How Innovation SuperNetwork is supporting businesses to find investment
Innovation is a core component driving our best and brightest businesses forward but it needs a strong funding infrastructure to support it. The Innovation SuperNetwork in the North East of England champions innovation, attracts investment, and connects businesses with investors to close skills and funding gaps. Neina Sheldon spoke with CEO, Estelle Blanks, to find out how the team are tackling these challenges and helping businesses to go further.
As a result of Brexit and COVID-19, innovation has been in the spotlight recently. Whether pivoting delivery models, creating brand new products and services, or adjusting processes to accommodate new regulations, businesses have shown incredible resilience this year.
“There is lots to look forward to,” Estelle Blanks, CEO of Sunderland-based Innovation SuperNetwork says. “The North East of England is changing and there are lots of challenges that will continue as a result of the pandemic and leaving the EU, but we have projects set up to help businesses mitigate these circumstances. Things won’t change overnight because embedding capabilities for innovation takes time, but we know that when it works, it makes a difference.”
Estelle is passionate about removing the barriers to innovation finance for North East businesses, driving programmes that address the supply and demand for investment at the same time.
This tandem approach is intended to create a virtuous cycle, reversing patterns that have historically led to disproportionately low levels of investment in the North East. A perceived lack of demand for finance leads to a lack of supply. A lack of supply and education leads to a lack of confidence in securing funding, artificially dampening demand.
Growing the supply of North East innovation finance
Innovation is expensive and risky, so it needs finance,” says Estelle. “We have access to a smaller proportion of private sector finances in the North East and we need to do something about it.
“We get less than 5% of the UK’s early-stage equity investment and about the same percentage of innovation grant funding.
“The North East currently has access to the £120m North East Fund, which means that businesses can tap into locally-based finance opportunities and the fund will be available for a few years to come. But we need to think about the longer term and the type of financial instruments that will be able to replace this. Even now, the equity gap in the North East is still estimated at more than £40m per annum. There is lots of work to do on policy and interventions that can support meaningful change in this area.”
One of the projects the Innovation SuperNetwork has introduced to address this challenge is the Newcastle Angel Hub. The team is working to attract, promote and educate angel investors on the benefits of investing in North East enterprise, as well as introducing them to early-stage businesses through pitch events.
“Some angels are high net worth individuals and want to invest wisely. Others want to help companies. Not all of them know about the ins and outs of investing, so we have developed investment training tailored to Angel investors to help them,” Estelle says.
Attracting more investors to the North East in part relies on highlighting a healthy demand exists in the region. In 2019, Innovation SuperNetwork successfully bid for Innovate UK funding of £1m to deliver the Regional Angel Investment Accelerator programme, as part of a consortium with the North East BIC, Leeds-based NorthInvest and the national UK Business Angels Association.
Early-stage businesses could apply for a portion of the money they needed from the fund, which reduced the amount they needed from an investor. With due diligence also done by the fund team, the risks were reduced, and angels were invited to invest to accelerate the overall investment in innovative small to medium-sized businesses.
Estelle explains: “Often the perception with central bodies is that there’s not much going on in the North East, but through this fund we have been able to highlight so many innovative businesses that need cash. We wanted to show that demand isn’t the problem and we’ve been proven right – we had a couple of years to spend the fund and were able to allocate the fund well ahead of the two-year window and created demand with a large pipeline of innovative and growing businesses.”
Boosting skills and confidence to drive demand
Stimulating demand for investment through educating and inspiring entrepreneurs to seek investment for their business is just as important.
Innovation SuperNetwork’s flagship event, VentureFest North East, is an annual highlight in the North East business calendar. It is packed with inspiring keynote speakers and informative panel discussions, as well as the North East Innovation Awards.
“Another aspect of the VentureFest programme that celebrates regional success is our Innovation Showcase and with many businesses having done so well this year, we wanted to use this – and the wider VentureFest event – to highlight some of these success stories,” Estelle says.
The event serves as an introduction to innovation for many businesses and the support that the Innovation SuperNetwork and its 60 partners can provide.
Meanwhile, Innovation SuperNetwork’s Access to Finance programme addresses knowledge gaps and builds confidence. Busting myths and boosting resilience through training and pitch preparation are core aspects.
“We realised there was a lack of education around the options for finance and people were giving up,” Estelle explains of the programme.
She continues: “This problem is compounded with diversity issues in investment in general. Women, in particular, still get a disproportionally lower amount of innovation finance. Along with our partner NorthInvest and many other organisations, we supported the creation of Fund Her North to help address this issue.
“We did a survey recently with Fund Her North asking if people know the difference between debt and equity and the answer was no. We also asked if they were currently actively looking for finance and over 20% said they had given up.
“Through the Access to Finance programme businesses get online tools, one-to-one support, monthly pitch training and when they are ready, they are connected to investors through pitching events. The deal flow through the programme is really strong and to ensure the pandemic hasn’t held up momentum in supporting businesses to secure finance and close funding rounds, we moved pitch events online, which has also had the benefit of opening up the opportunities to investors outside of the region.”
Estelle delivers some of the training herself alongside others in the team, to help businesses to understand the basics.
She continues: “We teach them about what is available, the difference between debt and equity, which types of finance are best when, what they involve and the pros and cons. We also help them with understanding the audience because investors come in all shapes and sizes. They need to understand what they are looking for generally and specifically. Overall, we want to help entrepreneurs realise they won’t create a growing business without help.”
Once businesses understand the basics, pitch training and one-to-one sessions help them to prepare for first-round investment and beyond.
“We have learnt a lot and we’re still learning,” Estelle says. “Funding wins are quite black and white. We know we’ve made a real difference and it’s very rewarding.”
As a ‘network of networks’, the Innovation SuperNetwork may be focused on serving the North East of England, but many of its partners serve across the UK and in turn, connect with other innovation hubs. Businesses and investors outside of the North East that are interested in connecting with their own local innovation hub can do so through their Local Enterprise Partnership.
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