Investment Trends in Q1 2011
The simple headline is that in Q1 2011, £221m (up from £153m in Q1 2010) was invested in just 42 UK/Irish companies (65) by 72 investors (82).
It is worth noting that we have excluded 2 large deals – Plastic Logic (£437m) and Appsense (£43m) – on the grounds that the companies are no longer HQ’d in the UK. If they were included the amount invested in Q1 would have exceeded the whole of 2010!
Beneath the headlines, there are two important trends in the data: negligible levels of investment activity in the Cleantech sector and significant decline in deals completed in the Regions (i.e. outside London).
Ascendant collects deal data from multiple sources (7 or 8) as well as directly from investors. Even so we have only been able to identify 2 completed deals in the Cleantech sector with a combined value of just £3m. This follows a 40% reduction in the funds invested in Cleantech during 2010 when compared to 2009. So has the bubble burst? Probably not as we have seen a few good Cleantech deals come through in Q2 – two of which Ascendant has done. But we are watching this space closely.
Comparing Q1 2011 with Q1 in 2010, there was a notable drop in activity – just 42 deals vs. 65 respectively. The decline has been most marked in the regions. Outside London, most of the regions we track recorded just 2 or 3 deals of £500k or more. When the value of funds invested is considered, London based companies took over 60% – well above the norm of 45%. The one exception to this was the North, which on the back of the Jeremie initiative faired much better the rest. Many of the regional development agencies have been “throttling” back in the last few quarters reflecting Government cutbacks and reductions in their budgets. We see no immediate solutions presenting themselves to this problem and anticipate that it will continue for some time.
Q1 is usually a key indicator of activity for the whole year. If the normal pattern of investment holds then we should expect a modest uplift from the 2010 probably getting close to £750m for the whole of 2011. However there are a number of significant dynamics that could push this number in either direction. For example, if activity in Cleantech space continues at the low level we are currently experiencing, then it could be a tough year.
Looking more generally, we have summarized our analysis of the year in the attached PAGEONE report. This highlights a number of trends – including:
- In the first quarter of 2011, £221m was invested in 42 deals by 72 investors
- The busiest investors were Accel, Braveheart, Octopus Ventures, Oxford Technology
- 57% (54%) of deals involved more than one investor
- Private investors participated in 21% of VC deals, US investors in 12%, Euro investors in 12% and Corporate Investors in 12%
- The 10 biggest deals (with disclosed values) received 82% (50%) of funds invested, included: Wonga (£73m), Cellnovo (£30m), Just-Eat (£30m), Sala International (£12m), Altobridge (£8m), Icera (£8m), Livebookings (£6m), Microvisk (£6m), Siine (£6m) and Basekit (£4m)
- There were two primary areas of investment focus – Internet/Wireless Services (£127m), and Software (£30m)
- 19 Internet/Wireless Services companies received investment in Q1. Wonga (£73m), Just-Eat (£30m), Livebookings (£6m) and Rated People (£3m) received the biggest VC cheques
- 12 Software companies received VC backing. The largest deals were: Altobridge (£8m), Siine (£6m), BaseKit (£4m) and OpenGamma (£4m)
- There were only 2 Cleantech deals – Novacem (£1.6m), Re Pet (£1.2m)
- NO semi/opto companies received venture capital in this quarter but Icera did raise £7,5m of debt (before being sold)
- The most active regions were London and the North which were responsible for 45% and 12% of deals respectively All other regions reported a very small number of deals – much lower than historic levels
- London’s share of the VC money amounted to more than 60% – the highest share Ascendant has ever recorded and well above its norm of around 45% of the funds invested in the UK and Ireland.