VC market shows optimism for post-Brexit Britain

VC market shows optimism for post-Brexit Britain

The number of deals completed in the UK fell to 196 - down from 219 in Q4 2016. VC market boosted by the success of a few well known UK firms like Funding Circle. Corporate activity in the VC market remains high in the UK. Globally VC deals were down, but investment grew to US$26.8bn in Q1 2017

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UK VC investment activity has stabilised at robust levels signaling cause for
optimism in 2017, according to KPMG’s Venture Pulse Q1 2017.*

Despite fears of continued Brexit-related uncertainty, total UK VC investment rose in the first quarter of 2017 while Europe as a whole saw a marginal decrease to $3.4bn. Reflecting the global trend, in the UK investment value was up but deal numbers were down. Investors backed larger, later stage deals as they looked to de-risk and fund predominantly proven ideas and startups that have demonstrated early traction.

At the same time, Corporate VC (CVC) participation in the UK continued to grow.

The last quarter saw 39 percent of VC deals involve some corporate participation, this number has grown steadily over the last two years and is up 2 percent on Q4 2016. Again, the deal count does not always correlate with more money, CVC deal value has waxed and waned over the last two years but overall, corporates are certainly showing an increasing interest in the UK.

Patrick Imbach, Co-Head of KPMG Tech Growth, comments: “UK VC investment activity is at robust levels and this should be a cause for optimism in 2017.  It’s clear that, despite a dynamic political and economic environment, capital remains available for those UK startups that are able to articulate and demonstrate their value proposition.

“Whilst investor caution still prevails, startups in financial services, life sciences and biotech have been especially successful in attracting VC investment; we’ve seen very strong fundraising from Currency Cloud, Funding Circle and Atlas Genetics. Tech giants are also clearly confident in post-Brexit Britain with Apple and Snap having chosen London for their international headquarters.

“I expect 2017 UK VC investment to continue at a healthy level.”

 

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Key Q1 2017 global highlights

  • Global VC investment rose from $23.8 billion in Q4’17 to $26.8 billion in Q1’17, a solid increase buoyed by a number of $100 million+ mega deals.
  • The increase in funding was strongly affected by a resurgence in mega-deals, including Airbnb’s $1 billion+ Series F round, and Grail’s $914 million Series B raise.
  • Globally, the Americas led VC investment, accounting for $17.8 billion.
  • Global median deal size at early VC financing stages continued to increase, with median Series B funding hitting $14 million, Series A $5.7 million, and seed stage $1.4 million.
  • Pharmaceuticals and biotechnology saw an explosion in the percentage of overall VC investment in Q1’17, with companies raising $3.9 billion during the quarter across 188 financings, compared to the $11.4 billion raised throughout 2016. 
  • The number of deals with corporate venture participation slid for 2 consecutive quarters but given the overall decline in venture financing volume, the percentage of overall financings in which they’ve participated hit its highest level since early 2007. 
  • After reaching a 12 quarter low in Q4’16, the number of global unicorn financings rose slightly in Q1’17 to 14.
  • California-based companies (i.e. Airbnb, Grail, SoFi, and Instacart), and China-based companies (i.e. NIO, Ofo, Hive Box Technology and Kuaishou Technology) dominated the top 10 global VC deals rankings during the quarter. Ola in Bangalore, India and Mobike in Singapore rounded out the list.

About Venture Pulse
The Q1 2017 edition of the Venture Pulse report produced by KPMG Enterprise’s Global Network for Innovative Startup, analyses the latest global trends in venture capital investment data and provides insights from both a global and regional perspective.  KPMG Enterprise has expanded the scope of Venture Pulse; this edition of the quarterly series provides in-depth analysis on the lifecycle of venture capital investments across the Americas, EMA and ASPAC, including a look at investment activity such as valuations,  financing, deal sizes, mergers & acquisitions,  exits, corporate investment and industry highlights.

*Note: all figures cited are in USD, data for the report provided by PitchBook.

For more information, contact:

Christina Bridge, KPMG UK

E: Christina.Bridge@KPMG.co.uk
T: 02073114252
M: 07789504905

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