KPMG Venture Pulse report Q1 2017

Investor sentiment appears positive despite UK PM Theresa May triggering Article 50, with expectations of increased levels of activity set to take place across sectors such as AI, IoT and blockchain.

That’s according to ‘KPMG’s Venture Pulse Q1 2017′ report, which noted that despite sentiment remaining positive, political uncertainty did result in a somewhat slow European VC market at the beginning of this year.

Although there was a drop both in terms of deal activity and total investment volume during Q1, the report goes on to note that there are positive signs for a turnaround.

Major technology companies, the report says, are continuing to show their long-term confidence in the UK’s ecosystem. In order to support this claim, the report cites Apple’s, Snap’s and SoftBank’s decision to chose London as the base for its international headquarters.

In more positive news, the findings show that UK startups operating within financial services, life sciences and BioTech also continued to attract investment during Q1.

In fact, companies such as Currency Cloud (£20m Series), Funding Circle ($100m Series F) and Atlas Genetics ($35m Series D) closed impressive investment rounds at the beginning of 2017.

European deal value

Although deal value in Europe remained fairly steady in Q1’17 with $3.4bn invested in companies, deal volume slumped to a five quarter low, particularly for early stage firms.

The report says that Angel and Seed stage deals were the hardest hit throughout the period, with Q1 2017 results remaining below the number of early stage VC investments for the second consecutive quarter.

Although the deal volume decreased, the research shows that corporate VC participation continued to be strong in Europe, with corporates taking part in 22% of all venture deals in Europe during Q1 2017 – the highest percentage seen over the past seven years.

Additionally, the first quarter of 2017 also saw strong investment into VC funds in Europe. This was exemplified by London-based VC Atomico raising a $765m fund.

The IPO market

While some mature players in the European tech market have announced their intent to IPO, the report says that concerns remain about the liquidity of the capital market, especially for early stage companies.

Firms such as London-based Deliveroo and Sweden-based Spotify are two of about half a dozen large companies that are expected to look for an IPO, but the report predicts that the market is likely to remain relatively quiet over the coming quarters.

US investors

According to the research, US investors continued to show a significant level of interest in opportunities across Europe and Latin America in Q1 2017.

The report says that post Brexit-related exchange rate fluctuations turned some investors’ focus to the UK. In stark contrast, others decided to target companies in Israel, Spain and other countries where companies were deemed to potentially offer a higher ROI.

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