Investors and founders say they’re concerned after reports emerged that the government had put a key contract with accelerator Tech Nation up for grabs. The non-profit has worked with nearly a third of the country’s 122 unicorns since 2011 and its global tech talent visa — which is unaffected by this contract switch — has been a major boost for the UK tech scene.
Barclays is set to take over the £12m contract, The Sunday Times reported.
“The decision is completely baffling to me,” Charlie Walker, founder of startup search firm Harmonic, tells Sifted. “Tech Nation has spent years building up a diverse network of advisers and mentors. How will Barclays replace this depth of knowledge and experience?”
As the pound hits an all-time low, and the UK is painfully short on tech talent, experts say now is not the time to be giving founders a scare about the government’s commitment to such an economically lucrative industry.
According to The Sunday Times, the Department for Digital, Culture, Media & Sport (DCMS) put Tech Nation’s contract up for grabs after growing concerned about its reliance on state money. A DCMS spokesperson tells Sifted that no final decision has been made and the grant recipient will be announced “in due course". Barclays has not responded to a request for comment.
Gerard Grech, CEO of Tech Nation, tells Sifted that the organisation has been growing its commercial, non-grant revenue in parallel with its work with DCMS— through commercial partnerships and its growth platform for scaleups.
Lost in the wash
One of the core reasons fintech founders in particular are concerned is because they say Barclays has “dragged its feet” on innovation and collaboration with startups in other areas.
Barclays is one of nine banks in the UK mandated by the UK’s competition watchdog to share their transaction data through the Open Banking initiative. The scheme was set up to encourage fintech growth and competition, as without the ability to access customers’ banking data many fintechs’ business models would be in jeopardy. But sources say Barclays has been “dragging its feet”.
“Them running a fintech programme seems unacceptable if they’re fundamentally opposed to that innovation,” one fintech investor tells Sifted.
Then there are anti-competition concerns. Europe’s big retail banks now rely on fintechs for a host of B2B services. Founders tell Sifted that by “getting in early” with this early-stage programme, Barclays could have an unfair advantage over competitors as their chosen banking partner. And they also worry that fintechs that aim to compete with Barclays themselves (like neobanks and investment apps) risk getting their ideas pinched.
“It feels wildly anti-competitive, especially given the fact that more banks have corporate VC funds today,” Nina Mohanty, founder of Bloom Money and member of Tech Nation’s Libra Cohort for underrepresented founders, tells Sifted.
She adds that many corporates also don’t understand what it takes to build a “high-growth tech startup from scratch”.
Harmonic’s Walker worries about a “clash” between Barclay’s priorities and the startups it's meant to be serving that were never an issue with a non-profit like Tech Nation.
Loftier ambitions
Given that Barclay’s new contract with DCMS has not yet been officially announced, the exact details are still unclear. But sources tell Sifted it was hot competition for the tender — and they assume that the bank won the government’s favour by pitching bigger plans for UK tech.
“I reckon [Barclays] are matching two or three times the grant amount at least, so that they can really go to town on the programme and build it out,” says Karan Shanmugarajah, CEO of wealthtech WealthKernel (which was part of Tech Nation’s “Fintech Cohort 3.0” in 2020), and an ex-Barclays investment manager.
But we’re yet to learn this detail — or where the government thought Tech Nation was falling short.
“We need to ask: what is the government intending to achieve here?” says Seb Wallace, investment director at Triple Point Ventures.
“Tech Nation provided a quasi-governmental ecosystem support role. Barclays has a multibillion-pound balance sheet and this small amount of funding is unlikely to have a material impact on them. Policy clarification on the decision (and what Tech Nation wasn’t doing sufficiently) needs to be addressed.”
Tech Nation’s future changes shape
While Barclay’s plans for the programme seem easier to assume, the loss of the grant is still a big blow for Tech Nation.
The organisation still has other government contracts on the go that are unaffected by this change. It will still run its global talent visa, which it runs in conjunction with the home office; its work with the Digital Trade Network to help UK scaleups grow into Asia Pacific; and its Lawtech programme in collaboration with the Ministry of Justice.
But fintech founders tell Sifted that the loss of this grant for work with early-stage startups will mean Tech Nation likely has to fundamentally shift its activities to become more commercially viable. This will mean upping its sponsorship from corporate partners — which some fintech founders worry could affect its impartiality.
One fintech founder tells Sifted: “If Tech Nation is to become a much more commercially minded organisation, will they charge startups for their programme? For early-stage companies that’s bad news, and surely it won’t feel right to the people administering the support?"
Sifted was one of several, secondary members of the Tech Nation-led bidding consortium for this tender.
Amy O’Brien is a reporter at Sifted. She tweets from @Amy_EOBrien and writes our fintech newsletter — you can sign up here.
