Healthcare sector ‘the one to watch’ for UK Venture Capital investors

Healthcare sector ‘the one to watch’

Venture capital (VC)-backed companies in the UK raised more than US$1,007 billion across 90 deals in Q3 2015 – a year-on-year leap in value of 29%, but slightly down on the previous quarter.

Also on KPMG.com

  • VC-backed companies raise over $1bn across 90 deals in Q3 2015
  • Highlights include $320m Series A investment in biotech firm Immunocore
  • Globally, VC funding in first 9 months of 2015 outstrips whole of 2014
  • Unicorn’ and $100m+ financing show no signs of abating

Venture capital (VC)-backed companies in the UK raised more than US$1,007 billion across 90 deals in Q3 2015 – a year-on-year leap in value of 29%, but slightly down on the previous quarter[1] - according to Venture Pulse, the quarterly global report on VC trends published jointly by KPMG Enterprise and CB Insights. 

The figures mean the UK continues to account for approximately one-third of all venture capital activity in Europe, with key transactions during Q3 2015 including the $320m Series A investment in biotech firm Immunocore;  the $70m Series C investment in food-delivery company Deliveroo; and $60m Series C investment in travel operator Secret Escapes. 

Jonathan Boyers, partner, KPMG Enterprise, commented: “While internet and mobile technologies continue to dominate VC deals across the globe, here in the UK, healthcare is becoming the key industry to watch. With major advances in biotech, medical devices and medical IT, healthcare has become one of our strongest hotbeds of innovation. Couple this with our world class universities and research base, and it comes as no surprise that the sector is garnering significant investor attention. 

“The $320m raised by Immunocore in July was the largest ever private fundraising by a European biotech company, and globally, the second largest biotech financing on record. While this has set the benchmark for now, I have no doubts that we will see further big ticket deals in the healthcare sector come down the line.” 

Europe leads the way in seed funding

Europe saw a total of $3.5 billion in financing across 313 deals, compared to Q2’s $3.2bn across 309 deals. Among the major global markets, Europe had the highest share of deals at the seed stage – accounting for 40% of all deals – which should suggest a positive outlook for the future as these companies mature. 

Tech continues to dominate the European VC investment landscape, with Internet and mobile deals accounting for 65% of all deals to European VC-backed companies in Q3 2015. However, Patrick Imbach, Head of KPMG’s High Growth Technology Group, points to another fast-growing sector that has caught the eye of investors. Patrick explains: “The size and scale of the UK and European Fintech market makes it another industry ripe for disruption. From payment processing, lending to insurance, we expect VC interest in these areas to only gain momentum over the next few quarters.” 

Other key findings of the research include:

  • On a global level, Q3 funding was driven by the continued strength of mega-round deals (those over $100 million in size) – 68 in total.
  • Asia, in particular, showed significant gains, jumping to $13.5 billion in funding in the quarter – a 38 percent increase over Q2. By comparison, Europe saw $3.5 billion in financing and North America saw $20.3 billion in the same period.
  • The median size of late-stage deals in the quarter globally was $35 million - a substantial increase from the $20 million median observed in Q3 2014.
  • At 23, the number of new unicorn[2] companies remained flat compared to Q2 2015.
  • Aggregate deal activity fell to 1,799 deals, the lowest volume of deals since Q2 2013 – and substantially lower than the 1,928 deals seen in Q2 2015. The downward trend in deals volume was driven primarily by a slowdown in seed VC activity on a global basis. 

Anand Sanwal, CEO of CB Insights, concluded: "Despite the chatter about an overheated market, the appetite for investment into fast-growing private start-up companies remains insatiable. Q3 2015 marks another dot com level high for funding and this has become the new normal, it seems. Investor FOMO – fear of missing out – continues to be a key driver of mega-financings and doesn’t look to abate any time soon."

 

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About KPMG: 

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

About CB Insights

CB Insights is a National Science Foundation backed software-as-a-service company that uses data science, machine learning and predictive analytics to help our customers predict what’s next—their next investment, the next market they should attack, the next move of their competitor, their next customer, or the next company they should acquire.The world’s leading global corporations including the likes of Cisco, Salesforce, Castrol and Gartner as well as top tier VCs including NEA, Upfront Ventures, RRE, and FirstMark Capital rely on CB Insights to make decisions based on data, not decibels.

[1] Q2 2015 saw a total of 99 deals totalling $1,130 involving UK-based VC-backed businesses

[2] A unicorn refers to a start-up company with a private market valuation over $1 billion

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