The UK remains Europe’s prime investment destination for Venture Capital (VC), according to latest research by KPMG Enterprise.
A total of £1.4 billion was invested by VCs into UK startups across 200 deals in Q3 (July – September 2018). This was up £9 million on £1.31 billion raised in the same quarter last year according to Venture Pulse Q3 2018, a quarterly report on global trends published today by KPMG Enterprise. This compares to £634 million invested in Germany over 73 deals and £344 million of VC investment into France over 37 deals in Q3 2018.
Two of the top ten European deals that closed in Q3 were UK based. London based biotech Orchard Therapeutics’ £111 million series C fundraise will be used to develop its most advanced clinical programs, which aim to treat rare inherited metabolic and immune system diseases. Meanwhile the £65 million series B fundraise by Cambridge based drug developer Artios will be key to getting its cancer treatment drug Pol-theta to the cusp of a Phase II trial.
Commenting on the findings, Patrick Imbach, head of KPMG’s innovative startup practice said:
“In what is considered a traditionally slow period for investment and with the added uncertainty created by Brexit, the UK has continued to attract VC investors to its thriving startup and scaleup sector. It is reassuring to see that concerns about Brexit have had little impact on the appetite for good quality UK enterprises, with amount of VC investment up on the same quarter a year ago.
“The UK enjoys significant advantages even in the shadow of Brexit, with great access to talent, its status as a global financial centre, world leading universities and concentration of traditional private investment managers. Although Brexit poses a big question mark for investors, many enterprises have already acted to mitigate the potential risks with several fintech companies having pursued banking licenses in order to be able to continue to operate in and across different jurisdictions.”
Trends to watch for in 2018
VC investors across Europe will be watching the Brexit negotiations even more closely over the next quarter as negotiation deadlines loom and the potential for a no-deal Brexit rise. Corporate investment across Europe is expected to remain strong, particularly in the automotive space as traditional manufacturers look for ways to take part in new trends and opportunities, such as car sharing.
Urban mobility continued to gain momentum in Q3’18, with many of the big car-sharing companies continuing to expand into other forms of transportation. Uber’s recent investment in Lime, an electronic scooter and bike share company, is a prime example of this.
Volkswagen launched its own car sharing system during the quarter while BMW and Daimler have begun to merge their car sharing options in order to achieve scale. The need to achieve scale is expected to continue to drive partnerships in the car sharing across Europe. Further investments in autonomous driving are also expected.
All healthcare sectors continue to see active interest with well over $19 billion raised globally by pharma and biotech firms so far this year, much larger than any prior year by a considerable sum.
Fintech continues to be the darling of the VCs, particularly in emerging economies such as India. Several fintech companies have already made names for themselves, in particular in the payments space, while others are following in their footsteps. One of the next waves of growth is expected to focus on online insurance and loans. The high rate of fintech adoption, combined with the large percentage of underserved people, makes fintech a good bet over the long-term.
Patrick Imbach observed :
“Health and pharmaceuticals enterprises have continued to attract the deep pockets of VC investors who are placing their money on building the next generation of pharmaceuticals based on a better working knowledge of how diseases are caused and the genetic factors related to them. With the population in the UK getting older, it is expected that biotech will continue to be a big bet for the foreseeable future as companies look to find ways to treat and prevent different diseases. This is fantastic news for the UK given our global reputation for biotech coming out of hotbeds such as Cambridge.”
“Fintech is seeing very strong growth in the UK. This reflects the maturing of the fintech market itself. A number of fintech businesses have become well-established. They’ve gained more scale and they are expanding both geographically and horizontally. Some, are poised to exit. We’re now starting to see fintech expand beyond London, with funds raised in Manchester and Leeds.”
The usually quiet summer period saw the value and volume of Venture Capital investments being made into UK startups fall from a bumper Q2, with deal value down from £1.64 billion in Q2 with the volume of deals down from 302 to 200.
The full report can be found at : https://www.kpmgenterprise.co.uk/perspectives/venture-pulse-q3-2018/
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