For the better part of the last decade, investors have eagerly been betting on the success of UK startups, with the number of deals growing steadily between 2011 and 2016. However, the number of investment rounds dropped last year due to Brexit uncertainties. Now a new report has revealed that while investor interest in British businesses recovered slightly in the last quarter, it’s still not back to pre-2016 levels.
Conducted by investment-tracking platform Beauhurst, the research revealed that 305 deals were completed in the first quarter of this year adding up to a total investment of £938m. But even though this corresponds to a 2.7% jump in the number of deals compared to the last quarter of 2016, it was still 6.72% lower than the first quarter of that year. Meanwhile the average size of deals shrank by 5.2% to £3.6m during the first quarter of this year.
And it seems as if investors are favouring seed-stage startups over scaleups considering that neither venture-stage nor growth-stage enterprises saw any overall increases over the quarter, in fact they both actively decreased. Of the deals, 45% were seed rounds, 40% were venture deals and 15% were growth rounds. Of the amount invested, 10% went to seed rounds, 43% venture rounds and 47% went to growth rounds.
Given that the first quarter of this year also saw crowdfunding investment increase by 11% it’s hardly surprising that three out of the top five investment portals were crowdfunding platforms: Seedrs and Crowdcube, the crowdfunding sites, were the most active investment portals, having completed 35 and 29 deals respectively. Entrepreneur First, the pre-seed investment programme for startups, came third after closing 17 rounds, followed shortly by Syndicateroom, the equity crowdfunding platform, which struck 13 deals, and Scottish Enterprise, the development agency, which reached 11.
Even though investment in the UK has declined in the past year, the first quarter of 2017 still delivered some impressive funding rounds. For instance, the startup bank Atom raised a smashing £83m, the biggest round of the quarter. Funding Circle, the peer-to-peer lending service, was hot on Atom’s heels, having raised £82m in the same period, while the third biggest round went to Cell Medica, the medtech startup, which raised £60m.
So while it may seem slightly discouraging that investment still hasn’t completely recovered, rounds like these prove that investors are willing to bet big on the right UK startups.