BusinessIn Wales

Finance, Public Sector & Government

Wales has a multi-billion pound funding problem

Wales has a £multi-billion funding problem Wales has a £multi-billion funding problem Gareth Jones – Founder & CEO, TownSq There’s a lot to unpack when it comes to the challenges facing SMEs in Wales looking to fundraise. A Welsh founder who relocated from London recently asked me a quite important question that faces our nation: “Where is Wales’ first unicorn coming from?” I didn’t have a good answer. And that’s a problem. The numbers tell one tale Welsh businesses raised $32.4 million from VCs in 2024 while London secured $11 billion. That’s not a typo – it’s a 340x difference that lays out the scale of the divide. Part of this might be cultural, but it’s a very real indicator of the difference. SEIS and EIS (Seed Enterprise Investment Scheme and Enterprise Investment Scheme) data tells us Welsh businesses get 14x less investment per head than London companies. Even the North West of England gets 20-30% more investment than Wales. When it comes to Innovate UK funding, London companies secure 13x more. North West businesses get 5x as much. This isn’t about natural market forces. This is about creating the conditions for success – and we’re not doing it. I’ve spent years working with founders, and I’ve seen brilliant Welsh entrepreneurs relocate to London not because they don’t love Wales, but because they can’t get the backing they need here. Right now, it’s hard to see how our policy addresses this. Subscribe to the Businessin Wales daily newsletter for FREE here.  Learning from America’s mistakes The USA faces identical challenges. California receives more VC investment than 40+ other states combined. When we talk about the American “entrepreneurial culture,” we’re really talking about just four states: California, New York, Massachusetts, and Texas. Last month, the Right to Start movement published a strong argument for the fight back with development banks focused on entrepreneurs’ needs, featuring revenue-based investment, secondary debt markets, and matched funding approaches akin to the Yozma Fund. Wales already has enough of this infrastructure to have a head start. The Development Bank of Wales last month announced a very successful set of results, having invested over £150 million in 2023/2024, supporting over 500 SMEs. But British Business Bank data shows demand is 100 times higher than current supply. We’re not failing because we don’t have the tools. We’re failing because we’re not using them at scale. The grant dependence myth There is one tired narrative that gets peddled when criticising entrepreneurs in Wales. Critics claim Welsh businesses are “hooked on grants” and need to “get real.” This totally misses the point in my opinion. Elon Musk’s three flagship businesses – Tesla, SpaceX, and Starlink – are built entirely on US innovation grants and subsidies. They’ve collectively received over £15 billion in non-repayable grants and subsidised debt, plus over £23 billion annually in government contracts. These companies are now worth well over $1 trillion. This argument alone, to my mind, highlights that grants absolutely have a role to play, but that they have to be focused on the right goals. The other indicator here is that Wales isn’t even getting its fair share of Innovate UK grants, but you could argue the use of the word fair in that statement given that process should be meritocratic. That would lead to an implication that we don’t have the level of innovation activity that would demand increased funding, and to provide it without this would be unfair on clusters that are proving the success of their investments. Both scenarios demand immediate action and create opportunities to focus on doing better. Backing talent I think about the Welsh Government’s Digital Development Fund from the early 2010s. Small £10,000 grants that helped entrepreneurs develop digital innovations. You just need to look at where those entrepreneurs are now. So many of them are creating jobs and wealth – inside and outside Wales. If we looked at schemes like that over a longer-term we might see the real value that can be created by backing entrepreneurs. The solution doesn’t need to be complicated Welsh businesses desperately need better support to identify and execute their innovation potential. They need investment mechanisms that de-risk early R&D. They need novel financial products like convertible debt for immediate cashflow. Projects like Clwstwr and Media Cymru have shown in specific sectors how innovation can be trained, and R&D skillsets developed, but there’s still a gap in connecting this with traditional investors to make sure both sides are speaking the same language. A gap that is a very rewarding opportunity. Most importantly, we need joined-up funding that eliminates the current postcode lottery. The Shared Prosperity Fund has made things worse, creating a fragmented landscape where your address determines your funding chances, with none of it feeling focused or strategic. Our choice A new economic vision won’t change things overnight. But if we commit to developing and fostering the founders we have, we can create unprecedented prosperity for future generations. The question isn’t whether we can afford to invest in Welsh entrepreneurship – it’s whether we can afford not to. Every day we delay, we lose potential jobs, innovation, and wealth to regions that take entrepreneurship seriously. Every Welsh founder who relocates elsewhere in order to succeed represents a lesson for future economic policy. If we want to see job growth and economic independence then we really only have one choice, and we have to face up to how to deliver on it. Want more from Businessin Wales? Why not follow us on our socials Linkedin X Instagram TikTok Listen to the Businessin Wales podcast YouTube Spotify Apple Podcasts Audible Uncategorised Glide secures NatWest funding to accelerate UK broadband expansion Residential Property, Technology & Innovation, Uncategorised Principality Stadium set to host opening ceremony of EURO 2028 Tourism & Travel, Uncategorised Swansea: A city on the up! Finance, Public Sector & Government, Residential Property, Tourism & Travel, Uncategorised

Public Sector & Government

What is Wales’ vision for small businesses: The foundation of our economy?

What is Wales’ vision for small businesses: The foundation of our economy? What is Wales’ vision for small businesses: The foundation of our economy? Gareth Jones – Founder and CEO, TownSQ Small businesses are the Welsh economy. Around 70% of privately employed workers in Wales work for SMEs, but in Wales we’re facing significant challenges in how we nurture and develop these vital businesses. The most recent research by the British Business Bank showed that 21% of Welsh SMEs reported barriers to accessing finance, if this is true across all SMEs that’s around 50,000 companies that don’t feel confident that they can raise the capital needed to expand, create more jobs, and build sustainable businesses that bridge generations. Entrepreneurs create new employment; their growth is vital to our economic growth and revitalisation of our towns and cities. Without their drive and hustle, we’re restricting our future prosperity. The challenge of supporting SMEs SMEs are a difficult group to engage with, they don’t always have a lot of shared challenges and priorities. Every sector has its own unique requirements, and trying to generalise them under one banner can lead to policies that don’t work for anyone. The political agenda here is around productivity, but it’s very rare that I hear directors using language like this. Small business owners talk about survival, about cash flow, about finding the right people, not about abstract economic outputs. Productivity is such an abstract concept, but business owners do talk about wanting more hours in the day and feeling like they’re already working flat out. The constant political chatter about productivity can feel like further evidence of politicians being out of touch with the everyday struggles and frustrations faced by business owners and operators. When companies are growing, they need tailored support that recognises and deeply appreciates their unique challenges, not one-size-fits-all policies based on theory that misses the point and disrespects the needs of committed founders. Focusing investment strategies A few years ago, in the States when Amazon was being lured to different cities across the country, a counter campaign picked up momentum promoting the idea of supporting 10,000 independent workers rather than trying to attract 10,000 jobs through inward investment. This puts a key dilemma into sharp focus for Welsh economic policy. Inward investment is an important strategy, but buying temporary jobs is not going to build long-term value. We need to focus on sustainable growth from companies grounded and rooted in Wales. SMEs need an inward investment strategy that leads to robust supply chains, and sustainable investment – which is obvious – but SMEs need policies that ensure that subsidised market entrants are giving back, especially if they have an unfair advantage in the talent wars through the funding and brand awareness. One problem with the inward investment strategy in Wales is that a lot of SME directors feel frustrated by the lack of transparency and the sense that there are better incentives for outsiders coming in than for homegrown companies that wouldn’t dream of relocating. Strategies need vision We have a lot of mechanisms for investing in Welsh SMEs, but we need a clearer strategy on what the growth priorities are in Wales to help businesses understand better how to access appropriate support at the right time. That support must understand much better why directors of SMEs in Wales are not able to take full advantage of incentives such as EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme), or why the Growth Guarantee Scheme hasn’t plugged the gap. The relationship Welsh Government has with MIT through the Industrial Liaison Programme offers an interesting perspective. Their suggestion highlights the difference between SMEs and IDEs (Innovation-Driven Enterprises), and the need for different strategies. SMEs are your everyday, foundational economy businesses that exist on every high street or in every community. There can be innovation, but innovation is not their bread and butter. IDEs are innovation driven – their approach can feel quite illogical to SME directors. Growth tends to come from IDEs, but it takes longer, and costs more to get to profitability. If this is our strategy, we either need to be transparent about it and make sure it is clearly understood and communicated, or we need to factor in how SMEs don’t go missing. We need to help SMEs understand how to innovate better and how to win over funders and backers to last the course. Either way, a focus on innovation can’t belittle or downplay the important role that traditional SMEs have in our economy, nor neglect to support their needs when it comes to investment and appropriate advice to unlock the potential that they see if they just had access to increased resources. Welsh founders need a vision for SMEs that balances nurturing homegrown businesses with attracting new investment, with practical support geared towards the needs of those directors, and that recognises and celebrates the diversity and resilience within our SME ecosystem. Without this vision, we risk missing an opportunity to build a resilient economy for future generations of Wales. 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