Without the right investment structures, there is a risk that some of the ‘most promising businesses’ across Yorkshire and the Humber may move elsewhere, according to a new report by venture capital firm Par Equity.
The Northern Lights 2.0: Yorkshire’s Calling report, produced by the VC firm and research partner Beauhurst, reveals the region is attracting an increasing share of total equity funding, but despite the rising value of investment, fewer businesses are accessing capital and there is a ‘critical gap’ in support for start-ups.
Between 2020 and 2024, Yorkshire and the Humber saw a 21 per cent increase in its share of UK equity investment and secured £344m in investment last year. It’s a solid figure but it represents just over 2 per cent of the UK’s total figure.
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But the regional companies that do secure funding are receiving larger investments. The average deal size in Yorkshire accelerated from £1.46m between 2020 to 2024 to £2.06m in 2024, representing a 41 per cent increase. And that’s in comparison with the national growth rate across the UK which stands at 1.25 per cent in the same time period.
Yorkshire and the Humber is home to world-class research institutions, with three Russell Group universities in Sheffield, Leeds, and York producing over 18,000 graduates annually.
University spinouts, including start-ups in AI, robotics, and quantum computing, appear to be key to regional growth but the report finds there is a need for better funding pathways. Without intervention, high-potential start-ups “may be forced to relocate to investment hubs outside the region” as early-stage funding remains a ‘bottleneck’.
“Sheffield, Leeds, and other cities across Yorkshire have all the ingredients to compete on the global stage – a highly skilled workforce, world-class universities, and developing tech clusters. However, without the right investment structures, we risk seeing the region’s most promising businesses move elsewhere,” warned Giles Moore, Regional Development Manager at Par Equity.
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Dr. Elizabeth Young, investment manager at Par Equity, praised the talent in Yorkshire and Humber as “some of the best in the country”.
She said: “We are only just beginning to tap into what that means for the UK’s start-up landscape. Leeds continues to lead the region’s healthtech ecosystem, while Sheffield is making exciting progress with initiatives like the KidsUp Accelerator complementing its deep tech strengths.
“With the West Yorkshire Investment Zone focused on health innovation, alongside collaborative efforts across the region, Yorkshire has the potential to become a significant player in the UK’s healthtech and deep tech landscape.”
The report calls for strengthened local VC networks; scaling university spinout funding mechanisms; the expansion of late-stage capital; and the creation of innovation clusters within investment zones.
Although Yorkshire’s tech ecosystem is gaining momentum thanks to the rise in investment, she agrees that there’s “not enough capital available in the regions” for pre-seed businesses.
“In the report, we found that seed stage companies at the £1m to £3m level are still relatively well covered. The bar is higher, with companies needing around £250,000 of ARR (Annual Recurring Revenue), but there’s still funding available. In terms of the funnel feeding into seed companies, that is definitely struggling a lot.
“With plenty of established and new angel syndicates popping up, they can’t fund everything, so we’re very much trying to fly the flag and hoping that there’ll be more co-investment models as I think a regional level, this is really important to unlock.”
These co-investment models, backed by combined authorities or the British Business Bank, she believes offer a major regional opportunity for growth.
“We need more diversity of capital and partnerships in terms of fund management to open up access for great regional companies to tap into London, US or EU funds.”
