Equity investment market update: Q3 2019
|
Product
See how our customers
use Beauhurst
Solutions
Want to see how other
people use Beauhurst?
Research
Read up on the latest trends in the UK’s high-growth ecosystem
Download our latest research reports, from industry deep-dive to ecosystem case studies and more
Find out about our bespoke research offering, and how we can help you with your next project
Sign up to a weekly newsletter to get the latest updates on startups, scaleups and investors straight to your inbox
Want to brush up on
the latest industry trends?
About
Product
Solutions
Research
Read up on the latest trends in the UK’s high-growth ecosystem
Download our latest research reports, from industry deep-dive to ecosystem case studies and more
Find out about our bespoke research offering, and how we can help you with your next project
Sign up to a weekly newsletter to get the latest updates on startups, scaleups and investors straight to your inbox
About
Pricing
| Hannah Skingle
Category: Business funding & investment, Crowdfunding
Deal numbers have declined across all stages of evolution, with a more severe decline at the earlier (seed and venture) stages. Venture deals were hit particularly hard, with a 24% drop in deal numbers from Q2. However, the amount of capital invested at this stage grew an impressive 56% from the previous quarter. No other stage of evolution saw a rise in pounds invested.
Although investment activity during 2019 as a whole is telling a fairly positive story, performance during Q3 is a little worrying. A decline in deal numbers is always a troubling sign, as it suggests investors are becoming less tolerant to risk and opting instead for a more selective portfolio. The most innovative startups need equity to fuel their growth, and these high-potential, fledgling ventures will be left in the lurch if investors choose to be more cautious with their capital.
This quarter has seen a significant shift towards larger deals. There were 11 megadeals (investments worth £50m+) made into private UK companies, just shy of the record 12 seen in Q4 2017. These make up 3.3% of all investments made during the quarter, but account for 49% of the total value invested. Just 29% of deals were worth less than £500k, down from a high of 52% in Q2 2014.
In turn, the average deal size has reached a new high of £7.68m, up from a low of £1.51m in Q2 2013.
A greater opportunity has opened up for larger, later-stage deals in recent quarters. More and more businesses have scaled to the point of requiring, and being able to take on, huge amounts of capital. They’re also allowing themselves more time to raise and deploy this equity. Just 6 high-growth companies have IPO’d in 2019 so far, compared to 15 at this time last year. With most companies taking longer to IPO, and many choosing not to go public at all, there is now ample demand for later-stage, and larger-scale, private investment.
Leading eHealth company, babylon, secured the biggest funding round in Q3 2019, raising an impressive £454m from sovereign fund PIF and Munich Re’s ERGO Fund, along with follow-on investors Kinnevik and Vostok New Ventures. This capital injection is set to fund further research and development, as well as the company’s expansion across the US and Asia.
Cambridge based CMR Surgical achieved the second highest raise of the quarter. The £195m funding round catapulted the company to unicorn status, and will be used to commercialise its medical robotics products.
No sector performed particularly well in Q3 in terms of deal numbers; only edtech experienced growth in deal numbers from the previous quarter – but this was an increase of only one deal. Artificial intelligence continues to give fintech a run for its money when it comes to deal numbers, but is yet to claim the crown.
In terms of amount invested, however, artificial intelligence had an incredible quarter. Babylon’s £454m deal took the total amount invested into AI companies to £673m – that’s 4.7x more than the previous quarter, and significantly more than the amount invested into fintech companies (£295m).
It remains to be seen how investment activity will adjust to any Brexit event in Q4. Investors’ risk aversion seen in this past quarter could certainly be in anticipation of a no-deal outcome. Clearly, a lot of the growth-stage companies aren’t short on capital, but we’re hoping that the entire ecosystem that supports the seed stage (earlier stage investors, angel networks and accelerator programmes) will be prepared to step up and help buoy those businesses that have solid propositions but less runway.
The Deal is our free, detailed analysis of every equity fundraising in 2018. We look at the stories behind the deals, and examine which companies, investors and sectors are making waves.
Sign up today to get a free demo where you can access the platform.
We’ll help you navigate the platform, so you can:
Everything will be customised around your business and needs, so you can explore relevant data and get the most out of the platform.
Beauhurst is a single source of truth on the UK’s high-growth economy – it truly is our guiding light in finding the right businesses to approach.