Most high-growth tech firms are funding their expansion with investment from business angels, family or friends rather than banks, a new survey shows.
More than half (56%) had been financed by business angels – wealthy individuals who usually play an active role in developing the business as well as investing – with a third receiving backing from family and friends.
Just 28% had secured significant funding through the traditional route of banks finance, according to the annual survey of technology companies by Kreston International, the global network of independent accountancy firms.
UK chairman of Kreston is Matthew Lee, managing partner at West-based Bishop Fleming, Britain’s fastest growing accountants, which has an office in Bath.
He said: “At a time when banks are ultra-cautious about new lending, it is hugely encouraging that business angels are investing in the growth prospects of technology companies.
“The South West is now a global hub for technology, and these companies are crucial to a UK recovery from recession, with their ability to export their innovations. Indeed, the latest survey revealed a reduction from 45% to 40% of respondents needing to use overseas resources.”
Some 43% of tech firms raised extra funding last year, the survey shows, with 35% raising more than £1m. Just 20% said they will approach their bank for funding over the next year, while almost half have decided to approach business angels and more than30% plan to approach venture capitalists.
A lack of funding and difficulties in generating revenue were highlighted by 35% of tech companies.
"These innovative businesses are the bed-rock for the UK economy's future growth. That cannot happen without the investment in their innovations and growth,” added Mr Lee.
Many of the firms were forward-looking in staff incentives with almost three in 10 granting share options to employees, more than 60% offering flexible working and 45% introducing home-working and job-sharing.
