Global survey points to growth for innovators

Global innovation businesses overwhelmingly expect improving business conditions and growth in 2015 with most planning to add headcount this year.

These are the findings of Silicon Valley Bank’s sixth annual Innovation Economy Outlook study that was released today.

The annual survey is designed to gauge perceptions on business conditions, capital-raising opportunities, hiring and talent, public policy issues and other topics relevant to innovation businesses.

This year’s survey included responses from more than 1,100 executives worldwide from software, hardware, cleantech, life science and healthcare businesses in start-up and growth stages of business in the US, UK and other global innovation hubs, with over 120 respondents in the UK.

“Our research has revealed continued optimism and momentum among both start-up and long-term players in the global innovation economy, and this trend is increasingly evident in the UK,” said Phil Cox, head of EMEA and president of the UK Branch for Silicon Valley Bank. “At a time when the pace of disruption is unprecedented, it is difficult to think of an industry or sector that isn’t embracing innovation for the benefit of its employees, operations and clients.”

Conducted in January 2015, the survey found that over three-quarters of respondents met or beat their revenue targets in 2014. The percentage of respondents who accurately projected their growth targets has is said to have increased steadily since the first survey in 2010.

According to the bank, optimism is high among innovation business executives in Britain with 97 per cent of respondents expecting business conditions in 2015 to be as good or better than in 2014, leaving three per cent of participants who anticipate conditions getting worse.

Over half of businesses surveyed in the UK reported raising capital in 2014 and while the success rate for doing so increased compared to 2013, 86 per cent of executives said the fundraising environment is challenging.

Globally, of all the surveyed businesses that successfully raised capital in 2014, 44 per cent raised from venture capital firms, 27 per cent raised funds from angel investor groups and micro VCs, 15 per cent took on bank debt, 11 per cent raised funds from private equity and another 11 per cent raised money from corporate venture firms. Fifty-four per cent of all businesses received funds from individual investors and six per cent received a government grant. Crowdfunding is still quite rare, with three per cent of all respondents surveyed reporting they received capital from the burgeoning source.

The survey found that while venture capital continued to play a significant role in funding global innovation firms (venture capital was on average 68 per cent of total funds raised for businesses that received it), it has become less frequently cited over the last three years as the most likely next source of funding. In 2013, 48 per cent of all respondents believed their next round of funding would come from venture capital, and 32 per cent reported the same this year.

“Whilst more than half of UK respondents were able to raise private capital in 2014, the majority say that it is a challenge – this is a sign that quality control is working,” Cox said in a statement. “It is clear that we’re seeing the maturation of the innovation economy both globally and in localised markets, such as the UK.”

Executives are looking to global markets to grow their businesses with over half of UK respondents stating that revenues will come from another country. Almost three-quarters expect that the majority of that revenue will come from the US. Over half (54 per cent) of UK businesses derived more than 20 per cent of their revenues overseas in 2014, and the expectations are higher for 2015.

Furthermore, the survey found UK innovation businesses of all sizes expecting to hire in 2015, with 79 per cent planning to add new talent. Of those planning to hire, 67 per cent plan to increase their headcount by more than a fifth.

Further details about Innovation Economy Outlook 2015 can be found here. The view from the UK can be found here.