Despite clouds on the horizon, venture capital investment in the UK has surged to a new high in Q1 2022.
The European startup ecosystems have raised over £30bn to start the year. Industry’s embracing digitisation, Private Equity firms looking for better returns and increasing fundraising focussed on earlier stage companies to achieve higher returns have all helped energise the UK’s venture capital market.
While interest rates are now on the rise, the significant amount of funds that have already been raised will probably keep investment steady heading into Q2.
Given the Russia-Ukraine crisis as well as rising inflation and interest rates, some venture capital investors in the UK are starting to feel pressure to get deals done quickly as the window of opportunity might close. Deal volume, however, could slow as venture capital investors start conducting more due diligence on certain types of deals.
Venture capital investors will probably also renew their focus on later stage deals, maybe to de-risk their portfolio, which could create challenges for startups looking to attract seed and early-stage investment.
IPO activity is also expected to remain subdued in Q2 given the ongoing volatility in the capital for markets. Fintech, HealthTech and alternative energy will likely remain the hot areas of investment over the months ahead.
For more UK and global insights please read the latest Global Venture Pulse Q1 report