Property for tech scale-ups stimulates investment boom
Investment from European funds into the UK’s technology ecosystem leapt to almost £2 billion in 2018 – and 70 per cent of that haul went to companies operating in the Golden Triangle of Cambridge, London and Oxford via a record 161 deals, a new report from law firm Penningtons Manches reveals.
The US is also pumping vast amounts of cash into Triangle-based tech and life science ventures.
Property options, as well as proximity to world-leading universities, are proving key in the investment equation as startups accelerate scale-up.
Penningtons Manches’ ‘Golden Triangle: Golden Opportunities?’ report finds that while deal numbers involving European funds have remained the same (150 in 2018, up from 149 in 2017) the value of these deals has increased by 14 per cent.
Investment from EU countries has notably increased, with the total amount invested, from deals with at least one EU-based investor, standing at £1.53bn in 2018, up from £1.26bn the year before.
The number of first-time deals between European funds and UK tech companies has also increased: almost 80 per cent of deals involved completely new relationships, up from 75 per cent and 73 per cent in 2017 and 2016, respectively.
Of the Golden Triangle deals, 135 were US-backed, with investors attracted to the knowledge intensive activities of the universities in these cities, as well as London’s particular draw as a FinTech hub.
Ross McNaughton, a Cambridge-based partner with Penningtons Manches currently seconded to the firm’s San Francisco office, said: “When it comes to the creation of cutting-edge technology, the UK is well and truly established on the world map.
“It is no coincidence that in 2018, the country’s high-growth, innovative, tech-focused companies – particularly those in the Golden Triangle – continued to attract attention from international investors.”
The US remains the largest overseas investor in UK companies. A third of the aggregate deal value secured by UK companies came from deals backed by US funds – suggesting they are more likely to be involved in large deals.
While the West Coast leads the way when it comes to investment into UK companies (101 in 2018 – the same as in 2017), East Coast investors are catching up with 79 deals, three more than in 2017.
In terms of deal value, the gap between West Coast and East Coast investments was far closer than in previous years – the total value of deals backed by East Coast funds in 2018 was £1.58bn, while deals involving West Coast funds totalled £1.67bn.
Software companies received the lion’s share of funding involving foreign investors, netting 222 of the 343 deals in 2018, followed by companies in the life sciences sector, with 32.
In terms of emerging sectors, FinTech attracted the most amount of attention from non-UK investors – pulling in 58 deals in total – followed by four Cambridge strong suit sectors: Artificial Intelligence with 39 deals, blockchain, digital security and eHealth.
Bidwells was not surprised to see the Penningtons Manches findings as the firm has invested heavily in becoming a leading property and infrastructure adviser within the Golden Triangle.
Bidwells and YouGov conducted research into the science & tech sector, interviewing 50 global S&T businesses about what they look for when deciding where to locate their businesses. They said the five most important factors were:-
• A city district location
• Hot desk space in a major Uni or research institution shared with researchers/other R & D businesses
• Out of town science park based around relevant specialist research organisation
• Dedicated premises in a university/research institution
• Dedicated premises near to a university/research institution
Saul Western, partner at Bidwells said: “The global tech giants are now funding incubators looking for the next unicorn companies. As an ecosystem grows it becomes more complex but it often starts with an idea in a university room or laboratory.”