UK startups see number of investment deals fall by over a third in one year

Research from Beauhurst reveals that the number of investments in startups fell by 44% in the first quarter of 2016 compared to the year before

UK startups see number of investment deals fall by over a third in one year

A startup’s ability to raise capital can often mean the difference between entrepreneurial success and failure. And it seems as if finding investors willing to take a chance on new ventures has become even more difficult, as the number of announced investments has plunged to a two-year low in the first quarter of 2016.

According to Beauhurst, the online platform tracking UK high-growth companies, the total number of announced deals – those which had appeared in the news or were advertised via press releases – and unannounced deals fell from 985 in the first quarter last year to 556 during the same period this year. The downturn struck the software sector particularly hard, which saw the number of deals fall from the quarterly record of 463 to 285.

Yet, not everything was doom and gloom. While the number of deals plunged, the total value of the deals still rose to £1.3bn, an increase from the total £1.1bn investments made in the final quarter of 2015. Adding to the good news, investment in seed-stage companies totalled £155m, 119% up from the previous quarter and 129% from the first quarter of 2015. That being said, investors are still investing more in later-stage startups, with growth stage investments amounting to £726m and venture stage deals totalling £237m.

With only one month left to Britain’s EU referendum, the investors’ increased distaste for risks could’ve easily been attributed to Brexit jitters. Yet, Beauhurst’s report suggests that it has more to do with global concerns such as China’s slowing economy and the tumbling oil price, than with uncertainties surrounding the UK’s membership in the union.

“We’ve seen a lot of pronouncements recently saying the UK will take on the global dominance of Silicon Valley in the not-too-distant future,” commented Toby Austin, CEO of Beauhurst. “But our data shows that however ambitious Britain’s next generation of companies are funding is becoming more difficult to come by.”

Here’s hoping for less uncertainty and more deals struck in the coming months.

Eric Johansson
Eric Johansson

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