The UK Investment Scene: 10x more seed, an acute Series A crunch, bigger deals

This week, Felix Haas and team hosted over 3,000 people in Munich for Bits and Pretzels. The conference had a quirky and fun twist: All speakers were given a pair of lederhosen or dirndl to wear, and startups got to pitch investors over a beer at Oktoberfest (at 10am!).

Sean Seton Rogers of ProFounders, Frank Meehan of Spark Labs and I during the VC panel. Entrepreneurs and their Table Captains

During the VC panel, we were asked to provide a high-level overview of key trends in investment across the UK (see below), Asia and the US. For my section, I turned to CB Insights for data on UK investments between 2010–2015.

The macro takeaway is that the UK has come a long way in only 5 short years: More deals and bigger deals. The graph below maps digital investments by number and total amount. Based on the current trajectory, the CB Insight data predicts over 250 investments in 2015.

The more interesting graph, however, is the breakdown of those investments by stage. Between 2010 and 2014 the number of seed deals has gone up 10x.

Some of this can be attributed to SEIS and EIS tax incentives providing more liquidity into early stage companies, alongside the growth of the number of seed-stage funds.

The number of Series A investments, however, has only gone up 1.3x. The Series A crunch, therefore has only increased as more seed-backed companies flow into the funnel.

Series B and C+ have both increased by 3x and this is really good news as those companies that scale and earn the right to secure a significant investment is increasing…as is the amount of capital from UK, mainland Europe and the US available to fund those rounds.

The top 10 rounds by investment amount in the last 5 years were all above $60 million with World Remit and Kobalt raising over $100m at Series B.

In summary, the vibrancy of the UK ecosystems growth is visible in the data and the growth of number of seed-backed investments demonstrates an increased interest in entrepreneurship as a career choice, and the availability of capital to support new nascent ventures.

While many of the Seed-backed companies might not merit Series A funding, I also believe that there is an opportunity for more VC funds to be focused on this stage of the funnel (as we are at White Star Capital) while other more established players continue to raise larger funds to support B and C+ rounds alongside US firms who are seeing the opportunity of the UK and Europe.

A big thanks to Matt Wichrowski, our awesome Summer Associate for his help in turning the CB Insight data into beautiful graphs.

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Christian Hernandez is the co-founder and Managing Partner of White Star Capital, an early-stage Venture Capital fund backing exceptional entrepreneurs with global ambitions. www.whitestarvc.com