UK scaleups are on course to exceed the record levels of VC investment seen last year, according to new figures released today.
KPMG Enterprise’s Global Venture Pulse survey has revealed that VC investment in UK scaleup businesses has surged during Q319, led by the £368 million funding round by Babylon Health and £195 million for Cambridge based CMR Surgical. The snapshot figures compiled by Pitchbook revealed a total of £2.4bn was invested in innovative, fast growth businesses in the UK during July – September 2019 up 19% on the previous quarter (£2.0bn) and £537 million more than the £1.9bn raised during the same quarter last year.
The figures show that more than £7.4bn has been invested by VCs in UK scaleups during the first 9 months of the year, which almost equals the £7.6bn raised for the whole of 2018.
The number of VC investments being made continued to fall however. There were just 245 deals completed in Q319 versus 421 in the previous quarter. This was a substantial drop (42%) on the 420 deals completed in the same quarter last year (July-September 2018).
Commenting on the figures, Tim Kay, Director with KPMG Enterprise said: “VC investment in fast growth UK businesses remains as robust as ever with the domestic economic and political outlook having very little impact on their appetite for our disruptive enterprises.
“There’s no sign that sectors such as fintech, biotech and healthcare are slowing down. The UK’s global reputation as home to the kind of disruptive businesses that are world leading in these spaces continues to attract the capital they need so that they can expand globally. There’s still capital in the market and VC investors appear to have few qualms about investing in UK stalwart industries.
“While there continues to be a significant amount of liquidity in the global VC market, investors are putting greater emphasis on governance, business models and expectations related to profitability. We are seeing the number of deals being closed continue to fall as VC investors appear to be changing their investment thesis with regards to the cheques they are writing. This is a trend we would expect to continue over the next quarter and into 2020, particularly when we look at the number of larger late stage deals.”
Cybersecurity becoming a big ticket for VC investors
On a global basis, the scope and breadth of cybersecurity has VC investors flocking to the space.
In 2018, $6.4 billion in VC investment went to cybersecurity companies –a record of investment that could be exceeded by the end of 2019. In Q319 alone, security and risk management platform OneTrust raised $200 million in the UK, in addition to other deals. While Israel has long been a leader in VC investment in cybersecurity, other countries are also rising on the radar of cybersecurity-focused VC investors.
Given the growing need for companies to become more efficient and to manage a more complex array of regulatory and compliance requirements, it is expected that this is an area that could see further investment in the future.
Bumper quarter for scaleups across Europe as new unicorns are born
Europe has already exceeded 2018’s record level of VC investment –with one quarter remaining in the year.
The region had a record quarter for VC investment during Q319. The diversity of innovation hubs across the region continued to play a key role in the strength of Europe’s VC market – with Germany, the UK, Sweden, Israel and Belgium all attracting significant funding rounds during the quarter. The diversity of companies attracting funding was also substantial, with VC investors in Europe embracing opportunities across financial services, healthcare, transportation, mobility, pharma and biotech, B2B services, and others.
The availability of funding continued to be strong across Europe during Q319, not only from traditional VC firms, but also from family offices. This likely contributed to the lack of interest in IPOs, and the rise of unicorn companies in Europe as new technology companies matured and yet remained private.
Charlie Simpson, Partner and Head of Mobility 2030 at KPMG UK, commented: “The level of investment being seen in the mobility space is only going to increase, and rapidly.
“Historically disparate value chains are becoming more connected as businesses gather the key ingredients around themselves in order to compete in this area. As a result, the scale of the investment opportunity has increased significantly and our own analysis suggests that there is a $9 trillion potential global market for mobility and related services.
“The rise of electric vehicles, autonomous vehicles and Mobility-as-a-Service is transforming the mobility landscape, and as it gathers momentum, it’s clear that many investors are paying attention and not willing to be left behind.”