Investment Trends in Q4 2010
The simple headline is that in 2010, 213 UK/Irish companies (up 10% over 2009) received £620m (just under the sum for 2009) from 234 investors (up 26%).
The last of these numbers – i.e. the number of active investors is particularly noticeable. (Our data does not “count” private investors within these numbers just institutions and companies.) As we look at our historic data this is almost exactly half the number of investors who participated in the boom/bubble year of 2000 when £3.5bn was invested. Clearly we are far away from the hubris of that time but we are very encouraged that there are a significant number of new players in the UK market. When the data is analyzed it can be seen that both US and Trade investors participated in more deals this year – 13% and 14% respectively – than in 2009. Ascendant is aware of a number of trade investors or corporate VCs who have recently joined or are planning to join the market and we expect them to become more influential over the next few years.
Within the broadly positive headline figures there was a noticeable reduction in the funds invested in Cleantech deals – down 40% over the figure for 2009. The volume of Cleantech deals did increase modestly (10%) so the combined effect was a sharp reduction in the average deal size to just £2.3m. In contrast the value of semiconductor/opto deals increased by 11% which the number of such companies receiving investment dropped by 43%, boosting the average deal size to almost £7m. Only in the Internet/Wireless service sector did more companies share an increase in investment. This sector took 27% of funds in 2010 – well ahead of Software (18%) and Cleantech (17%) – and has regained the title of “Favored Sector for UK/Irish VCs”.
It is too early for a forecast for 2011 but January has got off to “reasonable” start with Plastic Logic finding £437m! So we will have to have a particularly bad year not to do better than 2010. We will have a better feel for the year once Q1 is finished so watch this space. Looking more generally, we have summarized our analysis of the year in the attached PAGEONE report. This highlights a number of trends – including:
- In 2010, £620m was invested in 213 deals of over £0.5m by 234 investors.
- In Q4, £140m was invested in 52 companies by 81 investors
- The busiest investors were Octopus, Carbon Trust, Enterprise Ireland, Scottish Enterprise, Accel, Amadeus, Balderton, Eden, Oxford Capital Partners and YFM
- Levels of syndication dropped to 57% (64%) of deals involving more than one investor
- Private investors participation in VC deals dropped to 21% compared to 24% in 2009
- US investors contributed to 27 deals, European investors 26 and Trade investors 29
- The 10 biggest deals received 28% of funds invested, included Icera (£31m), InterResolve (£30m), Oxford Nanopore (£17m), Cambridge Broadband (£17m), Alertme (£15m), Hut Group (£14m), Picochip (£14m), Mimecast (£13m), Aquamarine Power (£11m) and Sterecycle (£10m).
- In the four primary areas of investment – Internet/Wireless Services led the pack taking £166m, followed by Software (£109m), Cleantech (£106m) and Semi/Opto (£83m).
- The InternetWireless Service sector was very active with 66 companies receiving investment. The biggest deals were: Alertme (£15m), Mimecast (£13m), Cloudmade (£8m), eWise (£7.9m), Notonthehighstreet (£7.5m), Huddle (£7m), Attraction World (£7m), Flirtomatic (£6m) and Autoquake (£6m).
- VCs invested in 49 software companies during 2010. The largest deals were: The Hut Group (£14m), SRL Global (£8m), Aepona (£7m), Openet (£7m), Image Metrics (£5m), Opencloud (£5m) and Eutechnyx (£5m).
- Of 45 completed Cleantech deals, the largest were Aquamarine Power (£11m), Sterecycle (£10m), Green Road (£6m), PhosphonicS (£6m), Blade Dynamics (£5m), Green Biologics (£5m) and Eight19 (£5m).
- 12 Semi/Opto companies received venture capital in 2010. Icera (£31m), Picochip (£14m), Miric (£9m), Light Blue Optics (£8m), Elonics (£6m) and Movidius (£5m) were the largest.
- London was significantly ahead of all other regions taking respectively 32% of the value invested and volume of deals. With the exception of the Midlands (£28m), all the key regions each received £45m – £65m.
- Outside of London, the North was the more active region with 24 companies receiving funding.
- Ireland suffered the worst decline (50%) in volume and value with activity shrinking to its lowest levels for over 5 years.
PS You may have seen that we recently completed the sale of Redeem plc – a leading recycler of mobile phones and printer cartridges with sales of £20m+. So we know quite a bit about achieving exits too.