Mid-sized tech companies are struggling to secure vital funding, with access to finance still being the biggest barrier to growth for half (45%) of firms, says a report published today by accountancy and business advisory firm BDO LLP in the South East.
According to the BDO report, medium-sized tech and media companies have become the squeezed middle of the sector, by missing out on the ‘rags to riches’ appeal of start-ups and failing to have the multi-billion pound pull of tech giants.
Interestingly a third (33%) of bosses believe the valuation hype – and subsequent share price volatility – of the world’s leading tech firms such as Facebook and Twitter has unfairly made some investors wary of the sector.
They also blame a general lack of understanding from lenders (55%) and an inability to explain how a new product might generate revenue (40%).
However venture capitalists, private equity investors and alternative funders say they are “crying out” for opportunities and urge medium-sized tech firms to come forward.
John Everingham, partner at BDO LLP in the South East, said: “The South East is a real hub for media and tech excellence, and it is concerning that there is a disconnect between the tech and finance community that could hamper growth ambitions.”
Medium-sized TMT businesses in the South East currently generate £22bn and employ more than 100,000 people. According to BDO’s Mid-Market Manifesto the sector in London and the South East is growing faster than that of California’s Silicon Valley.
Everingham adds: “This sector is big business for our region, but its growth potential is even bigger. If we want to create a market where mid-sized businesses can develop into global tech leaders in their own right, they need the right finance and support along the way.
“It is important that business leaders know where to turn for funding. Bank debt and private equity are the most common forms of funding for growth, but crowd funding, peer-to-peer lending and government grants are also good alternatives.”
