Q2 2011 PAGEONE report

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Q2 2011 PAGEONE report

Investment Trends in Q2 2011
The simple headline is that in Q2 2011, £234m (up from £190m in Q2 2010) was invested in 48 UK/Irish companies (47) by 70 investors (84). When added to our figures for Q1 that makes £455m invested in 91 companies in the first half of 2011. It is worth noting that in the whole of 2010, just £620m was invested in 213 companies so while we are seeing good progress in terms of funds committed, the market is a bit behind in the volume of companies receiving money.

View Q2 2011 PAGEONE report >

There were a couple of notable movements in the market during this quarter.

Perhaps the biggest was the bounce back of Cleantech deals. Q1: 2 Cleantech companies raise a total of £3m. Q2: 10 Cleantech companies raise £70m. We believe that there was no single factor driving this. The reasons we see are a small number of new investors, greater participation by corporate/strategic investors, and a greater number of late stage deals – more than 50% were Series C or later. Whilst we are encouraged, we would still be very cautious about concluding that all is well in the “green” tech sector as we are aware of a number of investors who will no longer look at new Cleantech deals and the extended timetables that Cleantech companies are enduring to close their rounds – much longer than other tech companies.

Another trend worth commenting on is the continuing high level of funds being committed to small numbers of companies. A good measure of this concentration is the percentage of funds invested in each quarter that are secured by the top 10 deals. In Q1 this peaked at 82%. Whilst it dropped in Q2 to 65%, this is still relatively high compared to norms of around 50%. So it looks as though many investors have decided to get behind (or place big bets on) what they perceive to be an elite group companies. This has happened before – about 11 years ago! The main difference now is that the “big” money is going to established businesses in late stage deals. So lessons have been learned.

The final trend that we would draw your attention to is a gradual withdrawal of investors from the market. In Q1 2008, over 100 investors participated in UK/Irish VC deals. In Q2, 2011 that number was just 70. Apart from a significant drop in early 2009 due the recession, there has been a clear and consistent decrease during this period. Given that we know that there have been a number of new entrants – particularly in the corporate sector – this implies that there has been shrinkage in the main body of technology investors. We are doing some deeper research on this and will publish this later this year.

When we commented on the prospects for the year at the end of Q1, we suggested that “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”. Clearly Q2 has been much better than many of us expected – particularly in Cleantech – and we are minded to push up our “guestimate” for the year to between £800m-£850m. As always, there are a number of significant dynamics that could push this number in either direction. So we look forward to seeing how it turns out!

Looking more generally, we have summarized our analysis of the year in the attached PAGEONE report. This highlights a number of trends – including:

  • In Q2 2011, £234m was invested in 48 deals by 70 investors.
  • In the first half of 2011, £455m was invested in 91 companies
  • In Q2, the busiest investors were Index, DFJ Esprit, Eden and Finance Wales
  • 57% of deals were syndicated – i.e. involved more than one investor • Private investors participated in 22% of VC deals, US investors in 2%, Euro investors in 10% and Corporate Investors in 22%
  • The biggest deals were: Enecsys (£25m), Oxford Nanopore (£25m), Shazam (£20m), Media Ingenuity (£18m), Wind Energy Direct (£18m), EVO Electric, Nujira (£10m), Worldstores (£10m), eWise (£9m) and Neul (£8m)
  • There were three primary areas of investment focus – Cleantech (£70m), Internet/Wireless Services (£60m), and Software (£45m).
  • There were 10 Cleantech deals in Q2 with the largest being: Enecsys (£25m), Wind Energy Direct (£18m), Evo-Electric (ND), Intelligent Energy (£7m) and Acal Energy (£5.1m).
  • 14 Internet/Wireless Services companies received investment in Q2. The big deals were: Media Ingenuity (£18m), Worldstores (£10m), eWise (£9m), Borro (£8m) and StylistPick (£5m).
  • 14 Software companies received VC backing. Shazam (£20m), Metaforic (£5m), Site Intelligence (£4m), Cognitive Match (£3.5m) and Brightpearl (£3m) were the largest
  • The only semi/opto company to receive venture capital in this quarter was SmartKem.
  • 18 London based companies raised £94m representing 37% of volume and 40% of the value of all UK/Irish Deals • All other regions managed to finance between 3 and 5 companies each.
  • Investment in companies from Scotland and the SW was particularly low with these regions only managing to raise £7m and £4m respectively

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