Venture Capital investment in innovative UK scaleups has surged in 2019 hitting more than £9 billion according to new research by KPMG.
The Global Venture Pulse Survey by KPMG Private Enterprise, revealed a 22% increase in the amount of money invested in UK fast growth businesses in 2019 compared to 2018.
The data, complied by PitchBook, recorded 1648 completed VC investments during 2019, with nearly £2bn VC investment made to scaleup businesses in the last three months of 2019, slightly down on the highs seen over the summer.
VC investments in later stage businesses, particularly in the financial services, biotech and healthcare sectors, drove the vast majority of deals completed.
Commenting on the findings, Tim Kay, Director with KPMG Private Enterprise who works with scaling businesses said: “Our scaleup businesses have had a fantastic year and continue to fly the flag for British innovation, attracting investment from all over the world. Despite the political uncertainties, entrepreneurs had no problem closing mega-deals, as VC investors focused on later stage companies in sectors in which the UK is seen as world leading.
“There was, however, a continued decline in early and seed stage deals. Access to funding is a foundation for growth, and domestic innovation could be impacted if our next wave of entrepreneurs fail to attract the capital they need to grow now. Whether or not early stage deals make a comeback this year remains to be seen as we may be seeing a fundamental shift in investor appetite.”
Record number of unicorns born in 2019
2019 saw a record number of VC-backed unicorns, with 110 new unicorns created globally, including the UK’s Babylon Health and Cambridge-based CMR Surgical.
The US accounted for more than two thirds of these unicorns, with 73 in total including Ripple, Bright Health, Duolingo, Scopely, and Next Insurance.
Europe also set a new record, with 18 new unicorns in 2019 compared to 12 in 2018 and only 6 in 2017. Elsewhere Brazil showcased its growing importance in the Americas with a record three unicorn births in 2019, including QuintoAndar, Loggi, and Wildlife Studios.
The breadth and diversity of Europe’s VC market and growing innovation ecosystems continued to be on display this quarter, with six countries, including the UK, accounting for the top ten deals in the region.
Europe beat its previous annual high of VC investment, attracting $37.5 billion in VC investment in 2019 compared to $28.2 billion in 2018. Germany, France, and Spain reached new annual records for VC investment in 2019.
Trends to watch in 2020
Looking ahead to 2020, political and economic uncertainty is expected to remain fairly high in several regions.
VC investment across Europe is expected to remain strong, and while the IPO market may see some increased activity, M&A and the trend to stay private longer, will likely continue to dominate. Late stage deals with a focus on companies who have strong business fundamentals and sustainable global growth models will continue to lead the way.
Fintech, health, B2B Services, AI and biotech are expected to continue to attract large volumes of investment whilst logistics, education, and ecommerce are all expected to remain hot areas of growth. Deep technology innovation is an area which is gaining momentum with investors from Asia in particular, even at early stage deal levels.