Silicon Valley IPOs cause one third of UK tech firms to miss out on funding.
A BDO report has highlighted how the IPO highs and lows of Silicon Valley giants like Twitter and Facebook, have left UK technology companies struggling to secure funding for their own businesses.
The hype and subsequent share price volatility of Silicon Valley giants led 33% of respondents to admit investors have become more cautious to lend and invest money.
Firms are having hard times in attracting new investment, with 55% of small and medium-sized technology and media companies admitting that there is a general lack of understanding from lenders. Some 40% also mentioned an inability to explain how a new product might generate revenue
Enterprises have said that vital capitals are now almost impossible to be secured in order to boost their own business.
The study has also looked into banking assistance towards smaller revenue businesses. It has found that, that most specialist services are offered solely to businesses turning over more than £25m, with PE investors more reluctant to get involved with companies turning over less than £5m.
The national tech industry lacks access to finance, with 45% of bosses naming this lack of access as the biggest barrier to growth. Furthermore, 31% expect the availability of finance to restrict their growth over the next five years.
71.2% of the companies surveyed are planning to use all the funding they can get for product innovation.
Paul Russell, partner at BDO LLP, said: "Tech companies at the lower end of the mid-market are being squeezed. They don’t have the ‘rags-to-riches’ appeal of start-ups or command the multi-billion pound excitement of the larger corporate, and as a result, access to finance is a real issue.
"And what is more concerning is that this disconnect between the tech and finance community is impacting the UK’s competiveness as the tech centre for Europe – it’s hampering innovation."
Mr Russel added: "There is more that could be done by the Government too. A second digital-focused Enterprise Capital Fund and increased public investment into both funds would be a good start, as would a specific innovation credit for technology businesses which would give an R&D type credit to a wider range of technological innovation than under current rules.
"If we want to create a market where mid-sized tech businesses can develop into global tech leaders in their own right, we need to support them along the way."