Q2 2014 PAGEONE report

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Q2 2014 PAGEONE report

Investment Trends in Q2 2014
The simple headline is that in Q2 2014, £320m (vs £192m in Q2 2013) was invested in 84 deals (69) of over £0.5m by 117 investors (82). These deals bring the totals for the year to date to £856m (£479m) and 170 investments (128). This represents 93% of all funds invested in the whole of 2013.

View Q2 2014 PAGEONE report >

The clear phenomenon of 2014 (so far) has been huge growth of investment in internet/mobile service companies. In the first six months of the year, £520m was received by 92 companies in the sector. This compares to £259m invested in 91 internet service businesses for the whole of 2013. In 2014, London has completely dominated the sector taking 88% of funds invested and 79% of number of deals.

The biggest single subsector in this internet group is “FinTech” – financial technology. Between January and June, 22 of these businesses received just under £300m from investors – more than the combined totals for Software and Cleantech. In many ways this simple statement underlines the major shift that has occurred in the VC market over the last 5 years. In 2009, Cleantech took twice the amount of VC money that all internet service companies received. In 2014, investors have new priorities…

Other than FinTech, the only other major grouping amongst internet service investments was in fashion/retail companies. We tracked 16 of these who received £85m. So whilst “FashTech” is a popular area for investment, relatively few of the businesses have achieved the scale that requires the type of “super investment” (ie >£10m) deals that are more common in FinTech.

In the PAGEONE Report for Q1, we asked the question “are we in a bubble”? Some of the warning signs that were troubling us at that time have eased – syndication has increased and growth has slowed – and so we continue to believe that there is no bubble but we are watching the market carefully.

In the year to date, the market has not quite followed the usual seasonal investment pattern – Q1 peak then reduced activity in Q2 – so a forecast for 2014 is not so easy to make. Our best guess for 2014 is still that around 300 companies will receive £1.5bn. Q3 has already seen some notable transactions – Funding Circle (£38m), XMOS (£15m), etc. So let’s hope that the good pace of activity is maintained.

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

  • In Q2 2014, £320m was invested in 84 deals by 117 investors
  • In the year to date, £856m has been invested in 170 companies
  • The busiest investors were MMC, Scottish Investment Bank, Index Ventures, Archangels, Balderton Capital, Forward Partners and Imperial Innovations
  • 75% of deals involved more than one investor
  • Private investors participated in 37% of VC deals, US investors in 10%, Euro investors in 8% and Corporate Investors in 15%
  • The 14 biggest deals received 55% of funds invested, included: Farfetch (£39m), Nutmeg (£19m), Ebury (£18m), MyOptique (£16m), Transferwise (£15m), Brandwatch (£13m), Nujira (£12m), Roli (£8m), Ticketscript (£7m), Osper (£6m), Aveillant (£6m), Brightpearl (£6m), Citymapper (£6m) and Currency Cloud (£6m).
  • Internet/Wireless Services companies received £180m, Software £65m and Cleantech £17m. £60m was invested in companies that could not be simply categorised
  • In the Internet/Wireless Services sector, 40 companies received investment, Farfetch (£39m), Nutmeg (£19m), MyOptique (£16m), Transferwise (£15m), Osper (£6m), Citymapper (£6m) and Currency Cloud (£6m) received the biggest VC cheques
  • The largest Software deals were: Ebury (£18m), Brightpearl (£6m), Certivox (£5m) and Intent HQ (£5m). 20 Software companies received VC backing
  • Just 5 Cleantech companies raised capital: Cylon Controls (£6m), E-Leather (£5m), Nova Innovation (£4m), Netthings (£1.3m) and Celtic Renewables (£1.2m)
  • Outside of the key subsectors, the biggest deals were: Roli (£8m), Aveillant (£6m), MCor (£5m), Nualight (£3m) and Masabi (£2.5m)
  • London and Scotland which were responsible for 52% and 11% of deals respectively
  • London’s share of the VC money was down from its peak in Q1 to 65% of all funds invested in the UK and Ireland.
  • On a city-by-city basis, 45 London tech companies received VC, 8 in Edinburgh and 6 in Cambridge. All other cities or towns had less than 5 deals.

If you have any queries do not hesitate to give me a call.

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