• Sebastian Winter

North England's Entrepreneurs Must Seize Unexpected Growth Opportunity Presented By COVID-19

Covid-19 has hit European businesses hard. A survey by McKinsey of 2,200 SMEs across the UK and Europe found that more than half worry they may not be in business in 12 months. If these fears play out the hit to the economy as a whole will be severe, with SMEs providing over two-thirds of the region’s employment according to Eurostat. This is not terrible news for everyone though, for the surviving businesses it is an unprecedented opportunity. The pandemic will leave vast empty spaces in the market that will need filling. To take advantage of this growth opportunity, entrepreneurs in the North of England must think beyond battening down the hatches and prepare for the opportunity of rapid growth. To achieve this they must prepare aggressive growth strategies, get chest to chest with new customer groups, and identify where to raise the capital to finance seizing the advantage.

NPIF fund managers provide a range of financing options for northern businesses.

Entrepreneurs can now access a slew of new lenders due to the Northern Powerhouse Investment Fund (NPIF), as we covered in a recent article. Early-stage startups and SMEs can get microfinance between £25,000 and £100,000 from Business Finance, part of The Growth Company, and msif in the Northwest, while in the northeast firms can access the same amount from Business Enterprise Fund and Finance For Enterprise. Business owners can access debt finance of between £100,000 and £750,000, this fund is managed by FW Capital in the North West, Tees Valley & Cumbria, and Mercia in Yorkshire & Humber. NPIF has also unlocked more equity investment in the region, with investments ranging from £50,000 for earlier stage ventures through to £2 million for later stage firms. Maven manages the fund in the Northwest, while Mercia manages the fund across North East of England.

The region has a plethora of high-wealth individuals ready to play angel

The north of England is home to plenty of people who had seen success within business. At Entelechy we have written about two such individuals. Firstly, Manoj, a serial entrepreneur, who sold one of his companies to GP Bullhound, an investment bank, and runs Techcelerate, a technology community in Manchester, helping startups to bring products to market and reach their growth milestones. Secondly, Roy, whose first business was acquired by Aviva, an insurance firm, and then set up DropJaw, an investment firm, to provide growth capital to local businesses and who also mentors entrepreneurs in a business school. These local successes provide an amazing pool of advice and early-stage risk capital that can mean the difference between a firm’s initial success or failure.

Entrepreneurs need to use THGs recent success to claim investor attention

The recent IPO of The Hut Group (THG) has brought the venture capital world’s attention to Manchester. It is a not very well-kept secret that most VCs invest in locations that spawned previously successful businesses. Plenty of books have been written on this topic, such as Brad Felds Startup Communities. THG raised its early-stage rounds from Praetura Ventures, a Manchester-headquartered EIS investor, before moving on to raise rounds from global names such as Barclays, HSBC, Citibank, and JP Morgan. This is a perfect opportunity for other entrepreneurs in Manchester or other Northern cities to approach investors in London to raise a Series B or later investment.

Photo by Markus Winkler on Unsplash

Northern Businesses Need To Beat The Drum To Attract Greater Pools Of Private Capital

As shown, Northern cities are home to plenty of success stories. For Northern businesses to fill the gap created by COVID-19 both within the UK and globally, they will need access to large pools of capital. The NPIF has begun to catalyze this process, but it is down to the local ecosystem of investors and entrepreneurs to keep beating the drum to make the world aware of the region’s potential. Both to make their businesses a success, and to bring the dream set out by the Northern Powerhouse to fruition.