Birmingham again celebrated the second largest number of start-ups after London in 2014-15; which as the second largest city we should really expect.
That said, the thriving entrepreneurial spirit in our city should be able to gain significant advantage over those in the capital; it is at least three times less expensive to operate a start-up in Birmingham than it is in London. Premises and staff costs are significantly lower; meaning that cash-burn rates in the new businesses are lower, so any investment goes further as the founder’s business plans are delivered.
This is of course good news. The businesses in Innovation Birmingham’s Entrepreneurs for the Future incubator, that have so far raised a total of £10m, can take advantage of a longer runway to launch their new businesses. In London, they would have had to raise at least £30m to do the same thing. That said, it is still significantly easier to raise equity funding for tech-based businesses in London than it is in Birmingham, and indeed across the Midlands. Early-stage London tech businesses burn cash at a faster rate but the cash is easier to come by!
For Birmingham start-up businesses, the challenge is follow-on finance, without which the ventures will stagnate and fail to achieve their potential. There is talk about new regional funds – there has been for a couple of years – but businesses need access to such funding now if a significant proportion of the celebrated number of start-ups, especially tech-based businesses, are going to achieve their full potential.
The incubators at Birmingham Research Park, E-Spark and the Innovation Birmingham Campus are all generating new exciting businesses to fuel the start-up community. As a grouping of incubation centres and with the support of other public and private sector organisations, Birmingham needs to create a funding escalator to drive growth of these next generation businesses.