrepreneurs and ideas in Wales are being held back – and investors are missing out.
In their recent paper in collaboration with Development Bank of Wales, Beauhurst calculated that Wales receives only 2.5% of the UK's total equity investment – despite having 3.44% of high-growth companies, and 6.18% of those outside London.
The challenge of freeing this untapped potential is something Wales Tech Week wants to address by welcoming investors and platforming Welsh startups with an exhibition and pitch events.
How significant is tech in Wales?
In 2022, Trade & Invest Wales estimated the total value of the Welsh tech sector to be around £8.2bn.
According to the British Business Bank’s Small Business Equity Tracker, in 2022 Wales achieved 19% growth in the number of deals done – to 70 – valued at £82m overall. This was a slightly lower investment value compared with the previous year – but the fall was in the context of economic conditions and was less severe than that experienced in other nations and regions.
The benefits of working with Development Bank of Wales
The Development Bank of Wales, backed by Welsh government, is the largest investor for Wales, having taken part in 250 equity deals between 2013 and 2022.
In this Business News Wales / Wales Tech Week digital discussion [link], David Blake, formerly of Development Bank Wales (DBW) and now investment director of Deepbridge Capital an active investment fund in the region, said the bank is a good co-investor to work with.
Entrepreneurs often go to DBW and win 50% of the investment they need, he said, making it easier for other investors to get involved. Because many startups receive early support through the bank and the startup ecosystem, investors coming into Wales can find companies that are to an extent “de-risked” with more “polish”.
Wales’ startup ecosystem
A closeknit ecosystem and strong incubator network is a huge advantage, said Carl Griffiths, who oversees the Technology Seed Fund at DBW, pointing to Technium in St Asaph, and the Sony Tech Centre in South Wales among many others.
Wales has particular strengths in compound semiconductors, cybersecurity and fintech.
“We've got some great institutions as well like the whole compound semiconductor ecosystem that's rapidly building itself,” Griffiths added, highlighting Wales world-class expertise in this sector.
Rachel Ashley, a founding member of Women Angels of Wales, a syndicate of more than 30 of the country’s most successful female entrepreneurs and business leaders, is keen to highlight the importance and benefits of searching out a diverse group of founders, across gender, race, age – and geography.
She added:
“I don’t think many people would actually just appreciate what the opportunity is in Wales. We also have strong educational institutions, such as Swansea University, producing spinouts.
“Wales is a place where there is talent – so hop across the border, to Newport, Cardiff and regional centres and have a look at what we’ve got on offer.”
Getting investor ready
Looking at this from the other side of the coin, what can entrepreneurs do to win investment and get a good deal?
Griffiths said there are new companies that come to DBW who are not investor ready.
“Don’t forget you are selling yourself and part of your company – you aren’t giving anything away.
“Understand your audience, know who you're talking to, even to the point of recognising what type of capital you are putting yourself in front of – there is a big difference between pitching to an angel versus a VC versus a family fund, etc.
“I think organisations like Tramshed Tech and others have a significant role to play in educating new founders in what it what it means to be ‘investor ready’ – such as making sure that you have your pitch deck in place.
“If you can possibly do it, find a good chairperson, to come into your company to act as that interface between investors and the business, freeing you as the founder to get on and run the business.”
“When we're looking to invest in a company, the most important thing is the people you're investing in, and you want somebody there who really gets their business, understands it, and is confident about taking the business forward.”
‘Nail the messaging’
Blake said that the process of securing investment is not as brutal as Dragon’s Den or Shark Tank – investors want to properly explore if you’re across your business and understand what you’re talking about.
“There's not really a shortage of good ideas out there. There's lots of people who say ‘I've got this brilliant idea, and it'll change the world’,” he said.
“But what I tend to find is that companies are really poor at explaining that value proposition, which might be ‘The reason I'm going to make this product is because my customer is going to save 10 times off the back of it’ or…’It's going to reduce carbon’. But people tend to be very fluffy around that. So I say, nail that messaging and you'll very quickly find that you've got investors interested in you.”
He added it’s important to be honest about your strengths and weaknesses.
“You have some companies with a team of founders who have grown and exited a company before and they've got lots of background senior level experience… You might be on your own trying to set this up – but that is also okay. Because what investors like to see is people who are very pliable, who understand their weaknesses, and how they can solve those problems and what that requires from a resourcing perspective.”
That might mean getting an experienced chair or non-executive director to help with wider business knowledge or governance issues.
That said, as someone who listens to pitches as one of the Women Angels in Wales, Ashley wants founders to be confident in what they have to offer.
“I think sometimes in Wales, people can be too humble – be confident.”
At Wales Tech Week, investors can be the first to learn about high-potential Welsh businesses thanks to the “Startup Alley” exhibition and Pitch Platform, plus networking and exhibitors from Wales’ strongest sectors. Entrepreneurs or anyone interested in starting a business can benefit from expert panels, business support organisations and networking.
