UK VC trend points to smaller, less syndicated deals

Stuart Mc Knight from Ascendant always sends a useful data package focused on UK and Ireland VC activity every quarter which generally triggers a quick post from me, and this is no exception. 

On the face of it, activity is up: 65 companies (up 48%) and £153M (up 34%) from 82 investors (up 34%).  However this is flat to Q4-09 whereas Q1 usually shows a big bounce.  If this is a leading indicator of overall 2010 activity, expect a slow year.  Some really interesting trends are emerging:

  • Striking trend 1: deal size is significantly down to avg. £2.4M which is the lowest in 9 years
  • Striking trend 2: syndication dropped below 60% to 54% for the first time in 10 years

So many smaller deals done by single investors

My interpretation is that a number of factors are contributing:

  • This reflects increased market share from VCT and regional investment funds who typically do smaller deals.  As we are seeing a thinning out of active “larger” funds and concentration of European venture capital arounds the “platforms” (Accel, Balderton, Index, Wellington…), alternatives like VCTs and FCPI’s in France are taking market share.
  • Capital efficiency has come of age and companies require generally less capital
  • The market is tough and investors negotiated a harder bargain for less money invested
  • There is no opto or semi deal to skew the sample :-)

Everyone is singing that same tune of high ownership and low capital intensity and the deal evolution reflects that.  Until exuberance returns, I suppose…


Some further data from this report:

  • In the first quarter of 2009, 82 investors invested in £153m in 65 companies.
  • The busiest investors were YFM (as a Group), Octopus Ventures, Amadeus and Finance Wales    …See the impact of VCT and Regionals
  • Levels of syndication dropped significantly to 54% (66%) of deals.
  • The 10 biggest deals included: Oxford Nanopore (£17m), Mimecast (£13m), Sterecycle (£10m), Openet Telecom (£7m), Greenroad (£6m), Autoquake (£6m), Control Circle (£6m), Image Metrics (£5m), Rainstor (£5m) and Intela Global (£4m).   … mostly tech-enabled services and cleantech
  • NO semi/opto companies received venture capital in this quarter
  • London based companies received around 45% of the funds invested in the UK and Ireland.

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