INSIGHTS / Blog

Pictured: Sara Alão, Stars Edge

Since 2020, more than £1.4bn in venture capital has been invested in the UK’s telecoms sector.

Despite the economic stresses reported across other sectors in the last four years, telecoms has seemingly bucked the trend. However, that doesn’t mean that the sector isn’t currently without its fair share of challenges.

At UKTIN’s Telecoms Commercialisation & Economics Conference on 2 October, the Investment Insights Strand united the investor and innovation communities to explore opportunities within the sector. Blending insights extracted from UKTIN’s Telecoms Investment Insights report, delivered in collaboration between UKTIN and Pitchbook, and conversations around critical aspects of the sector, the day offered attendees a broad insight into the landscape and some of the challenges and opportunities it presents.

Applying findings from the Telecoms Investment Insights report

A fireside chat between Simon Bond, UKTIN Translation and Innovations Lead, Bristol Innovations and Nalin Patel, Lead Private Capital Analyst, Pitchbook explored some of the insights gleaned from the Telecoms Investment Insights Report, released earlier this year. Acknowledging that market capital has tightened in recent years, Bond raised the question of whether telecoms is no longer seen as an investible or attractive market in comparison to other high-technology sectors.

Speaking in response, Patel noted that while AI in particular remains front and centre of discussions, attracting a high proportion of available capital, telecoms will ultimately still benefit from these investments, “AI is the one that’s front and centre at the moment, we’re seeing a lot of capital going into that. Telecoms is a sector that will definitely utilise AI.”

“We’ve seen in VC that there has been an increase in granularity around segmentation in certain sectors. We’ve seen quantum computing, non-terrestrial networks, and AI, all attracting funding. Investors are becoming more selective though and we’re seeing in a competitive market that the best start-ups rise to the top.”

The overarching theme of discussions was that whilst the sector is not without its challenges, the doors for investment are still open for the right companies and innovations.

 

Future Trends

The afternoon’s panel discussion, chaired by Andy Sellars, Advisor, Chip Start UK, delved deep into the current trends shaping the future of telecoms and the critical role that government policy could play in innovation.

One of the key topics discussed was the growing role of network APIs, which are enabling developers and businesses to access and leverage network capabilities more flexibly, paving the way for new services and solutions. Alongside these advances, however, is growing concern for the environmental cost of telecoms innovation, particularly with the rapid growth of AI. The panel highlighted that the projected rise in energy consumption driven by AI technologies could see global energy demands rise from 3% of total generation to an estimated 8% by 2030.

Another central theme was the overall investment landscape in telecoms, which is often characterised by high capital demands and long development timelines. Many startups require “patient capital” – investors who are willing to commit funding over a long period of time and often wait up to a decade to see any returns. This does present challenges for the start-up communities, but discussions indicated that there is still investor appetite to invest in these companies at an early stage.

It was widely noted that the UK has established itself as the VC capital of Europe, offering a robust ecosystem for startups and innovation, but the panel also concluded that the US is approximately 20 years ahead in terms of deal flow and later-stage exits. American investors typically have access to larger pools of capital and are more willing to back large, late-stage deals. This creates a competitive advantage for US-based telecoms ventures, as they can scale faster and reach the exit stage more easily, but UK ventures should not be discouraged. The turn of a new era in Government opens up new priorities and possibilities, particularly where deep tech innovations are concerned.

What should the new government do? Key takeaways from the panel

When asked what message they would take to the UK’s new government, the panellists reached a clear consensus on three key recommendations:

1. Open the capital flows: To keep pace with the rapidly evolving telco landscape, the UK must ensure there are enough capital resources to support innovation across all stages of development. Access to sufficient funding is critical for both early-stage startups and established telecoms companies looking to expand.
2. Back hard-tech and deep-tech: The UK has a natural competitive advantage in hard-tech and deep-tech sectors, particularly in telecommunications, AI, and energy. These areas represent the future of global innovation, and by focusing on supporting these industries, the UK can secure its position as a leader on the global stage.
3. Avoid backing too many ‘winners’: While it may be tempting for governments to pick and heavily back a select few companies, the panel warned against this approach unless there is a clear, long-term strategic need. Diversification is key to maintaining a healthy, competitive market, and over-concentrating investment can stifle the very innovation the government seeks to promote.

Overall, the message was clear: collaboration between telco entrepreneurs, early-stage ventures, investors, and policymakers is essential for the sector to thrive.

Insights from Entrepreneurs and Investors

The later roundtable sessions provided an invaluable forum for experienced entrepreneurs and industry leaders to share their knowledge with both fellow founders and investors in the room. Led by seasoned entrepreneurs from Krucial Networks, Vypercore, and Stars Edge, these founders offered practical advice on navigating the venture finance landscape, with conversations highlighting several important themes around the relationship between telecom startups and their investors.

Entrepreneurs emphasised the need to engage with a broad spectrum of investor groups, including angels, VC firms, corporate venture funds, and national investment funds, with each category bringing unique benefits and challenges to the table.

The entrepreneurs also shared their experiences pitching for investment across different regions, notably the UK, USA, and Europe, with each market having its own set of norms, expectations, and opportunities, and understanding these regional differences is key to securing funding.

In the UK, entrepreneurs often find a more cautious investment culture, with investors typically seeking evidence of market traction before committing significant capital. This makes early-stage financing more challenging, though the UK’s strong reputation as the VC capital of Europe helps startups attract global investors, especially in Series B+ stages.

In the US, the investment landscape is much larger and more aggressive. American VCs tend to be more comfortable with risk and are willing to make larger, later-stage investments. US investors are also known for pushing companies to scale quickly, which can be both an opportunity and a challenge for startups looking to expand globally.

In Europe, however, entrepreneurs noted that while there is increasing access to funding – particularly from national and EU-level investment bodies – there is still a gap compared to the USA. However, Europe offers a more collaborative ecosystem where governments and large corporations often play a more active role in supporting innovation, which often works in the favour of early-stage ventures.

Another significant theme from the roundtables was the importance of achieving traction in beachhead markets before seeking seed or growth-stage funding.

Allan Cannon, CEO, Krucial and Investor, Russell Haggar, CEO, Vypercore and Investor, and Sara Alão, Founder, Stars Edge, all shared their experiences of identifying niche customer use cases that provided a clear, real-world demonstration of their technology’s value.

Rather than pitching broad, theoretical market potential, startups were advised to focus on specific, solvable problems in well-defined markets. By proving their value in these beachhead markets – whether through pilot projects, initial sales, or partnerships – entrepreneurs can begin to build credibility with investors. These smaller successes also provide a platform to extrapolate to larger market opportunities as the company scales, using clearly defined growth milestones to show investors how their business can expand beyond its initial niche.

The Telecoms Commercialisation & Economics Conference highlighted both the opportunities and challenges facing the sector. Despite economic pressures, telecoms continues to attract significant investment, with emerging technologies like 5G, AI, and network APIs leading the way. However, challenges like capital constraints and environmental concerns remain key issues.

Industry leaders emphasised the importance of strategic investments in hard tech and deep tech, as well as the need for patient capital to support long-term growth. But ultimately, collaboration between telecom entrepreneurs, investors, and policymakers will be crucial for driving innovation and ensuring the sector’s future success.

Explore support available for early-stage deep tech start-ups