Startups

‘Insane’ — UK tech reacts to government moves that might hand UK startups contract to Barclays Bank

Comment

Aerial view of Piccadilly Circus in London, England, UK
Image Credits: Alexander Spatari / Getty Images

Tech Nation is trailing in second place in the race to remain the U.K.’s government-backed “startup champion” after the latter put the £12 million contract out to tender, according to TechCrunch’s sources. First in line at this point in time — in a decision which is due in December — is banking giant Barclays. Tech Nation’s existing government funding runs until March 2023.

But the prospect of a profitable, global bank taking over the contract has been branded “insane” and “mad” by some key U.K. industry players.

On the weekend, The Sunday Times reported that government officials have been concerned that Tech Nation was “breaching state aid rules because it had failed to become self-sufficient” which led officials to put the contract out to tender earlier this year.

However, although the Times reported that Tech Nation had lost the contract, TechCrunch understands that the final decision has yet to be made. Plus, it’s understood that Tech Nation is intending to carry on “as is”, even without the government subsidy, supported by fundraising from sponsors, subscriptions and partners.

Barclays had applied for the contract through its network of Eagle Labs incubators, some of which have physical locations, but most do not.

It’s thought this, if patchy, nationwide-presence is helping to woo the government in its so-called “levelling-up” agenda as it seeks to boost more start-ups outside London.

If successful, Barclays would also be able to administer the Home Office’s digital visa scheme, though it’s unlikely to have a monopoly on this.

Again, it’s been erroneously reported that Tech Nation would lose this capability. The £12 million funding and the operation of the Visa scheme are in fact separate issues, and the final government decision will have no baring on Tech Nation’s role, designated by the Home Office, to endorse the Global Talent Visa.

Tech Nation has long been embedded in the U.K. tech startup scene. Tech City UK, its predecessor, was launched in 2011 by former prime minister David Cameron and concentrated largely on the London ecosystem until 2018 when it merged with Tech North (based in Manchester). It’s since gone on to run myriad programmes connecting tech startups and scale-up with each other and with investors in the U.K. and abroad.

The nonprofit is chaired by Lord (Jo) Johnson (Boris Johnson’s brother) and chaired by former Sage boss Stephen Kelly.

Gerard Grech, chief executive of Tech Nation, said the body’s work represented a “£15 return on every £1 invested by the government.”

In a statement he told me: “We’ve supported over 4,000 tech companies from around the U.K. More than 30% of the UK’s 122 tech unicorns (eg Monzo, DarkTrace) have graduated from a Tech Nation programme (49 in total to date). Some 44% of the UK’s decacorns graduate from a TN non-dilutive accelerator growth programme (failure rate is less than 5% thus far).”

“Hundreds of tech firms have signed up to the Tech Zero pledge, co-founded with companies like Mozo and Olio, which commits tech companies to Net Zero. Our Libra growth programme shines a light on founders and leaders from under-represented sections of society as does the latest Diversity & Inclusion toolkit we recently launched for tech founders to help them develop a more diverse workforce,” he said.

“Today, Tech Nation’s work represents a £15 return on every £1 invested by the UK Government. This is one of the best ROIs for the taxpayer in the most strategic growth area of the economy,” he added.

Tech Nation’s recently published annual report said it could remain a going concern if government funding was withdrawn.

The industry has reacted, broadly speaking, with dismay that a massive global bank would be handed sole responsibility for supporting the U.K.’s tech startup ecosystem.

One source told City A.M. that the move was “like letting an arsonist teach kids about fire safety” given that the bank would have to support programmes for startups in the fintech space, putting it into a conflict of interest.

Another said the government has “effectively handed Barclays funds to acquire new customers” and was a “potential competitor or customer of the startups it’s meant to be supporting.”

Speaking to me on a condition of anonymity one investor called the government’s decision to put Tech Nation’s funding in doubt was “insane.”

“It’s mad. We need to shout this into oblivion. We can’t hand the support to the tech ecosystem to an incumbent bank! Everyone needs to know how mad this is,” he said.

Another VC told me the decision to put Barclays in the front-running for the contact was “like President Bush declaring ‘Mission Accomplished’ after the Gulf War, when the war was far from over. I don’t know what the government was thinking. I suspect this new government cares more about banking and financial services than tech.”

Brent Hoberman, founder of LastMinute.com and now head of FirstMinute Capital commented on LinkedIn: “[I] Have been a fan of Tech Nation and the hard work and impact they have had and the creativity to expand their role. It’s a tough job and the scrutiny that rightly comes with government money makes it especially hard to experiment. Barclays will need to find leverage to have more impact and scale.”

Ian Merricks, managing partner at White Horse Capital and chair at The Accelerator Network, and a rival bidder for the Tech Nation contract, said it was “hard to be more incensed at this use of public business growth support funding. I imagine the ‘winners’ have a larger lobbying function than we do, as a private sector consortium.”

Tanya Suarez, founder & CEO | IoT Tribe, commented: “Surely this provides an unfair advantage and could be used to influence the founders choice of banker at several stages of growth. I wouldn’t be happy if I were any other UK high street bank or other financial institution that has been supporting founders over the years. Let’s not forget Barclays had a net operating income of £22 billion in 2021 and profits of £7 billion. If they really wanted to do this, they should carved out a minute amount of that to cover the £5-6M a year that they will receive… I don’t believe they need grant money to do it.”

Nichola Bates, Head of Global Accelerators and Innovation Programs at Boeing, said: “I don’t see how this makes sense for Barclays, or the eco-system. At £12m it probably costs Barclays more to bid for it. But surely this is work they would (and should) be doing anyway – without the need for Govt money?”

Grech said the decision was in the hands of the DCMS.

A DCMS spokesperson said: “No final decisions have been made. The successful grant recipient will be announced in due course.”

More TechCrunch

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

5 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?