Ascendant has just completed its review of venture investment in private technology companies in the UK and Ireland during 2018 and it has never been higher. The chart below highlights the last 5 years but we can confirm that just under 15x more money was invested in 2018 than in the lowest level in recent memory which was in 2003.
In 2018, £6.4bn was invested in 1,059 deals of over £0.5m – up 20% in value and 31% in volume over 2017. In the three primary areas of investment focus: 458 Internet Services – companies received £2.9bn, 354 Software buinesses took £1.6bn and 247 Hardware enterprises picked up £1.9bn.
884 investment groups (i.e. not individual investors) participated in these investments – up 24% on 2017. US investors were involved in 12% of transactions, European investors in 10% and Corporate Investors in 16%. Private investors participated in 28% of deals and Crowdfunding platforms financed 12%.
The 10 biggest deals (with disclosed values) which received 16% of funds invested, were Revolut (£180m), Graphcore (£159m), Freeview (£125m), Atom Bank (£107m), Adv Man Ctrl Sys (£88m), Monzo (£82m), Starling Bank (£80m), BenevolentAI (£80m), Acorn OakNorth (£77m) and CMR Surgical (£75m).
The most active regions were London and Ireland which were responsible for 57% and 12% of deals respectively. However London’s share of the VC money was 61% of all of the funds invested in the UK and Ireland. This dominant position is actually down from its cut in 2017 which was over 70%.
Ascendant is often asked when we think the market will turn and over the years have developed a number of tools to help us spot any changes in sentiment or “softness” early. There was a steep decline in confidence during Q1 of 2018 but positive sentiment returned and grew in the last 3 quarters and, subject to what happens with Brexit, we believe that this trend will continue. This is particularly true in the area of Fintech which now represents 23% and 30% of the volume and value of the market.
So no panic just yet but we should have a little caution at this stage. Whilst it is true that the market is booming and there is an ever growing number of fund managers, institutions, companies and organisations backing tech businesses, it is worth noting that c.70% of these did only one investment in the last year. If there is any sudden shock to the market these parties must be likely to withdraw and if so, the number of deals getting done will plummet. These is some precedent for this, when the Internet Bubble burst in 2000 the number of active investors in the UK and Ireland dropped by 47% – in the same 3 year period the number of deals completed shrunk by 70% and money invested by 88%! 2003 was a very difficult time so hopefully we will not see that again, but as always we would always urge companies to “get it while they can”!
The summary of Ascendant’s 2018 review can be seen here.
Feel free to contact me if you would like to have a conversation about trends in the venture market and how they can be best exploited when companies are looking to raise capital.