Patrick Imbach
Head of Innovative Startups
KPMG

Top deals

Two of the top ten European deals that closed in Q3 were UK-based. London-based biotech Orchard Therapeutics £111m series C fundraise will be used to develop its most advanced clinical programs, which aim to treat rare inherited metabolic and immune system diseases. Meanwhile the £65 million series B fundraise by Cambridge-based drug developer Artios will be key to getting its cancer treatment drug Pol-theta to the cusp of a Phase II trial.

Brexit

In what is considered a traditionally slow period for investment and with the added uncertainty created by Brexit, the UK has continued to attract VC investors to its thriving startup and scaleup sector. It is reassuring to see that concerns about Brexit have had little impact on the appetite for good quality UK enterprises, with amount of VC investment up on the same quarter a year ago.

The UK enjoys significant advantages even in the shadow of Brexit, with great access to talent, its status as a global financial centre, world leading universities and concentration of traditional private investment managers. Although Brexit poses a big question mark for investors, many enterprises have already acted to mitigate the potential risks with several fintech companies having pursued banking licenses in order to be able to continue to operate in and across different jurisdictions. With government plans to relax the immigration cap signalling a more business friendly immigration system is on the way, this should help our fast-growing businesses continue to attract skilled workers to the UK post-Brexit.

Trends to watch for

VC investors across Europe will be watching the Brexit negotiations even more closely over the next quarter as negotiation deadlines loom and the potential for a no-deal Brexit rise. Corporate investment across Europe is expected to remain strong, particularly in the automotive space as traditional manufacturers look for ways to take part in new trends and opportunities, such as car sharing.

Urban mobility continued to gain momentum in Q3’18, with many of the big car-sharing companies continuing to expand into other forms of transportation. Uber’s recent investment in Lime —an electronic scooter and bike share company is a prime example of this.

Volkswagen launched its own car sharing system during the quarter while BMW and Daimler have begun to merge their car sharing options in order to achieve scale. The need to achieve scale is expected to continue to drive partnerships in the car sharing across Europe. Further investments in autonomous driving are also expected.

Spotlight on sectors

All healthcare sectors continue to see active interest with well over $19 billion raised by pharma and biotech firms so far this year, much larger than any prior year by a considerable sum.

Fintech continues to be the darling of the VCs, particularly in emerging economies such as India. Several fintech companies have already made names for themselves in particular in the payments space, while others are following in their footsteps. Moving forward one the next waves of growth will centre on online insurance and loans. The high rate of fintech adoption combined with the large percentage of underserved people make fintech a good bet over the long-term.

Health and pharmaceuticals enterprises have continued to attract the deep pockets of VC investors who are placing on building the next generation of pharmaceuticals based on a better working knowledge of how diseases are caused and the genetic factors related to them. With the population in the UK getting older, it is expected that biotech will continue to be a big bet for the foreseeable future as companies look to find ways to treat and prevent different diseases. This is fantastic news for the UK given our global reputation for biotech coming out of hotbeds such as Cambridge.

Fintech is seeing very strong growth in the UK. This reflects the maturing of the fintech market itself. A number of fintech businesses have become well-established. They’ve gained more scale and they are expanding both geographically and horizontally. Some, are poised to exit. We’re now starting to see fintech expand beyond London, with funds raised in Manchester and Leeds.

Top UK Deals Q3

  • Orchard Therapeutics (Drug Discovery) - $146.87m
  • Artios (Drug Discovery) - $85.66m
  • Bulb Energy (Energy Traders and Brokers) - $79.07m
  • Secret Escapes (Restaurants, Hotels and Leisure) - $68.53m
  • Monese (Financial Software) - $60.00m
  • Zopa (Financial Services) - $57.98m
  • ReViral (Drug Discovery) - $55.00m
  • Juvenescence (Biotechnology) - $53.08m
  • Darktrace (Information Technology) - $50.00m

About Venture Pulse

KPMG Enterprise’s Global Network for Innovative Startups launched the Q3’18 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.

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