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Peer2Peer Finance News | November 23, 2017

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Tech companies to drive demand for alternative finance in 2017

Tech companies to drive demand for alternative finance in 2017
Anna Brunetti

UK tech start-ups and scale-ups look poised to drive borrower demand for alternative finance this year, a new report has revealed.

Three quarters of tech entrepreneurs are expecting their firms to grow in 2017, compared with just over half of entrepreneurs and business leaders across all sectors.

Brexit-induced uncertainty has not dented confidence among tech leaders, according to an entrepreneur index produced by accountancy firm Smith & Williamson.

Read more: Businesses borrow less from banks due to Brexit fears

The exponential widening of funding options, and in particular the transition of crowdfunding into a mainstream funding channel, seems to have played a key role in boosting tech companies’ optimism.

“Despite uncertainty in the UK, and wider economy, there are a lot of things going for tech companies as we move in to 2017,” said Sancho Simmonds, partner and scale-up lead at Smith and Williamson.

“There is a wealth of expertise available, a developed economy, a collaborative environment, a friendly tax regime and a relatively accessible supply of funding. Indeed, over half of our respondents felt that access to funding was improving.”

Tech companies are increasingly happy to use the innovative funding options available to them, he said, which in turn pushed traditional lenders and angel investors to become more tech savvy to tap into that borrower demand.

Read more: Fintech Week 2017 set to showcase the UK’s strengths

“Where lenders may have once seen unknown risk, there are now experts who are able to understand the industry and the potential lendee’s place within it. These developments have been hugely beneficial to tech start-ups and scale-ups.”

Smith & Williamson’s index measured the views and confidence of about 170 owner-managers and entrepreneurs in the UK, 31 of whom are from the tech industry.

Tech entrepreneurs had a more bullish outlook than other respondents, with 45 per cent of them feeling that their business would thrive irrespective of access to the EU single market. Only 16 per cent of them said they were looking to seek new opportunities in export markets due to a weaker sterling.

“Many tech businesses are under the impression that they are insulated from the wider cyclical nature of the economy,” said Simmonds.

“There is a belief that if the tech firm is innovative it is likely to be a success whatever is happening.

“Whilst to some extent this may be the case, we would always encourage businesses to be aware of the impact the world around could have and factor that into any business planning.”

Read more: SMEs unaware they can secure finance on assets