£9.2 billion ($11 billion) invested last year.
Venture Capital (VC) investment in innovative UK scaleups surged during 2019 hitting more than £9 billion according to new research out today.
The Global Venture Pulse Survey by KPMG Private Enterprise, revealed a 22% increase in the amount of money invested in UK fast growth businesses in 2019 compared to 2018. The data, complied by PitchBook, recorded 1648 completed VC investments during 2019, with nearly £2bn VC investment was made to scaleup businesses in the last three months of 2019, slightly down on the highs seen over the summer.
VC investments in later stage businesses, particularly in the financial services, biotech and healthcare sectors, drove the vast majority of deals completed.
Commenting on the findings, Tim Kay, Director with KPMG Private Enterprise who works with scaling businesses said :
“Our scaleup businesses have had a fantastic year and continue to fly the flag for British innovation, attracting investment from all over the world. Despite the political uncertainties, entrepreneurs had no problem closing mega-deals, as VC investors focused on later stage companies in sectors in which the UK is seen as world leading.
“There was, however, a continued decline in early and seed stage deals. Access to funding is a foundation for growth, and domestic innovation could be impacted if our next wave of entrepreneurs fail to attract the capital they need to grow now. At best, it will slow their growth; at worst, it will make them uncompetitive on a global stage, leading them to relocate or become unsustainable.
“The large amount of dry powder VC investors have available suggests there could be a significant amount of capital deployed quickly now that there is greater political certainty in the UK. Whether or not early stage deals make a comeback this year remains to be seen as we may be seeing a fundamental shift in investor appetite.”
Record number of unicorns born in 2019
2019 saw a record number of VC-backed unicorns, (companies valued at $1 billion), with 110 new unicorns created globally, including the UK’s Babylon Health and Cambridge-based CMR Surgical.
The US accounted for more than two thirds of these unicorns, with 73 in total including Ripple, Bright Health, Duolingo, Scopely, and Next Insurance. Europe set a new record, with 18 new unicorns in 2019 compared to 12 in 2018 and only 6 in 2017. Brazil showcased its growing importance in the Americas with a record three unicorn births in 2019, including QuintoAndar, Loggi, and Wildlife Studios.
The breadth and diversity of Europe’s VC market and growing innovation ecosystems continued to be on display this quarter, with six countries, including the UK, accounting for the top ten deals in the region. Europe shattered its previous annual high of VC investment, attracting $37.5 billion in VC investment in 2019 compared to $28.2 billion in 2018. Germany, France, and Spain reached new annual records for VC investment in 2019.
Trends to watch in 2020
Looking ahead to 2020, political and economic uncertainty is expected to remain fairly high in several regions. VC investment across Europe is expected to remain strong, and while the IPO market may see some increased activity, M&A and the trend to stay private longer, will likely continue to dominate. Late stage deals with a focus on companies who have strong business fundamentals and sustainable global growth models will continue to lead the way.
Fintech, health, B2B Services, AI and biotech are expected to continue to attract large volumes of investment whilst logistics, education, and ecommerce are all expected to remain hot areas of growth. Deep technology innovation is an area which is gaining momentum with investors from Asia in particular, even at early stage deal levels.
There is also expected to be an increase in interest from VC investors for collaborative economy platforms based around specialised industries –such as RigUp, which provides a platform for recruitment and talent management for oil rigs.
Corporate VC investment is also expected to remain robust, with a continued focus on investments to support fundamental market shifts in industries as diverse as energy, healthcare and media.
Tim Kay concluded :
“As the UK enters negotiations about its future relationship with the EU, disruptive businesses in the UK will be watching closely to ensure the essential flow of talent to the UK continues. Whatever outcome Brexit may ultimately have, the fact that negotiations are now moving may have assuaged some investor concerns in terms of their willingness to participate in deals, and we can expect to see large volumes of investment continue to find its way to our innovative ecosystems across the UK.”
Media Contact :
Emma Murray, KPMG Press Office, 020 7694 6506 email@example.com
Notes to Editors :
A scaleup as defined in this research is a business that has received at least one round of institutional / Series A investment which will be used to grow the business.
About KPMG in the UK
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 17,600 partners and staff. The UK firm recorded a revenue of £2.40 billion in the year ended 30 September 2019. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 154 countries and has 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG uses PitchBook as the provider of venture data for the Venture Pulse report.
Figures supplied are a snapshot of deals data available as of 6th January 2020. The Venture Pulse does not contain any transactions that are tracked as private equity growth by PitchBook. As such rounds are often conflated with late-stage venture capital in media coverage, there can be confusion regarding specific rounds of financing. The key difference is that PitchBook defines a PE growth round as a financial investment occurring when a PE investor acquires a minority stake in a privately held corporation. Thus, if the investor is classified as PE by PitchBook, and it is the sole participant in the recipient company’s financing, then such a round will usually be classified as PE growth, and not included in the Venture Pulse datasets.
Also, if a company is tagged with any PitchBook vertical, excepting manufacturing and infrastructure, it is kept. Otherwise, the following industries are excluded from growth equity financing calculations: buildings and property, thrifts and mortgage finance, real estate investment trusts, and oil & gas equipment, utilities, exploration, production and refining. Lastly, the company in question must not have had an M&A event, buyout, or IPO completed prior to the round in question.
© 2020 KPMG LLP, a UK limited liability partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.