UK the jewel in Europe’s crown for VC investment
Fast growth businesses in the East of England saw a surge of VC investment in the first three months of the year with more than £350 million ($497 million) ploughed into local businesses.
Venture Pulse, a quarterly report published by KPMG Private Enterprise, found that VC investment levels had increased by 65 per cent in the first quarter of 2021 compared to the £121m invested in Q1 of 2020.
The volume of deals completed in Q1 2021 remained flat year on year, as investors focused on paying higher values for late stage deals in established scale-up businesses.
The most significant deals in the region included the multi-million secondary raise by Cambridge-based Inivata, and the £33m ($46m) Series B by PhoreMost Ltd, the Cambridge based biopharmaceutical company dedicated to ‘Drugging the Undruggable®’.
Essex based Tevva, which designs and develops mass-market extended-range electric-powered trucks, secured nearly £9m ($12.5m) funding in an oversubscribed round of investors mostly from the US and Canada.
Other notable deals in the region included £2.3m for Suffolk based PBD Biotech, which has developed a rapid test for tuberculosis in livestock, to help bring its product to market and a £1.25m seed round for plant based meat alternative manufacturer Jack & Bry, which is headquartered in Swaffham.
Chris Wilson, head of Corporate Finance for KPMG in the East of England said: “The East of England continues to attract VCs from across the world interested in investing in fast-growth, disruptive businesses.
“The ability of the region to produce both large, late stage businesses which attract investors with deep pockets, as well as nurture early stage businesses with ambitious growth plans, is testament to the diversity of the region.
“Emerging from the pandemic, the VC market moved at an incredible pace, with £92 billion invested in innovative companies globally. Continuing to focus on enhancing our competitiveness in the UK post-Brexit is key, but supporting our disruptors, particularly early stage businesses, will be crucial to continue to develop our ecosystem and maintain our global position as leaders in innovation.”
The story across the UK
Nationally, more than £5.1 billion of VC investment went into fast growth UK businesses in Q1 2021, up 25 per cent on the previous high of £3.9bn raised in Q4 2020.
The UK attracted the lion’s share of large deals taking place in Europe, accounting for seven of the top 10 financings taking place in the opening quarter of the year.
A total of £15.1bn was raised across Europe in the first quarter of the year, with the UK accounting for more than a third.
VC investment in service on demand companies has increased dramatically within the last 12 months, making it a sector to watch in 2021. With the likes of Deliveroo creating a culture for quick takeaway delivery, consumers are now turning their attention to grocery shopping.
In the UK, since the beginning of 2021 five new players have emerged on the market; the speedy grocery delivery sector is young but it’s catching the attention of the VC landscape.
FinTech, biotech, B2B services, business productivity, and cybersecurity will all likely remain attractive to investors, while ESG is expected to continue to gain traction.
VC and CVC investment in Europe is expected to remain robust in Q2 2021, with more megadeals and large acquisitions potentially on the horizon.
Wilson concluded: “Looking ahead, we are likely to see B2B services continue as a fast-growing area of VC investment both for VC and CVC investors.
“Growing numbers of FinTechs are focusing on B2B services – offering everything from financial tools for SMEs to solutions focused on enhancing cash flow or managing accounting requirements.
“Given the number of local and global financial institutions looking to improve their legacy tech and infrastructure, it is likely that there will continue to be significant investments in this space as we go through 2021.
“We expect to see continued interest in IPOs and we are likely to see more coming through this year. The use of special purpose acquisition company (SPAC) mergers, a phenomenon that has been building in the US in recent quarters, is becoming increasingly popular.
“It is an area to watch for the UK which has yet to follow suit – especially to maintain our leading global position in the FinTech space.”