Q3 2013 PAGEONE report

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Q3 2013 PAGEONE report

Investment Trends in Q3 2013
The simple headline is that in the third quarter of 2013, £178m was invested in 54 technology deals (vs 48 in Q3 2012) of over £0.5m by 61 investors (75). This is a big drop in money invested compared to Q1 (£287m) and Q2 (£192m) but not so far from Q3 last year (£183m).

View Q3 2013 PAGEONE report >

This general downward drift in terms of funds over the last three quarters invested is a concern. Even after adjustment for seasonality, the data increasingly shows that the two key “darlings” of investors for many years – Internet Services and Cleantech – have staggered or stalled (respectively). The former is still attracting significant capital and a good number of investors but 2012 may well turn out to be the high point for Internet Service companies for quite some time. The trends on Cleantech have been clearer for longer – a pinnacle was reached in 2010 and the market has struggled since then. One positive area is Software. More money has been invested in more software businesses in the year so far (64 deals, £140m) than in the whole of 2012 (55 deals, £106m). This is a very welcome development.

Over the last 5 years, Ascendant regularly highlighted the increased participation of private investors/angels in venture investments. In some quarters over this period, private investors have taken a stake in over 30% of these deals. This was the case In Q3 when 35% of deals (of £500k or more) had angel participation. We will look at this trend more closely when reviewing the full year figures in January but thought it would be interesting to examine at the Q3 angel deals as a teaser. In the last quarter, 19 tech companies received over £30m from angels and funds who co-invested with them. So whilst the average deal size of £1.6m, the largest was £11m. Software companies were main recipient group, taking 2/3rds of the funds invested. Internet Services were significantly behind this with just 17%. London saw the most angel deals but Scotland was not far behind. An interesting indicator of the “bustle” in this area is the number of deals in this quarter which Ascendant tagged with participation from the Angel CoFund – 5 – its busiest ever quarter (on our data).

At the end of Q2, our best guess for the year was that around 220 companies would receive just under £900m. The level of investment in Q3 has been slow but volume has held up, so we have marked down our forecast in value but are still bullish on volume. At the time of writing, given the data described above and our transaction experience, we are inclined to suggest a target for 2013 of around 220 companies receiving around £800m. A very big drop on last 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 Q3, £178m was invested in 54 deals of over £0.5m by 61 investors.
  • In the year so far, £657m has been invested in 182
  • The busiest investors were Scottish Investment Bank, Angel CoFund, Octopus, Imperial Innovations, Business Growth Fund, Enterprise Ventures, MMC, Par Equity and Parkwalk
  • 57% of deals involved more than one investor
  • Private investors participated in 35% of VC deals, US investors in 6%, Euro investors in 7% and Corporate Investors in 9%
  • The biggest deals included: Shazam (£26m), NewVoiceMedia (£22m), Calastone (£11m), Touchtype(Swiftkey) (£11m), Movidius (£11m), Inoapps (£10m), Bath Empire (£9m), Plaxica (£8m), Chemist Direct (£7m) and Naked Wines (£7m)
  • There were three primary areas of investment focus – Internet/Wireless Services (£67m), Software (£65m) and Semi/Opto (£12m). Cleantech raised only (£4m). A number of companies who could not be simply categorised, together raised £30m
  • In the Internet/Wireless Services sector, 18 companies received £67m. NewVoiceMedia (£22m), Calastone (£11m) and Bath Empire (£9m) received the biggest VC cheques
  • 19 Software companies received £65m – Shazam (£26m), Touchtype (£11m), Applience (£4m) and Relayware (£4m) were the biggest deals
  • 3 Semi/Opto companies raised £12m: Movidius (£11m), mLed (£1m) and Cambridge CMOS (not disclosed)
  • Cleantech activity was very thin with just 3 companies raising only £4m
  • Otherwise the biggest deals were: Plaxica (£8m) and VTL (£4m)
  • The most active regions were London and Scotland which were responsible for 38% and 19% of deals respectively.
  • London’s share of the VC money was 40% of the funds invested in the UK and Ireland.
  • Unusually, Thames Valley took a high proportion of investment – 15%

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