Published: Oct 12, 2023
Focus:
Insights
The North East of England has emerged as a hotbed of world class innovation, driven by a vibrant and supportive business ecosystem and global reach. In Newcastle alone, tech firms brought in a combined turnover of £2 billion in 2022 across 3,500 creative and digital businesses.
While it comes as no surprise that London outpaces the region in terms of tech investment, key locations such as Newcastle, Middlesbrough, Durham, Sunderland, and Northumberland have become magnets for attracting businesses, supporting innovation, and fostering homegrown talent.
Maven's support across the region goes far beyond just the deployment of capital through the likes of the Maven VCTs, North East Development Capital Fund and Finance Durham Fund, we also actively engage with the local tech community and closely collaborate with industry stakeholders.
As part of that outreach, our North East team recently we hosted a technology roundtable, chaired by Senior Investment Manager, David Nixon, and featuring a number of local tech founders, sector experts and advisors including Chris Wilson and Rob Cooper, Corporate Finance at UNW; Alex Mouat, Head of Investor Relations and Strategic Partnerships at Sunderland Software City; Pete Daykin, Founder of Wordnerds, an innovative customer feedback analysis tool; Kevin Beales Founder of MySalesCoach, Refract and the Test Factory; Gilbert Corrales, Founder of Leaf Grow, an end-to-end performance marketing services platform; Zara Anita Paul, CEO of Choppity.com, an AI video editor for turning long videos into social media clips; Paul Lancaster, Senior Consultant for Nigel Wright Recruitment and founder of Newcastle Startup Week; and Chris Hughes, Corporate Partner at Mincoffs.
In the first part of this four-part series, the discussion centred around artificial intelligence (AI) and the opportunities and risks within the software market. In the UK, the AI Market is expected to grow from £17 billion to £803 billion in the next 12 years and today 68% of all large / enterprise companies have adopted at least one AI technology with Data Analysis & Management, NLP and Machine Learning most common across companies.
“With any new technology there’s always a perceived downside, but the risks with AI are often overblown. In natural language processing we can start using words and numbers predictively, and it’s a really exciting prospect with lots of opportunity. Whilst there is limited but existing risk as there is with most things, for those of us operating in this space we’re enjoying the prospect of pushing boundaries and exploring how we can better utilise AI in our everyday life.”
Pete Daykin
“Inevitably there will be a generational gap between those who use this technology and those who do not. The key to this is embracing AI is rather than fearing it, learning to understand it without placing taboos on it, because in the next 10 years every business will be in some way powered by AI.”
Gilbert Corrales
Interestingly, the UK has twice the number of AI jobs than any other country in Europe and already contributes £3.7 billion of GVA (Gross Added Value) to the economy. While this is clearly an area of huge opportunity, it is also one we have to manage with the risks in mind. Statistics show that 42% of the UK population has concerns over job losses.
“One of the best things about AI is that companies with very little funding can build products and services very quickly. You no longer need to hire a team. This is also where the fear and negativity comes in. But AI is just a tool, blaming it absolves the individuals who use it negatively from responsibility, and stigmatises its use for everyone, even those who couldn’t afford to work without it.”
Zara Anita Paul
A recent report by the World Economic Forum, predicts that by the year 2025, AI could take away around 85 million jobs from people worldwide but it could also create 97 million new jobs. While some would argue that to fully leverage the value contained in data, the power of AI is essential, many are concerned at decision making without human intervention and 37% of the UK population have ethical concerns about its use.
According to Tech Nation, the UK now has more than 1,300 AI companies and new research shows more than 1.3 million UK businesses will use AI by 2040. The Alan Turing Institute was recently selected to lead pilot of a new AI Standards Hub aiming to increase the UK's contribution to the development of global AI technical standards.
“From a legal perspective, AI is still in its infancy and it’s difficult to say whether or not we actually need separate regulation on its development and use a “wait and see” approach, which on balance probably is best and certainly something which seems to be the UK government’s preferred approach, as opposed to the European approach of moving to regulating early. From what we have seen so far, I think one thing is certain, it’s likely that AI’s use will challenge and drive change in some long-term and well established legal principles.”
Chris Hughes
New plans for regulating the use of AI to help develop consistent rules to promote innovation, support growth and protect the public have been introduced to Parliament. The proposals aim to enable companies operating in the space to share information on how they test their AI’s reliability as well as following guidance set by UK regulators to ensure AI is safe and avoids unfair bias.
“Most of the UK’s businesses are unaware of the prospects surrounding AI, a lot of people operating in the tech space are making strides but the opportunity is large and growing for almost all sectors. With the thriving university ecosystem in the North East, the region is well placed to take advantage of the number of innovative and disruptive university spinouts paving the way for leaps in machine learning. AI presents the potential to improve efficiency across all industries and we’re at a very exciting stage in this development.”
Chris Wilson
The potential benefits of adopting AI are huge and growing but because the concept is still in very early stages of research and development, businesses are still learning what it is, how they can adopt the right solution and how that will impact their company.
"We have observed a growing trend across the region where an increasing number of businesses are engaging with the field of AI, and are keen to monitor this activity going forward, seeing how it ramps up over the coming months. The opportunity is huge. At Sunderland Software City, we’ve partnered with the Hartree National Centre for Digital Innovation to assist businesses in their adoption of advanced digital technologies. There are more and more companies approaching us, looking to understand how they can incorporate AI and machine learning into their operations."
Alex Mouat
AI continues to change and challenge the way in which businesses operate and the opportunities and subsequent risks are vast. From improving efficiency, productivity and decision making to driving job displacement and create bias and security issues, we're operating in largely unknown territory but with businesses investing more and more each year the potential applications for AI are exponential.
“It’s clear that while the risks and concerns in this growing industry are valid, the opportunity and scope available to businesses who want to harness the power of AI is huge and growing. The local tech community is positioning the region as a thriving hub of technological advancement, catalysing on growth, creating job opportunities, and contributing to the North East's emergence as a national technology leader.”
David Nixon
Maven is one of the UK’s most active private equity investors and is passionate about working with ambitious technology-led businesses to achieve their strategic goals and maximise growth potential. If your business, or the business you advise, is looking at private equity as a solution to fund future growth we would love to hear from you. Speak to one of our investment team by getting in touch at funding@mavencp.com.
