TheTreasurer

UK business owners looking overseas for capital, says EY

Difficulties with finding suitable, domestic backers and London-centric nature of funding sources are forcing entrepreneurs to look further afield

A majority of UK entrepreneurs are looking beyond their own shores for the valuable venture capital (VC) that will help their firms grow, according to research from EY.

In its latest Fast Growth Tracker report, the Big Four auditor revealed that 62% of British business owners are casting their nets overseas for VC.

One likely motivator for the trend is that 39% were unable to find suitable, domestic investors in their latest funding rounds.

The report notes that three-quarters of UK owners completed their most recent rounds over the past 12 to 24 months – with many of them finding the process anything but easy.

Almost a quarter (24%) of entrepreneurs said that their deals took between six months and a year to finalise, with 4% taking even longer.

Plus, a 40% segment said that they struggled with the distracting effects that raising a funding round had upon their teams and the standard, day-to-day operations of their firms.

Another difficulty, the report points out, is that start-up funding routes remain overwhelmingly London-centric: the UK has yet to develop the type of multiple, large-scale VC hubs with regional focuses that are present in nations such as the US.

However, among owners of existing firms, 71% say they plan to raise funds again in the next 12 months.

Some 72% of entrepreneurs within that segment are looking for up to £5m in capital, with a further 17% aiming to raise more than £10m.

EY Fast Growth Platform partner Richard Goold said: “Funding has historically been – and continues to be – a hurdle to growth for the country’s entrepreneurial businesses.

“This research shows a disparity between matching ambitious enterprises with suitable investors, leading many to look overseas to find the growth capital they need.”

He noted: “To make our start-ups a British business success, more routes to funding need to be created to ensure that these bright, entrepreneurial businesses are enabled to flourish.”

EY Entrepreneur of the Year partner Joanna Santinon said: “Entrepreneurs, with their innovative and optimistic outlook, will help to lead the way for UK business.

“In a rapidly changing world, where others see barriers, entrepreneurs will often see opportunity.”

She added: “Other businesses can learn a great deal from their ‘can-do’ attitude, passion and sense of purpose, which contributes to their fast-growth and ambitious plans for the future.”

Read EY's full report here.

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