Philip Hargreaves, GC Business Growth Hub’s Access to Finance Lead shares four key trends expected to define the investment market in 2021.
With the end of the financial year looming and business planning underway, it is usual for businesses to contemplate their financial outlook. This year is the most challenging for business owners that I can remember, with the UK in lockdown, COVID-19 restrictions impacting on how businesses operate and the current export challenges and international growth opportunities following the UK's exit from the EU.
To support businesses with their plans to recover and grow, we have summarised a series of potential upcoming trends that could impact the funding marketplace in 2021.
The funding environment will remain very strong
Fundraising momentum, particularly in the early-stage marketplace will be stronger in 2021 than last year, even with the withdrawal of government schemes.
The UK will witness the seemingly insatiable appetite for growth-based fundraising, paralleling the US market, but driven by Asian investment. The rise of early-stage ‘micro-VCs’ and post-seed funds will continue, in part supported by the British Business Bank, although with a declining market influence.
Funding ‘supply’ will be in part a direct response to significant increases in business demand. Structurally, the UK economy could witness a significant shift towards greater levels of self-employment driving innovation and demand for funding. This trend will particularly impact early-stage equity funds and networks where competition for funding will increase. Traditional event-driven networks will continue to adapt business models to accommodate increased business volumes and potentially access new capital.
2021 may also see the rise of ‘micro crowd-funders’ to invest alongside existing capital and take advantage of the strong growth in the UK equity crowdfunding marketplace.
Remote working will expand the fundraising landscape
Since the beginning of the pandemic, a large number of businesses have made a major shift to remote working.
Even though office-based working is expected to resume at some degree once restrictions are eased, working remotely will continue to play a key role in the way we conduct business.
This means that businesses will have access to a wider portfolio of funders and networks as these will no longer be constrained by geography.
The 2020s will emerge as the decade of data
If the 2010s were the decade of software and SaaS, then the 2020s will be the era of data companies adding value and competitive advantage to clients across all sectors. In 2021, data insight and application will shape the next waves of innovation.
Businesses in Greater Manchester can access the latest COVID-19 insights and intelligence to inform their strategy through the Growth Company’s fortnightly Business Survey.
The Greater Manchester Business Growth Report for 2021 can also be used to understand opportunities and challenges in the year ahead.
From an investment perspective, 2021 will see investors including corporates increasingly focussing on start-ups active in databases, data capture and movement and data quality to capitalise on advances in artificial intelligence and machine learning.
Investment will look locally more than ever before
Investors could actively consider financing more geographically focussed business models. This could be attributed to any of the following reasons:
- Consumers’ shifting interests - According to the Global Web Index Consumer Trends Report for 2021, the demand for local solutions is expected to grow exponentially. This could be due to remote working having increased the time we spend in our local areas and the knowledge that sourcing locally generates value-adding economic activity for the local community. The importance of supporting local-based business rather than multinationals has been at the forefront of the COVID-19 pandemic.
- Local can be very efficient – The past year has accelerated a societal culture shift where speed is a key element of the delivery of customer value. Delivery windows are shrinking and with developments in 3D printing and autonomous production, continuing reductions in order-to-delivery times can largely only be achieved through reducing physical distance.
- Environmental lobbying and policy development towards zero-carbon – The Government’s commitment to supporting the green sector and accelerating the country’s path to net-zero is evident in The Ten Point Plan for a Green Industrial Revolution that was published earlier in November. When products are locally sourced or locally developed, the movement of goods and materials required is minimised and can therefore lead to a reduction in a business’ carbon footprint.
If you are based in Greater Manchester or Lancashire, you can access fully-funded, tailored support through the Access to Finance team which has significant knowledge of the funding landscape and extensive relationships with:
- Business Angel networks
- Venture Capital
- Public Sector Funds
- Alternative emerging sources such as International Investors (via UK Home Office Innovator Visa’s)
Philip Hargreaves, Access to Finance Lead
Philip has worked in commercial and corporate banking for the past 40 years. He is now responsible for the Hub’s Access to Finance Team.
Working closely with partners in the business and professional communities, Philip and his team are passionate about supporting local SMEs who are looking to grow.
“Fundraising in the current marketplace is often complex, requiring time and specialist understanding of all the available options. Putting the right finance in place, at the right time, can mean the difference between success and failure.”
The information provided is meant as a general guide only rather than advice or assurance. GC Business Growth Hub does not guarantee the accuracy or completeness of this information and professional guidance should be sought on all aspects of business planning and responses to the coronavirus. Use of this guide and toolkit are entirely at the risk of the user. Any hyperlinks from this document are to external resources not connected to the GC Business Growth Hub and The Growth Company is not responsible for the content within any hyperlinked site.