Venture Capital (VC) investors are driving deal values back up for the North’s most innovative businesses as deal activity rebounds in the region, according to Venture Pulse, a quarterly report on global trends published today by KPMG Enterprise.
The number of VC transactions – classed as deals supported by the likes of angel, seed or venture capital investment – completed between January and March 2019 was 17, up from just twelve in the final quarter of 2018. The average deal value also increased from £2.17m to £2.91m.
However, when compared to the first quarter of 2018, investment in Northern start-ups has suffered a fall of more than 50 per cent from 38 deals. Average deal value has also dropped by more than a third from £3.58m.
Nationally, the report found that investors were willing to pay premium value for innovative UK businesses, despite the fall in transactions. More than £1.19 billion ($1.56 billion) was invested in the first three months of the year, around the same level seen in the first three months of last year. This was raised across 161 deals which was down 57% on the same period in 2018.
By comparison, Germany saw a fall in investment levels over the first quarter of this year to £1 billion, whilst France continued to build a strong innovation ecosystem and saw its largest quarter of investment to date, with £760 million ($1 billion) invested in its growing start-up community.
Fintech, biotech, and healthtech continued to drive a significant amount of the VC investment, highlighting the resilience of these industries and the strength of the UK’s innovation ecosystem.
Commenting on the data, Graham Pearce, Northern-based director and Head of Technology Corporate Finance at KPMG in the UK, said:
“Global venture capital investment is down as investors pull back due to numerous economic factors. The UK is no different and, in turn, the North of England has also suffered in terms of the size and volume of deals completing in the region. We’ve also seen uncertainty driving investors to quality and compete for the highest quality assets, which has pushed up prices in some corners of the market.
“Overall, I’d say that VC investment is strong in the UK and the North, thanks to a robust start-up ecosystem. We might be witnessing the start of a positive rebound in activity since the end of last year as investors shrug off the volatility and commit to backing the fundamental growth prospects of the exciting start-up community we have developed locally.
“Encouragingly, we expect that investor attention may shift away from traditional hubs, where the price tags on deals are high, and towards some of the great innovative centres of the North for opportunities. Providing Brexit uncertainty can be curtailed, Northern deal volumes should recover further. VC investors won’t want to sit on unspent cash and the region and country still remains an attractive investment location for innovative businesses.”