Newcastle Tech — 2018 Report Card

It’s been 12 months since I wrote ‘Newcastle is failing Tech Entrepreneurs’, in which I pointed out how poorly we’re performing compared to similar cities across the country.

A lot’s changed for Newcastle in the last year — new funds, new co-working spaces and new companies — but what does that actually mean for the ecosystem? To find out I’d like to introduce you to Newcastle’s end of 2018 report card:

Welcome to Newcastle

Investment & Acquisitions:

First up is money and there is finally some positive news around access to investment!

12 months ago the Jeremie 2 investment funds were still ‘delayed’, and we had no idea if or when they’d be released. Thankfully in the last year the deal was signed, and all 5 funds are now active, and will invest a total of £120m across the region. Northstar are managing the Innovation fund — a £27m fund aimed at early stage businesses, and they’ve already backed 38 new companies since the fund launched in April.

We had a number of regional companies close large rounds this year with a couple of the highlights being:

  • Partnerize (formerly PHG) raising $9m at a $127m valuation
  • Moltin raised $8m this year, and have opened their first US office

And after a dry spell that lasted far long than it should have, we finally had some acquisitions this year:

  • KyKloud were acquired by Accruent for a rumoured £12m in January
  • Rocket 9 sold to LeoVegas for £65m in June
  • WhatUsersDo were bought by UserZoom for an undisclosed amount

However the news isn’t all positive, with Angel investment still being one of our main weaknesses. According to the UK British Angel Association report that came out this year the North East is trailing far behind the rest of the country:

Location of Angel deals (red) and Angel location (blue)

Investment Score: B- (Good effort, but could do better)


Community

Campus North Closing Party

Let’s start with the bad news — 2018 was the year that Campus North closed it’s doors for the last time (read more about it here). At the end of a fantastic 5 years it was a very sad moment to close the doors behind us, and to say goodbye to all the amazing tenants who had been a part of the community.

However there is good news, we’ve got some brand new spaces for tech companies opened this year:

  • Proto, based in Gateshead, provides co-working space alongside facilities for VR and AR businesses
  • TUSPark, in the centre of Newcastle, is a co-working space backed by Tsinghua University Science Park and is also home to Newcastle’s Barclays Eagle Labs

We’ve also got more community networks. January saw the launch of the Newcastle Tech Trust — a not for profit initiative designed to represent and support tech startups from across the region. The Trust has already brought together experienced founders with new startups at a number of events, representing tech companies in the regional press and has more planned for 2019.

Newcastle Tech Trust Christmas Party

I’m delighted that I can now talk about Ignite being back in the region. 3 years after we last ran a programme in the NE we’re back on our home turf with two new programmes — a pre-accelerator (which you can read more about here), and an accelerator programme (more details here) which will be starting in February 2019.

And this is just two of the new programmes in the region, with others including Digital Union’s Innovation Fund, a Northstar/Council backed Ageing accelerator, along with the Forge IOT programme all taking place in 2018 or 2019.

Ignite Newcastle Pre-Accelerator Workshop

I’m also delighted that we’ve got new events like the Founders Friday series, bringing fresh faces to Newcastle and helping to engage the local ecosystem, which I hope we’ll see more of in 2019.

However one of the big challenges we currently have is event space to support the local meet-ups. After the closure of Campus North, which hosted around 15 free events a month, the meet-ups have struggled to find suitable space that won’t charge to host them — and this is something that as an ecosystem we need to urgently address.

Community Score: C (Great progress, but we’re still missing some of the fundamentals)


Policy & Strategy

Newcastle Council’s latest tech policy, announced in early 2018 was full of ambition but lacking in any specifics of how we move forward — which is a lot like the strategy they launched in 2017, the Auxin report they commissioned in 2016, and every other policy for the sector we’ve seen in the last 5 years.

Despite the involvement of some committed individuals at the council, as a group it’s still not making the technology sector a priority. Perhaps this isn’t surprising given the number of pressing issues that the council is currently juggling, but I hope that the candidates for the North of Tyne Mayor will recognise the potential for economic prosperity that the sector offers and make it a core part of their manifestos.

Tech Nation is now one year into their role as the national champion for startups (since combining Tech City and Tech North) and we’re lucky to have someone as engaged as Jamie Hardesty leading the charge in the NE. However from talking to founders in the region I think it’s very noticeable now that we’re one of 11 nationwide clusters, rather than one of a handful of cities in the North — definitely a case of a small fish in a bigger pond.

Policy Score: D (No significant progress since last year)


Summary

There’s been some great news this year — investment funds, raises, exits, new co-working spaces and the launch of the Newcastle Tech Trust, and the city definitely feels more positive than it did 12 months ago.

However we are still operating so far behind where a city of our potential should be, and there’s a long way to go before we’ve caught up with our peers. Manchester has just announced the development of their fifth WeWork co-working space and Amazon has announced it’s opening a 600 person office in the city (along with a 250 person office in Edinburgh). Even taking into account the size difference between Manchester and Newcastle, it’s hard to argue that we’re even close in terms of ambition or what we’ve achieved in the last five years.

So how do we get from here to there?

  • We need real leadership, along with a robust strategy for the sector within the council, and that leadership needs to come from someone who’s been a tech entrepreneur (see the Boulder thesis for why this is so important).
  • We have to increase the number of new high potential companies being created in the city (along with the number relocating here). These startups are the scale-ups of the future, and as they grow they’ll create jobs that graduates want. This helps keep more talent in the city — developing a positive cycle that will help more companies as they grow.
  • Collaboration — nothing will improve unless the public, private and education sectors find some common ground and work together. The universities must consider what meaningful part they can play in engaging with and encouraging grass-roots activity.
  • A healthy dose of luck. There needs to be a catalysing event in the city that can help change our trajectory. This isn’t something we can control, but we can increase our changes of it happening. A Skyscanner sized exit within the region, a local office for Amazon/Google/Microsoft, or even a North of Tyne mayor who gets why this is so important would all make a significant difference.

So how about it Newcastle — why don’t we make it our New Years Resolution to be the city we all know we can be?

We can do this. We have the potential. We have the people. We just need to make it a priority.


Footnote: If you’re based in the NE, and are interested in making it a better place to live and build businesses then step up and do your bit. If you’re a new founder then get in touch with the Tech Trust and we’ll help connect you to some useful folks, if you’re an experienced entrepreneur then get on twitter and offer to mentor new founders (without expecting anything in return obvs), and if you just want to get involved then then head to a meet-up and see some of the amazing things that are happening (loads listed here).