The divergence between the number of venture deals and aggregate VC invested worldwide is more emphasized than ever before through the first half of 2018. Thus far in the year, nearly $130 billion has already been invested across more than 6,000 financings. By comparison, 2017 saw over 15,000 venture financings for $160 billion+.

European venture firms are still backing startups across all startup and growth stages, just far fewer at the very early stage than in previous quarters. The median transaction size soared even higher at the early and late stages in 2018 to date, at $4.9 million and $9.1 million. This trend is supported by the general maturation of the venture market, the entrance of more and more international investors with deep pockets and of non-traditional investors into European VC, the preference to invest in more mature businesses with a proven track record and market traction, and significantly strong fundraising by the VC firms which keep their dry powder high.

Top deals

Continued uncertainty on the macropolitical and macroeconomic environment does not appear to be substantially hampering appetite for investment in great UK startups. Six of the top ten European deals closed this quarter were for UK businesses, including Revolut ($250 million), Freeline Therapeutics ($119 million), CRM Surgical ($100 million), Liberis ($81 million), Culture Trip ($80 million), and Crescendo Biologics ($70 million).

The European outlook

The developments around trade, Brexit-related matters, the level of cross-border investment as well as domestic and foreign perceptions of the EU’s economic prospects will certainly impact overall venture funding activity, simply as firms try to gauge the level of macro risk. However, with plenty of private capital still available for deployment worldwide, it is unlikely that VC activity will plummet, but rather may enter a subdued plateau for some time.

Top performing sectors

Artificial Intelligence (AI) and Cybersecurity continued to be hot area of investment in all regions of the world in Q2’18. Fintech and Biotech were also seen as key priorities. Investment in these areas are expected to gain significant momentum over the remainder of the year.

During Q2’18, the UK announced a massive $1billion deal to put the UK firmly on the map in terms of AI innovation. The deal included both new government funding for AI research, and private sector investments. Under the deal, for instance, Japanese VC firm Global Brain and Canada-based VC firm Chrysalix will both locate their European headquarters in the UK and will invest a total of £145 million in UK-based AI and robotics startups.

Interest in the healthcare sector remained strong in Q2. Pharma & Biotech startups have already raked in $13.2 billion in funding globally, putting 2018 on pace to eclipse the $16.5 billion notched in the entirety of 2017. Moreover, combined healthcare devices, supplies, systems and services companies have raked in $7.4 billion, relative to $11.03 billion for all of last year. It’s clear that healthcare investment is only growing more robust as entrepreneurs and investors continue to exhibit interest in the myriad of opportunities within the sector.

Companies feel pressure as General Data Protection Regulation (GDPR) comes into effect

GDPR went into effect in Europe this quarter - a regulation that will have significant consequences for all companies operating in Europe. While the new regulation may not have a major impact on VC investment directly, it may cause some distraction as startups look to manage the new compliance regime. Given the stiff penalties associated with non-compliance - up to 4% of global revenue or 20 million Euros - and the substantial reputational risks in the event of failures, it is likely that companies that have not done so in advance could be scurrying to put policies and procedures in place to comply over the next few months.

While there may be negative short-term consequences for businesses due to the distraction of GDPR, the benefits of a strong data protection framework could make European companies more attractive over the longer term as they become global leaders in how to manage private consumer and employee data.

Spotlight on UK regions


London-based companies attracted the most capital with Q2 witnessing the third-highest quarterly sum of VC invested ever, against a backdrop of a slowly diminishing number of Venture deals closed. However, there is starting to be an uptick in investment for businesses across the whole of the UK.

As more regional collaboration starts to happen to ensure sufficient scale and breadth to compete, more capital will start to flow to the rest of the UK.

The North

Much is being made of the transformational impact the Northern Powerhouse to the local economy which is attracting investment across the region, with obvious ‘hubs’ being Manchester, Leeds, Newcastle, Sheffield and Liverpool. There are now around 200,000 jobs in digital tech businesses across Manchester, Leeds, Newcastle, Sheffield, Liverpool and Hull and Northern tech businesses are recruiting the best talent straight out of universities in the region.

The Northern Powerhouse Investment Fund is by far and away the most active investor – it has been involved in around 10 fundraisings in Q2 raising over £7m. Other active investors locally include Deepbridge Capital, with multi-million pound investments in Zilico in Q1 ($19 million) and vTime ($7.5 million).

The Healthtech, Biotech and Fintech sectors are most attractive to investors with lots of overseas investors prepared to spend money on the quality startups coming out of the North. Already in 2018, there have been a number of significant cross-border tech deals, such as the £1bn acquisition of Leeds based Callcredit by a US business.


The tech cluster is thriving with increasing levels of activity across the ecosystem. The number of new startups is high, fuelled and supported by an increasing variety of co-working spaces, accelerators and support programmes.

Capital is starting to flow tracking at about £1m per week of equity funding this year. This will only accelerate with the Midlands Engine Investment Fund, which was launched earlier this year, coming fully on stream.

Bruntwood’s investment in science park ‘Innovation Birmingham’ which supports emerging tech companies that have already raised more than £18m in equity finance, heralds an era of major expansion at the region’s leading digital and technology campus. There are also expansion plans for the Alpha Works co-working space, in a bid to support the city's growing number of startups and small businesses. This ramp up in activity is driving collaboration across the City.

Furthermore, the West Midlands Combined Authority (WMCA) is looking to make the region home to GovTech via it’s UrbanChallenge aimed at using technology to tackle social issues and to help improve public services.


Scottish companies raised £21million in the second quarter of 2018 which is two and a half times more than the previous quarter (£8.4million).

Standout deals in Scotland included the £10million raised by Edinburgh-based AdoRx Therapeutics, a drug discovery company, and £6 million by 3F Bio, which creates sustainable protein from renewable sources.

Investment in Scotland has bounced back following a hesitant start to the year. The country’s biotech scene continues to attract investors as it is well established and home to a number of promising startups.


Confidence in Welsh startups is strong, with companies receiving over £4.5m in Venture Capital in Q2. The report also reflected a trend for innovative health related solutions in the capital.

Cardiff based Jellagen received £3.8 million towards its goal of utilising the current abundance of jellyfish to produce biomaterial for medical devices, while Bond Digital Health, also based in Cardiff, received £200,000 towards its aim of providing AI healthcare technology for patients to self-record their own medical data.

Other investments included £150,000 for North Wales based Touch Biometrix, which develops fingerprint sensor technology for electronic devices; £165,000 for Gwynedd based MDF Recovery, which recovers wood-fibre from used materials and an undisclosed amount for Chepstow based Poli, which creates platforms to improve opinion polling.  

The Global trends

  • The unstoppable late-stage financing trend - After several years, it’s almost tempting to think that the flow of capital to late-stage companies has to slacken at some point. However, more than $28 billion in Series D or later financings has already been invested in 2018 to date, putting 2018 on pace to exceed even the $39.7 billion notched in 2016. The poster child of the global late-stage largesse is Ant Financial, which raised no less than $14 billion in fresh funding in this most recent quarter. The late-stage financing trend is still supported by multiple robust factors, primarily the maturation of the venture market, the entrance of non-traditional investors into VC over the past decade, and significantly strong fundraising by the VC firms.
  • The evolution of liquidity - A clear sign of the maturation of the venture market has been the increased usage in alternate means to liquidity, highlighted in the prior edition of Venture Pulse. Another sign is the fact that even though the volume of VC-backed exits has been declining slowly but steadily for some time now, exit values have remained relatively strong on a historical basis. Fewer companies are making it through traditional liquidity events – primarily due to continued easy access to capital in private markets – yet those that do are able to command good prices quite often.
  • Initial public offerings (IPO) outlook brightens - The volume of IPOs remains muted by and large, but the total capital raised by all the VC-backed IPOs globally has soared to $9.7 billion, already moving past 2016’s low point of $6.4 billion. Although still far from previous highs, such a sum does signify that well-prepared companies with strong equity stories can still debut on public markets and perform well.

Top UK Deals Q2

  • Revolut (Financial Software) - $250.00m
  • Freeline Therapeutics (Biotechnology) - $119.19m
  • CMR Surgical (Surgical Devices) - $100.22m
  • Liberis (Consumer Finance) - $80.91m
  • Culture Trip (Social Content) - $80.00m
  • Crescendo Biologics (Therapeutic Devices) - $70.00m
  • S4 Capital (Investment Holding) - $68.76m
  • Flender (Financial Software) - $60.13m
  • MoneyFarm (Financial Software) - $54.45m
  • Juvenescence (Holding Companies) - $50.00m

About Venture Pulse

KPMG Enterprise’s Global Network for Innovative Startups launched the Q2’18 edition of the Venture Pulse Report. The report analyses the latest global trends in venture capital investment data and provides insights from both a global and regional perspective. This edition of the quarterly series provides in-depth analysis on venture capital investments across North America, EMA and ASPAC and will cover a range of issues such as financing and deal sizes, unicorns, industry highlights and corporate investment.

Please note, these figures are accurate as of 12th July 2018. 



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