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It’s not all doom and gloom for business investment

Startup Giants’ CEO reacts to positive £8.8bn investment in UK businesses last year.

Equity investment in the UK’s smaller businesses increased by 9% in 2020 to £8.8bn, the highest amount since the Beauhurst data series began in 2011, reveals the British Business Bank’s annual Small Business Equity Tracker. The strong momentum continued into Q1 2021, with the total value of equity investment in smaller businesses reaching £4.5bn, by far the highest amount ever recorded in a single quarter.

Jeb Buckler, Founder and CEO of Startup Giants, the Home Office approved visa route for innovative founders, found this to be incredibly encouraging. He said:

‘With more people taking the plunge to become entrepreneurs, some forced into the decision by the past year’s events, this is a sign that great momentum for future innovation will be within the British Isles over the coming decade.

‘Diversity and ideas are built into every thing we do at Startup Giants and if we can build up a strong workforce of talented, forward thinking individuals successfully running scalable businesses, then the nation’s people and economy will recover from the past year’s events at an increased rate. To know that we’re not the only people who value ideas at the early stages and first years of business is heartening.

‘With businesses being put on the spot last year when having to make changes that perhaps they had been avoiding, such as having a greater workforce working from home, the need for business solutions has risen with the emphasis on saving time via technology and communications also rising.’

The average UK deep tech company raises £24m after six rounds of funding

Catherine Lewis La Torre, CEO, British Business Bank, said:

The UK’s small business equity finance market had a record year in 2020 with activity ramping up in the second half. This momentum continued into the first quarter of 2021 with record breaking levels of investment – a clear sign of returning investor confidence in UK smaller businesses and the country’s economic recovery.’

However, it doesn’t end there, UK deep tech investment is also on the rise

Investment in UK deep tech companies has continued to grow rapidly in the past five years, rising 291% to £2.3bn in 2020. The number of deals also increased by 78% to 440 in the same period. This is higher than the increases seen in the number of deals in the US and rest of Europe – 66% in the US and 73% in the rest of Europe.

However, when it comes to the overall value of investment, the UK still lags behind. UK deep tech companies receive substantially smaller rounds of funding than the US. The average UK deep tech company raises £24m after six rounds of funding, compared to the £113m raised by the average US deep tech company after six rounds.

US deep tech companies received almost twice the level of investment than those in the UK, even after accounting for size differences between the two economies. Between 2018 and 2020, UK deep tech companies received investment equivalent to 0.09% of UK GDP whilst US deep tech companies received investment equivalent to 0.16% of GDP.

Within tech, software continued to receive the largest share of deals (500 deals worth £2.5bn)

Levels of investment vary widely by sector

The levels of investment vary widely by industry, with the UK’s thriving tech sector remaining the most attractive to investors and accounting for 46% of total equity investment in UK smaller businesses. Investment into smaller UK tech businesses increased 7% to £4bn with the number of deals rising 12%, as the sector benefitted from an increase in digitisation and remote working caused by Covid-19. Within tech, software continued to receive the largest share of deals (500 deals worth £2.5bn).

Investment into smaller businesses within the life sciences sector rose 70% to £631m. The number of deals also increased by 26% compared to 2019. However, equity investment into sectors heavily impacted by social distancing measures, such as retail, personal services and leisure and entertainment fell, with deal numbers decreasing by 13%, 17% and 10% respectively.

Still good news for latter funding rounds.

Future Fund: Breakthrough, a new £375m UK-wide scheme due to launch this summer, will help address the later stage equity finance gap faced by innovative UK deep tech and R&D-intensive companies.

Jeb Buckler continued:

‘The news of this scheme is very important for future Startup Giants venture builder and PMO clients. As you well know, we don’t simply grant funding and leave, at Startup Giants we guide our Founders and prepare them for funding from pre-seed stage to VC funding rounds over a three year period.

‘Many of our applicants hail from a R&D and deep tech solution edge so the more investment opportunities out there creates a vibrant and lively space within the UK to promote true innovation that can define industries and lead markets into the future.’