The latest annual report of UK based technology and healthcare start-ups by Silicon Valley Bank (SVB) indicates that businesses will focus on profitability over growth in 2016 and that there is little enthusiasm for the country exiting the European Union (EU).
The ‘Start-up Outlook’ report, the fourth issued by the targeted financial services group, gauges perceptions on business conditions, fundraising, hiring and policy issues. SVB also surveyed start-ups in the US and China this year.
“Whilst global markets have slowed in 2016, we’re cautiously optimistic about the UK innovation economy,” said Phil Cox, head of Europe, the Middle East and Africa (EMEA) and president of SVB’s UK branch.
“We’re expecting a healthy recalibration in terms of tech valuations, but funding will always be available for start-ups solving real problems. This year, businesses will be focusing on profitability over growth at all costs -which will ensure that the UK innovation economy continues to thrive and maintain its position on the global stage.”
Highlights from the UK survey and are based on responses from primarily private technology companies with fewer than 50 employees and annual revenue of up to US$10m:
Business Conditions: 58% of startups expect 2016 to be better than 2015, a 21 percentage point drop over the last two years.
Brexit: 72% said leaving the EU would have a negative effect on their business, up from 64% the prior year.
Fundraising: 80% said the fundraising environment is somewhat or extremely challenging, while 40% of startups expect their next source of funding will come from venture capitalists;
59% said their realistic long-term goal is to be acquired; while for 17% it is to complete an initial public offering (IPO).
83% said the merger and acquisition (M&A) market will either stay the same or there will be more acquisitions over the next 12 months.
Talent: 60% said access to talent is their most important public policy issue, while 95% said it is challenging to find people with the right skills to grow their business, up from 89% in 2013.
42% said the lack of access to talent has inhibited product development and 48% said it makes it more difficult to scale their operations
Diversity: 61% of startups had no women on their board and 47% had no women in executive positions. Only 15% have programmes in place to increase the number of women in leadership positions
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
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