Investment Trends in Q1 2013
The simple headline is that in the first quarter of 2013, £282m (£298m) was invested in 59 deals (64) of over £0.5m by 82 investors (99). Whilst down in value from Q1 last year, this total is still a good step up from Q4 2012 which amounted to just £209m. Volume is clearly down but not significantly.
The stand out transaction of the quarter was Truphone which received £75m from investors including Roman Abramovich. This is the second largest deal Ascendant has recorded in the last decade following Tamar Energy’s £98m last year but ahead of the £73m raised by Wonga 2011. Another large deal in the last quarter was Gaelectric – an Irish developer of wind power and energy storage projects – who raised £55m. With these two large deals, the number of UK/Irish tech companies that have raised £50m in a single deal in the last ten years now totals 7.
Q1 was also an interesting quarter for the changes in investment priorities in the market. There was a dramatic drop in the number and value of deals in the Internet/Wireless Services sector – 16 companies received just £51m compared to the 29 companies who collected £113m in Q1 2012. The scale of this decline is unprecedented. It is too early to state that there has been a waning of interest in Internet plays but we do suspect that some investors are looking to correct/re-balance their portfolios which may have been “overweight” in the sector.
By contrast investors invested significantly more in the software sector – 19 companies received just under £40m compared to just 15 companies who collected £14m in Q1 2012. Deal sizes are still generally low in this sector but the increase in activity (the first material upward change for years) is very welcome.
In Q4 last year, 29 London based tech companies captured £151m. Q1 this year is quite different – 24 companies raised just £62m. London still remains the most active region in the UK and Ireland but for the first time in 16 years it was beaten on value invested by Ireland who claimed £64m (after the Gaelectric deal mentioned above). However if London is compared to other cities rather than regions no other city or town comes close to it.
2013 has started with some interesting deals and good levels of activity. Q1 always sets the tone for the year as there is a good correlation between the value and number of deals done in Q1 with the final figures for the whole year. So, based on the Q1 run rate, our best guess for the 2013 is that around 200 companies will receive just under £1bn. Let’s hope that the pace of activity is maintained.
Looking more generally, we have summarized our analysis of the year in the attached PAGEONE report. This highlights a number of trends – including:
- In Q1 2013, £287m was invested in 59 deals of over £0.5m by 82 investors.
- The busiest investors were Scottish Enterprise, Business Growth Fund, Enterprise Ireland, Imperial Innovations and MMC
- 68% of deals were syndicated
- Private investors participated in 29% of VC deals, US investors in 5%, Euro investors in 8% and Corporate Investors in 19%
- The 10 biggest deals were: Truphone (£75m), Gaelectric (£55m), Farfetch (£29m), Scopus Engineering (£13m), Xeros (£10m), Hut Group (£9.0m), Magma Global (£8.5m), Fan Duel (£7.0m), Aveillant (£6.5m) and OnApp (£6.0m).
- 7 Cleantech companies successfully raised £73m. The biggest deals were: Gaelectric (£55m), Xeros (£10m), Smarter Grid Solutions (£3m), Oxford Photovoltaics (£2m) and MHA Lighting (£1.5m)
- The largest Internet/Wireless Services deals were: Farfetch (£29m), FanDuel (£7m), Iwoca (£2m) and Rentify (£2m). 16 Internet/Wireless Services companies received £51m.
- In the Software sector, 19 companies shared £40m. The Hut Group (£9m), OnApp (£6m), Altobridge (£5.2m) and Semetric (£3m) received the biggest VC cheques.
- Outside of the key subsectors, the biggest deals were: Truphone (£75m), Magma Global (£8.5m), Aveillant (£6.5m), LUX Assure (£3.3m) and Aubin (£2.3m)
- The most active regions were London, Scotland and the North which were responsible for 41%, 14% and 14% of deals respectively.
- However, London’s share of the VC money was unusually low amounting to 22%% of the funds invested in the UK and Ireland. In fact Irish companies were the largest recipient of funds taking 33%.
- On a city by city basis, 24 London tech companies received VC, 4 in Dublin, 4 in Edinburgh and 3 in Cambridge.
- No other city or town had a significant number of deals.