The UK’s tech ecosystem is primarily centered around London, with London, Oxford, and Cambridge absorbing 80% of venture capital investments.
The UK’s tech ecosystem is primarily centered around London, with London, Oxford, and Cambridge absorbing 80% of venture capital investments. However, 70% of this capital converges in the Greater London region. Edinburgh-based venture capital firm Par Equity is launching a £100 million fund to address this geographical imbalance, focusing on early-stage startups in northern regions and focusing on cutting-edge intellectual property.
While Cambridge and Oxford boast illustrious academic histories, other parts of the UK also possess rich academic credentials. Universities like Manchester, Sheffield, Liverpool, and Leeds, as well as institutions in northern regions like Edinburgh, have produced globally renowned figures such as Charles Darwin and Alexander Graham Bell.
What sets the north apart is not only its academic prowess but also the potential for investors to secure more favorable terms, away from the bustling hubs of the south. Paul Munn, Managing Partner at Par Equity, highlighted this advantage, citing an instance where the firm supported an advanced materials business at a fraction of its high-profile competitor’s valuation within the “golden triangle.”
The competitor raised £60 million for an inferior product. Now, key staff members are flocking to join Par Equity’s portfolio company, showcasing the north’s untapped potential.
Established in 2008, Par Equity’s journey began with an inaugural £4.8 million “innovation fund” fueled by angel capital. This was followed by a £40 million EIS (enterprise investment scheme) fund in 2012, designed to provide tax-efficient investment opportunities for high-net-worth individuals.
In addition to these, Par Equity has leveraged capital from its Par Investor Network angel community, British Business Investment’s (BBI) Regional Angel Program, and the Scottish Government’s innovation-focused investment body, Scottish Enterprise. To date, the firm has deployed an impressive £167 million in capital, supporting 78 startups and executing 423 individual transactions, including follow-on investments.
Today’s announcement marks a pivotal moment for Par Equity as it introduces its first institutional VC fund, Par Equity Ventures I LP. Spearheaded by the Scottish National Investment Bank and BBI, with contributions from the Strathclyde Pension Fund, the fund is geared towards high-growth tech companies in the northern UK, particularly those with robust intellectual property.
The fund’s scope includes climate tech, industrial tech, and health tech. The latter sector notably yielded a substantial return for Par Equity when Best Buy acquired its Edinburgh-based portfolio company, Current Health, for $400 million in 2021.
While the north-south demarcation may blur, for investment purposes, Par Equity will focus on the Midlands and northward, encompassing Scotland and Northern Ireland. The fund’s management will be based in the central Edinburgh office, complemented by recently established hubs in Leeds and Sheffield providing additional support.
Historically, the south, London in particular, attracted startup founders due to capital availability and talent pool. However, the remote-work revolution catalyzed by the pandemic, coupled with macroeconomic shifts, is prompting founders to reconsider their base of operations. This juncture presents an opportune moment to intensify investments across the entirety of the UK.
Paul Munn emphasized the north’s formidable educational institutions, stating that half of the UK’s leading universities are situated in the region, renowned for their excellence in science, technology, and engineering.
He noted a positive shift, with more graduates choosing to remain in regional areas following the pandemic and escalating living costs, signaling a potential renaissance for the northern regions.
In the endeavor to rebalance regional investments, Par Equity’s £100 million fund holds the promise of propelling northern startups to new heights, leveraging their untapped potential and contributing to a more inclusive UK tech ecosystem.