Robert Dickson

The ‘Tech Companies: Funding Innovation Survey’ was carried out at a recent webinar hosted by the firm and attended by over 100 investors, advisors and representatives from tech companies.

Despite recent circumstances, 45 per cent of attendees are cautiously optimistic about fundraising for tech companies as we move into the final quarter of 2020.

25 per cent of respondents said they believe we are entering a time of great opportunity for tech businesses that which to raise funding.

However, 30 per cent expect the forthcoming period to be very challenging for tech companies looking to fundraise.

Robert Dickson, corporate partner at Mason Hayes & Curran, said: “It is pleasing to see a certain degree of optimism come through in the survey, which is consistent with our own experience of the market.

“The operating environment for businesses has been challenging, but there are many opportunities for tech companies on the horizon. As we become more reliant than ever before on technology because of the pandemic, we are seeing tech companies innovating and creating products that provide solutions to real-life problems. Investors are attracted by this innovation and creativity.”

The report reveals 85 per cent faced some challenges during the lockdown, although nothing insurmountable.

Seven per cent revealed they had no issues, while another seven per cent found it extremely challenging.

Anne Harkin, corporate senior associate, said: “This reflects what we have been seeing with our own clients.

“There have been challenges, but generally all parties have been able to find satisfactory work-arounds in order to get deals over the line.”

In terms of general challenges with funding transactions, 44 per cent stated their greatest challenge was negotiations becoming protracted on the terms of the deal.

Thirty-nine per cent felt the greatest challenge was around due diligence, such as the issues of target companies not being resolved satisfactorily and documents not being available.

According to the survey, straight equity investment is the most common form of fundraising for tech businesses (48 per cent), followed by equity/ debt hybrid at 39 per cent.

Twelve per cent stated that venture debt is the most common for them, while no-one reported using alternative lending.

Mr Dickson added: “As we get to grips with the new environment, tech companies continue to raise funds however allow for extra time to get the deal done.

“Funders may also have more of a focus on how a business can scale and grow in the medium to near term, so tech entrepreneurs will need to demonstrate this effectively.”