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The Covid-19 pandemic has, unsurprisingly, been a major theme of Computer Weekly’s 2020 startup coverage. From difficulty in securing government support loans to the collapse of veteran players in the ecosystem, UK technology startups have been hit hard by the pandemic and subsequent lockdowns.
This was particularly true of early-stage startups, which consistently struggled to raise investment throughout the year and were largely locked out of accessing government loans. In September 2020, the problems faced by these firms culminated in a record number of 1,067 startups filing for administration, liquidation or dissolution since the start of lockdown on 23 March.
Despite the difficulties faced by startups, some positive trends developed, for example in growing net- zero and fertility technology investment. On top of that, a number of startups that Computer Weekly spoke to were focused on building tools that could help people maintain and exercise their privacy online.
On 20 April, the UK government announced a £250m Future Fund loan scheme to support startups and small and medium-sized firms during the pandemic. According to its initial headline terms, however, enterprises were only eligible if they were an unlisted UK registered company and had raised at least £250,000 in equity investment from private, third-party investors in the past five years.
According to figures obtained by Computer Weekly from Dealroom.co, there only 5,000 startups had raised £250,000 or more in the past five years. In the UK, there are roughly 30,000 startups in total, meaning 83% of enterprises were not eligible for Future Fund loans.
While tech startup ecosystem leaders were largely positive about the support secured for startups, many early-stage companies have continued to struggle throughout the year due to a lack of support.
Although the General Data Protection Regulation (GDPR) has certainly raised people’s awareness of their digital rights since it was introduced in May 2018, there is still a distinct lack of tools and mechanisms that actually allow people to exercise them with ease.
Specifically focused on the GDPR’s right to be forgotten, machine learning startup Mine uses a “non-intrusive” algorithm to monitor people’s email inboxes, which cross-references the subject line information with a company’s privacy policies to determine exactly what data it holds on a user, without having to access the actual content of the emails.
At the time of writing, Mine had analysed the privacy policies of more than four million digital services to understand what data they collect from users. When developing the app, Mine discovered that the average user has 350-400 companies in their digital footprint, 80% of which the user interacted with just once.
Once users know where their data is, Mine helps them reclaim it by submitting automated right-to-be-forgotten requests to the companies with the click of a button.
Despite the difficulties faced by technology startups throughout 2020, they did manage to attract £663mn worth of investment in the month since the coronavirus lockdown began, most of which was brought in fintech, artificial intelligence, digital security or blockchain startups.
By the end of May, this figure was just over £1bn, but while overall investment went up, it was highly concentrated in just a few hands.
Only 5% of the funding received by technology startups went to those firms raising investment for the first time, meaning early-stage technology startups got just £52m.
On average, this meant investors were committing less that £1m to these companies per funding round. In turn, the total value invested into each startup dropped by 83%.
The pandemic has obviously prompted massive interest in healthcare technology (healthtech), but a market analysis from July revealed that billions have been invested in four healthtech sub-sectors since 2014 – $2.2bn in fertility tech startups, $4.4bn in cannabis tech companies, $4.5bn in telemedicine firms and $7bn in developing medical records systems.
Looking at the overall deal count in each sub-sector, the study also found that each has had an almost continuous rise in the total number of deals being made every year. Of the four, the growth of investment into fertility-related technology startups has been the most consistent.
“The trend is clear to see. As fertility rates continue to decline, demand for fertility treatments will continue to rise, but not everyone who wants treatment can access it,” said Kamran Adle, an early-stage investor in the Future of Health team at Octopus Ventures.
“That’s where we see the big opportunity in the coming years, with new technologies and services enabling new treatments that are cheaper and more scalable. Ultimately, this presents a huge opportunity to transform patient outcomes and should make having a baby much more accessible to all.”
In early August, the self-styled global community for tech entrepreneurs and startups, TechHub, went into administration as a result of significant revenue reductions caused by the pandemic.
The organisation, which provided workspace near London’s Silicon Roundabout and offered tailored support to help developing startups and entrepreneurs, was launched in 2010 and has been used by more than 5,000 companies, making it an important player in the London startup ecosystem.
According to founder and CEO Elizabeth Varley, the company was operating its London workspace at “almost full capacity in February this year”, but lost three-quarters of its income between 23 March when UK lockdown started and 1 August.
In an effort to keep afloat, TechHub joined with its stakeholders – funders, advisers, employees, and so on – to devise a plan for navigating the pitfalls of the pandemic, but this was dismissed by the landlord who “would not discuss or negotiate it”.
Videoconferencing and other communications technology companies have done well during the pandemic as a result of massive increases in remote working. One of these is British comms startup Element, which is using an open source, decentralised network known as Matrix to support enterprises in securely exchanging real-time information during the pandemic.
Unlike centralised systems, where all users are connected to a central network owner or server that controls the data and access to it, Matrix’s decentralised approach means only devices involved in the conversation can decrypt the data.
The primary difference between Element and other messaging services is therefore that users can connect to servers of their own choice, giving them more control over how their data is stored and shared.
“On our side, we’re trying to build an ecosystem with Matrix – it’s a long term-thing and we think it’s better to have a very big ecosystem, with many companies adding value on top of it [rather] than a multitude of small silos who are just fighting against one another over who is going to be the best in the next few years,” said CEO and chief technology officer Matthew Hodgson.
In September, research by Tech Nation revealed that the UK is leading Europe for venture capital investment into net-zero technology companies working to reduce carbon and other greenhouse gas emissions.
It found that net-zero companies had received £336m in 2019, a 28% increase on the previous year, while French and German net-zero firms secured £216m and £283m, respectively.
To support and accelerate the growth of “pioneering sustainable tech companies”, Tech Nation also developed a net-zero scaleup programme with the backing of government, which has taken on a cohort of 30 companies that it believes could help the UK reach its goal of net-zero greenhouse gas emissions by 2050.
Shortly after TechHub went into administration, it came to light that 1,067 startups had filed for administration, liquidation or dissolution since lockdown on 23 March.
Of these, 273 fast-growth companies made filings in September alone – a 181% month-on-month increase from August – marking the highest number of startup collapses in one month for a decade.
According to Plexal managing director Andrew Roughan, filings were kept artificially low during the early months of the pandemic by various government support schemes, but their effect was starting to diminish by late summer.
“The government commendably offered a number of startups a lifeline at the peak of the crisis,” he said. “But despite the slowly improving funding picture, we are now starting to see the pent-up effect of the pandemic on UK businesses – in particular early-stage startups.
“Government support has artificially kept companies afloat and delayed the true impact. We are only now starting to see more severe damage to UK startups that puts the survival of an entire generation of innovative companies at risk.”
Inrupt, a startup launched by World Wide Web inventor Tim Berners-Lee, unveiled an enterprise-grade version of its decentralised web technology, allowing businesses and government organisations to build applications that give customers and users greater control of their personal data.
The story looks at how a number of early adopters, including Salford Royal NHS Foundation Trust, the government of Flanders and the BBC, have been using Inrupt’s Solid Privacy Platform, which allows users to choose how and where their data is stored, as well as who has access to it, through the use of personal online data stores.
CEO John Bruce told Computer Weekly at the time that, unlike the current arrangement between users and application developers, whereby all kinds of data is mined without consent for the company’s profit, Solid could help create a more “inclusive capitalism” where people are more involved in how data about them is used.
In line with the news that the UK is leading Europe in net zero investment, another seemingly positive development from 2020 was the success of UK technology startups addressing one or more of the United Nations’ Sustainable Development Goals, which have seen investment increase ten-fold in six years.
Also known as “impact startups”, these firms raised €1.4bn from January to October, with Cleantech and climate tech companies raising most of the capital.
“UK impact tech firms have come on leaps and bounds over the last six years, with nearly 10 times more investment made into groundbreaking companies in 2020 than 2014,” said George Windsor, head of insights at Tech Nation. “UK tech must continue to play a key part in tackling some of the world’s toughest challenges, including climate change.”