Angel investors and government grants dominate British tech investment

The UK's tech sector is significantly more reliant than the US on the beneficence of "angel investors" – the private individuals who invest in very early stage startups.


Almost two-thirds of executives who work in the technology sector reported angel investors as a source of funding in 2013, compared to just 41% of American execs, according to the annual innovation economy report from US investment bank SVB.


That makes angel investment the most significant source of funding for British startups in 2013, outstripping venture capital, which was used by just under half of the nation's tech startups. The different sources of investment may be part of the reason why British execs are more positive than those across the Atlantic.


"UK executives who successfully raised capital in 2013 are less likely than those in the United States to say the fundraising environment is extremely challenging," the firm reports, "and more likely to say it is either somewhat challenging or not very challenging."


Britain's tech sector also has a significantly higher reliance on grants from the Government than Silicon Valley. One in 10 execs took state funding in 2013, more than twice the rate of their American colleagues.


On the other side of the equation, Britain sees markedly less money from private equity and corporate investors than the US does, with slightly more than one in ten and one in twenty respectively reporting them as sources of income.


Despite the differences between the two nations, British executives still aim for a more American style of fundraising when asked about the future: half of them plan on getting income from venture capital as their next source of funding, and 30% are looking to angel investors, while just 1% want the money to come from a government grant.


The report, Innovation Economy Outlook 2014, was based on interviews with 1,200 executives working in high growth businesses worldwide, 100 of whom were based in the UK. Half of them worked at a company with fewer than 10 employees, and more than 80% were in the software sector.