Facebook and Twitter hype 'hurting UK startups'

Fluctuating share prices of Twitter and Facebook can leave SMBs without funding, claims report

Government funding

Twitter and Facebook's volatile share prices are hurting startups trying to raise their own funding, it is claimed.

Around a third of bosses at SMB tech companies said that the hype surrounding some of the biggest firms, coupled with their unpredictable share prices, has made investors more tentative about the sector as a whole,  according to a report from business advisory and accountancy firm BDO LLP.

The survey is based on responses from 70 businesses across the UK, in addition to venture capitalists, private equity investors and alternative funders interviewed by BDO.

Paul Russell, parter 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.

"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."

Banks are reluctant to assign specialist teams to smaller businesses with less than 5 million turnover, according to the report.

This has led to 45 per cent of bosses surveyed citing finance as their biggest obstacle.

Almost a third (31 per cent) said they expected lack of funding to restrict their growth in the next five years.

Russell added that more could be done by the government to help struggling companies, saying: "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.

"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."

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