What digitalisation means for the future of startups and investment

Digitalisation has and is transforming the world of business, and for startups, this shakeup will dramatically change the way they operate. Whilst established organisations are still trying to catch-up from the rapid digital acceleration caused by the pandemic, which heightened an already fast-paced, technology revolution. But for the startup world, the picture is slightly different. 

To shed some light on what digitalisation will mean for startups and investors, a study conducted by Connectd found that while the future is not all rosy, digitalisation will have an increasingly positive effect on startups, largely driven by its influence on closing the gap between entrepreneurs and investors. This trend will continue in 2022, with 84% of investors looking to spend more in the new year.

How investors plan their road ahead in the wake of digital transformation (and the pandemic), how entrepreneurs map out their business post-Covid, and how digitalisation fits into their respective plans will determine what the overall picture will look like, but the early signs for startups are looking positive. 

76 new startups created every hour

In 2020, there were 665,495 new companies incorporated in the UK. That equates to around 76 every hour and more than one every minute. While it’s a drop from the year before, it was still the second-highest number of incorporations since figures were first reported. Considering the world was going through the biggest global event since the Second World War (the Covid-19 pandemic), this is pretty good going.

The most profitable startups, according to research by TechCrunch, are focused on e-commerce, mobile apps and SaaS - in other words, technology. This illustrates the key trend we’re seeing; there’s a sustainable cycle developing of tech startups, which in turn, grows tech (and so on). 

Technology and digitalisation are rapidly transforming the way startups operate and grow. The business world is coming to the realisation that automation has the power of rapidly scaling growth. What were once just industry buzzwords, terms like ‘AI’ and ‘SaaS’ have become much more widely used, and this is really helping the startup world. Obviously, tech startups benefit from the whole world going digital, but it helps non-tech startups too; implementing automation from the off allows them to scale at a rate that’s never been possible before. We’ve seen this with our own platform, Connectd. We’ve implemented smartmatching technology that uses automation in order to match entrepreneurs with investors in a way that wouldn’t be possible without technology.

Of course, resourcing is not the only important part of growing a startup – investment is absolutely vital. Digitalisation can help in this aspect too.

Remote working has vastly opened up the radius of where investors are looking to spend their money, bringing investment to startups across the whole country (and even further), having previously been a notoriously London-biased space. Our research showed that 74% of investors are more likely to make deals from other parts of the country and don’t feel restricted by their location.

There are also fantastic online platforms now available thanks to the powers of digitalisation, that bridge the gap between investors and entrepreneurs, combatting this common problem.

The unfortunate victims of digitalisation

Of course, with any great scale of change comes consequences. While digitalisation certainly has its benefits on startup growth, there are some unfortunate victims, one being networking.

In our survey, 41% of entrepreneurs and investors said they have cut the time they spend on networking in person down considerably and 42% said they no longer feel the need to take time travelling to such events. Some investment programmes like accelerators are based around such events, so this could be taken as a negative consequence of digitalisation. We are taking this research into consideration with our own network and trying to enable more meaningful connections both online and offline.

With that comes pitching too; over a third of investors in our survey said they now look to find deals virtually. It’s unclear as to the effect this will have on startups. While pitching and networking in person may have reduced, that’s not to say that they haven’t been replaced by virtual meetings.

Conclusion

It’s clear to see that digitalisation is powering the startup world like never before. Technology and online platforms are providing entrepreneurs with so much opportunity to automate simple processes and save time.

It may be true that pitching in person will continue to decrease, but this should be seen as a positive rather than a negative. The reduction in travel, small talk, lunch meetings and other unnecessary chunks of time will be better used to grow business instead. While revenue is of course a vital factor in startup growth, for many, time is equally important. With rising costs in R&D and no product to sell, startups are under increased pressure to get to market fast or succumb to the pressures.

As we enter a whole new digital era that only serves to grow innovative new solutions, benefitting all aspects of life from businesses and people to society and the environment, it will be exciting to see what the future holds for the startup industry in the UK.