The North East has spent years strengthening its tech ecosystem, but industry leaders believe the challenge is changing.
As the region matures, several industry leaders argue the priority is no longer simply helping businesses to scale, but encouraging “more people to start companies” in the first place.
That was the key debate emerging from Prolific North’s latest GRAFT Regional Tech Champions roundtable recently hosted at UNW’s office in Newcastle.
Backed by UNW, Muckle LLP and Leighton, the event brought together founders, advisers and ecosystem leaders to examine entrepreneurship, investment, talent, as well as tackling a key question: what does the North East needs to do next to build more ambitious tech businesses?
Collaboration remains the region’s “biggest strength”
Kicking off the discussion, if there was one unique strength that everyone around the table broadly agreed defines the North East, it was collaboration. It mirrored much of the conversations we recently had with tech leaders for the first instalment of our GRAFT series focused on the region.
“What makes the North East special and unique is that there’s an absolute desire to collaborate,” said James Bunting, CEO of software development firm Leighton.
“There’s a real acceptance here in our region that we’ve got great capability, we’ve got great credibility, but we want each and every organisation to do well.”
READ MORE: ‘We’re making a bet on the North East’: why confidence is growing across the region’s tech sector
Alex Craig, partner at Muckle LLP, agreed: “There is a great desire to help people, support people and connect people.”
Rachel Pattinson, co-founder of Women in Tech North East, said she had “relied on collaboration” when setting up her organisation two years ago, while Rick McCordall, head of company creation at Newcastle University pointed to initiatives such as the Northern Accelerator, which has brought together the region’s five universities alongside a new £22.5m fund to support university spinouts.
At Newcastle University spinout ScubaTx, co-founder and chief scientific officer Bill Scott said the North East has “clear regional strengths to build on”, from the National Innovation Centre for Data in Newcastle to clusters of excellence across the region, from life sciences to AI. But he believes more needs to be done to raise the region’s profile beyond the North East.
“We need to do a better job of projecting that outward and bringing more of these companies and investors inward because I think by and large, we maybe aren’t as out there as we could be.”
He believes raising the region’s profile would attract more investment, encourage larger businesses to establish a presence in the North East and ultimately create more opportunities for business growth and successful exits.
That prompted a wider debate around whether the North East is telling its own story effectively.
David Dunn, CEO of digital and tech support network Sunderland Software City, argued that the region should be careful not to define itself around a handful of tech sectors.
Instead, he believes the North East’s strength lies in creating an environment where ambitious businesses can succeed regardless of what industry they are in.
“Whether it is cybersecurity or healthtech, I think we can have brilliant companies in any one of those sectors, but it doesn’t mean we have to double down and have that as a strategy,” he argued. “As soon as we do that, we could lose other companies who are not in those sectors.”
For him, the region’s strength lies in “creating trust” which has helped attract opportunities into the region while also giving companies confidence they can continue growing from the North East rather than relocating elsewhere simply to win national work.
James Buckell, head of engineering at iamproperty, argued that different parts of the region should continue to lean into those specialisms whether that be Teesside’s focus on accelerating creative and digital businesses or Newcastle’s strengths in AI and data.
As the discussion turned to how the region can ensure more of its success stories remain connected to the North East as they scale nationally, he set out how iamproperty has already demonstrated this.
“That’s exactly what iamproperty has done. We built the business in the North East, but we’ve grown into a national organisation while keeping our North East identity.. The IP and business is here, but we’re operating nationally and that story is landing,” said Buckell.
From his perspective on advising technology companies, Alastair Wilson, corporate tax partner at UNW, said too many successful North East businesses eventually become absorbed into larger international firms after being acquired, with their regional roots becoming less visible over time.
“We have a start-up problem”
While the discussion may have kicked off by celebrating the North East’s collaborative ecosystem, it quickly shifted to that question about where the region’s next generation of tech businesses will actually come from.
“Whilst the North East has increased the number of start-ups it has, it is nowhere near where it needs to be. We still have a start-up problem in the North East. Full stop,” said David Dunn from Sunderland Software City.
He argued while much of the conversation nationally has shifted towards helping scale-ups grow faster, in regions like the North East, focusing too heavily on scaling risks overlooking the very businesses that will become tomorrow’s scale-ups.
“We’re told there isn’t a start-up problem at a national level. That may be true on a spreadsheet, but if you look at different parts of the UK, including the North East, there is still a problem.”
It sparked a lively debate as Bill Scott, co-founder of life sciences firm ScubaTx, argued that while the region certainly needs more start-ups, he’s seen how local medtech businesses have scaled to a certain level then “run out of funds and then fall over”.
“I think we do have a problem with start-ups. But a start-up for the sake of a start-up is not a good reason.”
He also highlighted the challenge of balancing business growth with regional retention, arguing that some promising start-ups and spinouts often leave the North East in search of capital, talent or acquisition opportunities needed to reach the next stage of growth. The result is that those businesses are no longer building their future in the region, particularly when backed by international investors.
Sam Condren, director at Newcastle-based data firm Serios Group, said a bigger question needs to be asked regionally: is the entrepreneurial mindset there for people to start up and spin out their own businesses?
“What you need are the people who want to work with the likes of iamproperty, learn about scaling and what you need to do, and then take their own ideas and go and implement it. But they need to have the confidence that they can do it,” she explains.
Sarat Pediredla, who previously co-founded hedgehog lab and is now building AI venture LevelFive, believes part of the answer in solving the region’s start-up ‘problem’ lies in creating more experienced entrepreneurs who go on to found second and third businesses.
He pointed to Silicon Valley, built on Hewlett-Packard “spawning all these amazing start-ups” which he isn’t seeing in the North East. While he praised companies such as Sage for helping strengthen the North East’s tech community, he believes the region needs more experienced leaders spinning out of those success stories to launch businesses of their own.
“I think that’s an ecosystem challenge and I think that’s all related in terms of the seniority of talent going out and doing their own thing,” he explained.
James Bunting, CEO of Leighton, said there needs to be a way of “incentivising” and retaining experienced founders in the region:“I do think the region lacks people that have been there and been there and done it.”
According to Robert Cooper, advisory at UNW, some entrepreneurs still believe they need a London postcode to secure venture capital. But in reality, most investors “don’t really care too much where you are”.
That doesn’t mean funding challenges have disappeared. While iamproperty secured investment in 2023 from Perwyn Group, James Buckell said he is seeing a “lack of willingness to take risks in the region”, as he pointed to figures showing that while the number of equity deals in the region has increased, overall investment values have fallen.
“We do need to invest more in getting the right start-ups, then having more start-ups so we can invest in the scale-ups – there needs to be focus on scaling too,” he added.
For Roxana Montazerian, founder of Newcastle AI start-up ROXID, early-stage businesses are increasingly being squeezed. While she welcomed Innovate UK grants and called for more of that funding to reach the North East, she argued the shift towards supporting scale-ups has left many start-ups caught in the “middle”.
Rachel Pattinson, co-founder of Women in Tech North East, shared a similar experience. Although she secured early support through Newcastle University and other regional partners, she said grant funding for start-up businesses remains fragmented and “really difficult to find”.
Others argued the issue is less about attracting investment and more about where that money is ultimately spent. Sarat Pediredla questioned whether public funding delivers the greatest long-term impact when directed towards international companies rather than homegrown businesses. He argued that money could be better spent on a start-up fund that could “accelerate” the needs of existing start-ups.
Lucas Martin, co-founder of renewable energy tech business NeuWave, agreed with those concerns as he shared his own experiences around raising investment.
“When it comes to the scale-up part, we’ve struggled a lot more,” he said. “In the UK generally, there’s just no risk appetite, particularly when you’re building deep tech but we have found a lot of regional investors have been pretty good, like the angel networks.”
Turning talent into tomorrow’s founders
If the North East wants more tech businesses, there was agreement that it must also think differently about how it develops the talent behind them.
For Rick McCordall at Newcastle University, that starts with strengthening the pipeline between research and commercialisation. The university has significantly increased the number of companies it is spinning out across AI, engineering and life sciences, while becoming far more open to collaborating with industry as traditional funding models come under increasing pressure.
“We were spinning out two companies a year, we’re now at six or seven. So we’re growing the number and there’s more work going on there,” he explained.
As a university spinout, Bill Scott from ScubaTx said he believes universities and regional partners have an opportunity to stay more involved with spinouts long after they leave campus, helping founders navigate the difficult years between launch and scale.
“I think it would be really interesting if, between the universities and the local region, you could find a way to continue to add value as companies grow and mature,” he said.
That prompted a broader discussion around whether universities are preparing graduates for the realities of working at fast-paced tech businesses in the region.
Sam Condren said Serios Group is on a “scaling journey” yet some of the key challenges over the past year have been getting access to the right talent as her firm has had to do “a lot of in-house training” to bring people up to the level the business is at.
Alan Morris, co-founder at LevelFive, described a similar experience after attempting to work with a university on updating course content to bring it up to speed with industry needs. He was told changes to a course could take seven years to be approved.
Others suggested entrepreneurship should become a much bigger part of the conversation while students are still studying, giving more people the “confidence” to consider starting companies rather than automatically looking for graduate jobs.
That challenge could become even more pressing as AI continues to reshape how tech businesses are now hiring. Alastair Wilson at UNW, warned that competition for graduate roles is already intensifying as entry level roles are “already shrinking”.
“When it comes to having to find ways for people to create their own businesses and not rely on coming out of university and step into businesses, the start-up economy is going to need to be resolved because the existing businesses are going to take on less people – I’ve literally never seen anything like it in terms of the graduate applications for roles,” he said.
When it comes to senior talent, Sarat Pediredla discovered it was a “real problem” when recruiting for hedgehog lab five years ago as the business had to go to London or further south if they were looking for someone to join the c-suite.
But post Covid, he has seen how the numbers of senior talent relocating back up to the North East and availability of that talent has “massively improved” as people start to reevaluate whether they need to be based in London. But he said there is “still a lot of work to do” to attract that talent.
Alongside talent, leaders also highlighted the importance of creating a more stable environment for ambitious companies to grow, arguing that greater policy stability would give founders more confidence to invest, recruit and expand.
Despite debating some of those wider challenges, the mood around the table was overwhelmingly optimistic about the direction of the region’s tech sector.
Wrapping up the discussion, leaders were asked one final question: if they were to come back together in a few years’ time, what single change would have made the biggest tangible difference to the North East tech ecosystem?
For James Bunting at Leighton, it would be “more jobs, more happiness and finding a way of creating projects for younger people”.
Others pointed to the practical changes needed to support that cultural shift, from better road and rail connectivity while Rachel Pattinson and Roxana Montazerian argued for greater investment in female founders, and Alex Craig called for stronger backing for early-stage businesses and deeper collaboration across the ecosystem.
But if there was one idea that captured the discussion, it was James Buckell’s call for a “culture change” in the North East.
“We are a region of working class, we’re brought up to look for the next job and go and work somewhere, earn a living and get a job rather than becoming entrepreneurs. There isn’t that mindset there from growing up. If we can change that, it will help with the lack of start-ups we have here. And it will help with more people wanting to take risks.”
Attendees:
- Lucas Martin, co-founder and COO, NeuWave
- Bill Scott, founder and CSO, ScubaTx
- Sarat Pediredla, co-founder, LevelFive
- Alan Morris, co-founder, LevelFive
- David Dunn. CEO, Sunderland Software City
- Roxana Montazerian, CEO and founder, ROXID
- Sam Condren, CFO, Serios Group
- Rachel Pattinson, co-founder, Women in Tech North East
- Rick McCordall, Head of Company Creation, Newcastle University
- James Buckell, head of engineering, iamproperty
- Deborah Hardoon, Head of Innovation and Economic Strategy, North East Mayoral Strategic Authority
- Robert Cooper, advisory at UNW
- Alastair Wilson, corporate tax partner, UNW
- Alex Craig, partner, Muckle
- James Bunting, CEO, Leighton
