‘Access to finance not diverse enough’
TECH companies in Wales have said there needs to be a wider number of funders and that the current marketplace is too dominated by the Development Bank of Wales.
In a report on the state of the Welsh digital economy, tech-led startups said access to finance in Wales was not nearly diverse enough.
The report, published by the Coalition for a Digital Economy (Coadec), found that most tech firms in Wales were concerned that public funds, such as the Development Bank of Wales, dominated the funding landscape.
The development bank, whollyowned by the Welsh Government, is Wales’ largest startup investor in terms of participation in equity deals at 391 between 2011-2020. Angel Invest Wales, the largest Angel network in Wales, consists of around 300 Angels which is funded entirely by the Development Bank of Wales.
The report said that, in order to join Angels Invest Wales, the Development Bank of Wales requires investors to meet certain financial criteria and, without being an official member of the network, potential Angel investors cannot access its benefits.
It saw many firms raise concerns about a lack of Angel investors in Wales – both because there were not enough and not enough that understood, or were interested in, tech.
Companies felt the dominance of the Development Bank of Wales in the funding landscape risked creating a culture of funding dependency with good ideas beginning to skew in favour of only fitting into a grant-giving process rather than the merits of the innovation or what the market wanted.
Tech firms said they wanted to see a new programme established that backs the creation of more venture builders while broadening the entry requirements to Angels Invest Wales.
They also recommended a review into how government funding can be leveraged to provide better engagement with startups. While investors wanted to see extra business skills support made available.
Firms said public spending would benefit from a more “long-term vision” to realise Wales’ potential as a tech leader. While a laudable attempt to be equitable across Wales’ regions and sectors meant that resources were diverted from areas that have genuine opportunities to become global leaders.
One stakeholder who was deeply embedded in the ecosystem and works regularly with the Welsh Government described its support as “faddy”.
Many firms also identified braindrain as a serious issue with some firms unable to hire developers and coders which suppressed growth. According to the report, around two thirds of Cardiff’s computer science graduates leave Wales after graduating.
BioTechs spanning Bangor, Newport and Cardiff all identified skills shortages as specific scaling blockers.
While organisations like GlobalWelsh, Tramshed Tech and Wales in MENA (Middle East and North Africa) were boosting Wales’ image overseas, tech firms wanted to see more trade envoys set up that champion specific sectors within Welsh tech.