A new initiative designed to support technology start-up firms will be launched in the UK next year, as cloud hosting firm Rackspace prepares to offer £12,000 to businesses for mentoring and hosting. Rackspace has already offered a similar programme to more than 850 businesses in the US, and now wants to roll it out to the UK, making it easier for entrepreneurs to get their ideas off the ground once they’ve registered their company.
Rackspace will work with universities, venture capitalists and co-working spaces to get in touch with start-up technology firms. The announcement was made at Google’s Campus building in London, and ties in the UK government’s recent announcement that it plans to relax the rules regarding internet and technology companies that want to float on the stock market.
Under the proposals, high-growth tech companies could be given a fast-track to the London Stock Exchange, offering a “new route” to the UK’s Initial Public Offering (IPO) market, with reforms to eligibility criteria and reporting requirements. Universities minister David Willetts said: “There is a rich crop of innovative European high-tech companies that will be going to the financial market over the next few years. We’re determined to make sure that as many as possible should do an IPO and float in the UK, not elsewhere.”
The news comes shortly after a survey of 50,000 entrepreneurs by Telefonica found that London is viewed as the seventh best city in the world to found a start-up. Silicon Valley in California was top of the list, but it faced competition from other cities such as Los Angeles, Tel Aviv and Seattle. London currently has about one-third of the start-up activity of Silicon Valley.
“We are now seeing emerging ecosystems beginning to act as real viable alternatives to the traditional centres of technology innovation. This is incredibly exciting, since it suggests that, increasingly, the necessary support infrastructures are in place the world over for bright minds to turn their ideas into reality,” said Gonzano Martin-Villa, chief executive officer of Wayra, Telefonica’s global startup accelerator.
However, one of the main problems identified in the report was that London has a funding gap when it comes to risk capital for new businesses. This is backed up by a recent survey by financial advice firm Grant Thornton, which revealed that 93 per cent of private equity and venture capitalist professionals believe a trade sale was the most likely outcome for private equity firms investing in the technology sector, while only eight per cent believed exits would be achieved via an IPO.
The government plans to tackle this problem by working with the London Stock Exchange to amend regulations that may be dissuading investors from funding growth companies, as well as increasing the availability of equity capital for businesses seeking to open their doors in the UK.
Xavier Rolet, group chief executive of the London Stock Exchange, said: “There is a direct and proven link between IPOs and job creation. Attracting both entrepreneurial businesses and the investors that support them to the UK is key to driving growth and generating jobs.”