Venture Capital investment stablises as the UK finds its new normal
VC investment into UK businesses has remained stable in the second quarter of 2023. However, investor caution remains over the growing cost of living crisis and rising interest rates impacting the UK economy.
A total of $4.1 billion was invested into UK businesses during April – June 2023, with 551 deals completed during that period. Whilst investment was down $0.5 billion on the previous quarter, the number of deals completed fell by 23% from 715 in the opening quarter for the year.
VC investors have become far more cautious with their spend and climbing interest rates are raising the bar on return requirements and causing investors to question their capital asset allocations. Investors will continue to prioritise companies who are well positioned to grow and thrive even in the changed business environment.
VC investors globally continue to hold back from making large mega-deals and late-stage deals in the quarter. More broadly, the steep decline in late-stage deal value and number of deals — particularly for Series D+ deals — continued in Q2’23. This continued pullback was not a surprise given ongoing investor concerns about valuations and a lack of exit opportunities.
Some early-stage VCs are finding it more difficult to raise their funds, but demand for finance and dry powder is still there, and high-potential businesses continue to get funded. These early-stage businesses are at the cutting edge of innovation, often providing solutions to macro-economic issues, and so this continued activity is hugely important for our innovation ecosystem and global competitiveness.
UK trends to watch in Q2 23
- Ongoing geopolitical and economic challenges will continue to impact deal volume despite ongoing record liquidity.
- Early-stage companies with proven cash flows at seed, early and series A stages are likely to constitute a large part of the deal volume.
Read more UK and global insights in the Global Venture Pulse Q2 2023 report.
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