Surge in UK high-tech investment
A surge in UK high-tech investment this year is reported by Ascendant, the technology focussed investment company.
In the first half of the year nearly £600m was invested in technology firms compared to the £786m invested for the whole of last year.
“We are experiencing a significant uplift in terms of funds committed and in the volume of companies receiving money,” says Stuart McKnight, managing director of Ascendant.
In Q2 2012, £297m (up from £234m in Q2 2011) was invested in 60 UK/Irish companies (48) by 102 investors (70). When added to our figures for Q1 that makes £596m invested in 124 companies in the first half of 2012.
“These numbers are much better than expected and present a very encouraging investment picture. £600m has not been invested in a six-month period for more than 10 years. Even in 2008, which was a boom year, VCs only managed to invest £550m in H1,” says McKnight.
“The market appears to be moving up by all the key indicators (volume, number of investors, deal sizes, etc.) that Ascendant tracks,” adds McKnight.
Internet/mobile/digital media continues to be “the name of the game” with the value of investment in H1 increasing by 30% to almost £0.25bn. Cleantech also did well but was biased by one exceptionally large transaction – Tamar Energy. Adjusting for this still presents grow in “all things green” of over 70% to £125m.
All other areas declined – including software and semiconductors – reflecting the challenging times companies in these sectors are facing when trying to raise finance.
A key driver of the growth in the market has been the boost in the number of investors participating in deals.
“Although we do track angel investment, Ascendant only reports on institution investment – i.e. we know who the key angels are, but only publish data on institutional investment,” says McKnight, “at the lowest point of the market – Q1 2009 – only 58 investors committed funds to tech companies in the UK and Ireland. In Q2, 2012 it was 102.”
The increase has been from a number of sources – new funds, trade investors, and the return of long standing participants. The latter is not a surprise – if a 10 year has been raised it still has to be invested. But many “well known names” have disappeared from our lists as they have failed to raise new funds.
The emergence of new funds is encouraging but it is very noticeable that many of these are small in scale. This raises 2 questions: how long will they last and where will the next round for their investee companies come from? “Shallow pockets” have been a defining characteristic of UK/Irish Tech Investors for many years and we may suffer these issues for a little longer.
The number of active trade investors is also expanding and they are becoming a very interesting and diversified group. For example, in the last 12 months, Ascendant has recorded investments by the World Gold Council and the Energy Technologies Institute in UK tech companies. These, and many other strategic investors, are not so obvious choices for sources of funds but they are very welcome in this market. So companies raising finance should really think out of the box when looking for money.
As mentioned above, at the halfway stage, the market is well ahead of its performance in 2011. With just under £600m invested in H1 2012 the outlook for this year looks good and we anticipate that the final figure for 2012 will be greater than £900m but probably not exceed £1bn.
In Q2, the busiest investors were Index, Cambridge Angels, Eden, Greylock, North West Fund and Scottish Enterprise
68% of deals involved more than one investor
Private investors participated in 30% of VC deals, US investors in 17%, Euro investors in 10% and Corporate Investors in 13%
The biggest deals were Just-Eat (£40m), Enecsys (£25m), Prosonix (£17m), Huddle (£15m), Isentropic (£14m), Openet (£14m), P2i (£12m), Funding Circle (£10m), MedicAnimal (£10m) and Notonthehighstreet (£10m)
In the Internet/Wireless Services sector, 22 companies received £130m. Just-Eat (£40m), Huddle (£15m), MedicAnimal (£10m), Notonthehighstreet (£10m), Funding Circle (£10m) and Onefinestay (£8m) received the biggest VC cheques.
11 Cleantech companies raised £71m with the biggest deals being: Enecsys (£25m), Isentropic (£14m), Tamar Energy (£7m), Sefaira (£7m), Heliex Power (£5m) and Navetas (£5m)
The largest Software deals were: Openet Telecom (£14m), Natural Motion (£7m), DataSift (£4.5m), Aframe (£4.2m). 16 Software companies received £44m.
Just 4 semi/opto companies received £12m in this quarter. The deals were: Seven Technologies (£7m), M Squared (£4m), ATEEDA (£1m) and Mesuro (£0.7m)
The most active regions were London and Scotland which were responsible for 33% and 17% of deals respectively
London’s share of the VC money amounted to 46% of the funds invested in the UK and Ireland
For the first time Ascendant saw no transactions in the South-West.