How UK CreaTech is writing a new script for investors – outside London

CreaTech

CreaTech, the dynamic space in which the creative and technology industries overlap, differs from the UK tech sector in more ways than its prefix.

Compared to the core UK tech industry, CreaTech is attracting different types of deals across a more varied geography and from a distinct pool of investors.

While the overwhelming majority of the venture capital (VC) investments in UK tech businesses tracked by the Tech Nation 2021 Report were in London-based companies, in contrast, 50 per cent of CreaTech companies that received VC investment in the last year were outside London, according to Tech Nation’s The CreaTech 2021 Report.

Most CreaTech VC deals were seed or early-stage investments, whereas recent VC tech deals more generally tended to be late stage.

And whereas most investments in UK tech came from outside the UK, 64 per cent of CreaTech investment in 2020 came from within the UK.

While to core UK tech industry is a much more established magnet for investment, drawing in an estimated $14.9bn of VC investment in 2020 despite the disruptions of the pandemic and the economic slowdown. This represents 17% annual growth, the highest increase of any major market, and cements the UK’s position as the third biggest destination for tech VC investment after only the USA and China.

Bu UK CreaTech grew investment by an even faster 22% to reach £981m (approximately $1.25bn), which, likewise, makes the UK the third biggest home worldwide for CreaTech investment.

In fact, CreaTech actually accounts for a higher share (9%) of all tech VC investment in the UK, than the comparable figures for the US or China (both about 6%).

So although CreaTech is developing quickly and with its own particular investment characteristics, why isn’t it better known – at least compared to other hybrids such as FinTech or EdTech?

The answer is partly because of a lack of definition and general awareness of the CreaTech landscape.

Thanks to the rise of digital media channels and production; extended reality genres; algorithms and artificial intelligence, the creative and digital industries have become inextricably intertwined.

Even the official Government statistics produced by the Department for Digital, Culture, Media & Sport, have not been able to separate some occupations and businesses which are counted in data for both creative and digital industries.

Tech Nation’s CreaTech 2021 report, published in March 2021, represents one of the first significant attempts to define and profile the CreaTech segment and the companies within it.

It describes CreaTech as the intersection of creative and tech industries in which innovations in artificial intelligence, algorithms, virtual and other extended reality, specialised software and other areas are transforming creative services, outputs, and processes.

The term encompasses both the transformation of the creative industries by technology, and the co-creation of tech products and services.

Think of AI-driven creative production houses, VR platform designers or machine learning-enhanced marketing tech services and you will have some sense of the great breadth of CreaTech startups and scaleups attracting investors’ interest.

This range will be showcased in the annual CreaTech Ones to Watch platform run by the Creative Industries Council (CIC) to raise awareness of growing CreaTech businesses, which will be accepting nominations until 25th June 2021.

Further, Tech Nation’s report, commissioned by the CIC – a forum of creative industry leaders and UK government, in association with Digital Catapult, the leading authority on advanced digital technologies, and Moore Kingston Smith, the accountancy firm, is also only the first of a two-stage process.

A planned follow-up will look at CreaTech’s impact on UK employment levels, job roles and skills.

With its potential to develop growing tech-enabled businesses outside London, it is perhaps unsurprising that CreaTech’s rise has been welcomed by ministers in a government which has made pledges to ‘level up’ the economy across the UK.

Culture Minister Caroline Dinenage has promised to “continue to work hard to encourage and enable the growth of CreaTech”.

So while CreaTech may have somewhat departed from the usual tech industry ‘script’ and developed a different investment profile, its audience among funders, industry leaders and UK government ministers seems happy to follow and encourage this dynamic UK growth story.