How Was UK Venture Capital Investment in Q3 2017?
Investment Conference: Next Round is coming up in November, so let’s check out the latest trends in UK venture capital (VC) investment.
In July through September (Q3) 2017, VC funding in the UK continued to decrease in the number of deals but increased in value, reaching its highest spending since the end of 2015, according to KPMG’s Venture Pulse Q3 2017 survey. During this quarter, 185 businesses raised a total of over $1.8 billion.
These findings follow the general trend of VC funding this year. From Q1 to Q2, there was a dramatic drop in the number of deals, from 258 in Q1 to 189 in Q2, that occurred despite investment value growing from $1.15 billion to $1.42 billion during the same period.
So why are fewer companies receiving more money in 2017?
One reason is the enormous Q3 investment in a handful of high-growth companies, including Deliveroo, Sound Cloud, and Tricentis, whose deals accounted for $900 million of the quarter’s $1.8 billion. These few companies are driving much of the growth in the VC industry.
But that still leaves plenty of capital for newcomers. What do they need to do to secure VC funding? As Patrick Imbach of KPMG explains, lower deal counts combined with rising value may indicate that, in addition to preferring proven companies such as Deliveroo and Sound Cloud, investors are becoming more discerning in their choice of younger businesses.
Such cautious investing caused a dip in VC activity in 2016 and, despite the healthier levels of activity this year, entrepreneurs have increasingly needed to clearly ‘articulate and demonstrate’ their company’s value to potential investors. Fewer companies may meet VC’s rising standards, but those who do can expect greater rewards in the form of large deal values.
Notably, the trend toward fewer deals and greater value per deal may be worldwide. According to Pitchbook’s latest report, VC activity in the US is moving in the same direction. There, VC spending is on track to be the highest in 10 years, but the $61 billion raised so far in 2017 has gone to the lowest number of companies in five years.
KPMG interprets the strong investment in UK businesses as a sign that, despite the looming uncertainties of Brexit, VC investors remain optimistic about UK businesses. In fact, the UK raised 40% of the $4.5 billion raised in all of Europe in Q3.
For entrepreneurs, the takeaway from these findings is that UK entrepreneurs who take the time to understand their company’s worth and craft an effective pitch increase their odds against fluctuations in any financial and political climate.
Learn more about the state of UK VC investment at the Next Round Investment Conference, on 15 November 2017 (12:30–6:30 p.m.) at London’s NatWest HQ. The conference will include a VC panel titled, ‘Catalyse Your Success Story: How VCs can empower your business,’ featuring UK VC firms Calculus Capital, ScaleUp, Beringea, Albion Capital and Edge Group.
Tickets available here!
