Fast-growth businesses in the UK continue to attract huge volumes of venture capital investment, despite the uncertain geopolitical and macroeconomic environment. 

UK scaleups saw 745 deals completed in the first three months of this year, raising over £6.9 billion ($9 billion), including the $1 billion megadeal for Checkout.com. 

Venture capital investment continues to flow into London (£5.2/$6.8 billion), while the rest of the UK saw buoyant levels of venture capital investment, with over £1.7 billion ($2.2 billion) invested across 334 deals.  Venture capital investment in UK innovators based outside of London has more than doubled since the pandemic (+59% from £3.3 billion invested in 2019).  Standout deals completed in the first quarter of the year included the £142 million raise by Nottingham based Oakbrook Finance, the £94million Series C raise by Edinburgh games developer Everywhere and the £51 million Series B funding for Cambridge based biotech Microbiotica.

With disruptive technology, digitisation and innovation continuing to dominate boardroom priorities following the pandemic, CVC-affiliated investment in fast growth businesses is expected to grow throughout 2022.

Fintech remains a very hot area of investment as the payments space has continued to grow. Buy-now-pay-later has become very hot in the eyes of investors. Recently, the FCA announced its intent to regulate the space which could drive consolidation for Buy-now-pay-later companies in the near future.

Warren Middleton, Lead Partner,
Emerging Giants Centre of Excellence,
KPMG in the UK

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Hot sectors for 2022

IPO activity has slowed as the Ukraine crisis has driven a significant amount of attention to defence-related technologies, particularly in the wake of many European countries announcing increases in their defence spending. This could drive investment across a broad range of areas such as drone technologies, or anti-missile defence technologies.  

Whilst it is expected the majority of investments will likely be into government entities, there could be increased investment in adjacent technologies such as communications.

  • Healthtech, energy, fintech, e-commerce and cybersecurity which is likely to continue throughout the rest of this year.
  • In Q2’22 venture capital investors will likely also be keeping a close watch on capital markets as the level of volatility continues.
  • With the IPO window closing, companies could reconsider their exit plans and strategies.  UK exit activity in Q122 was down significantly on every quarter of 2021. £2.8 billion ($3.6 billion) was raised through 56 exits in the first quarter of 2022 a huge decline on the £11.9 billion ($15.5 billion) across 68 deals in the same quarter in 2021.

Read more UK and global insights in the Global Venture Pulse Q1 Report.

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