As 2017 wound down, a round of approximately £100 million+ mega-financings propelled the UK’s totals of VC raised to nigh-unmatched heights. At the same time, deal volume decreased to 175 deals in Q4, down by 76 from the previous quarter. Benefiting from the steady nurturing of innovative start-ups over the past decade toward full-fledged growth, plus ongoing interest from deep-pocketed foreign investment firms and corporate investors, the UK recorded a surge in 2017 toward nearly £5.5 billion in aggregate VC invested, the second-highest tally of the decade by far.

The increase in VC investment is even more noteworthy when taking into account the ongoing conversations around economic uncertainty in the UK this year. The depreciation of the Pound may have driven some value-play investments, while the number of late-stage deals likely reflects the commitment of VC investors to established companies in their portfolios. These included mega deals such as Truphone (£255 million), TransferWise (£211 million), OakNorth (£154 million), Orchard Therapeutics (£85 million) and Secret Escapes (£83 million).

Patrick Imbach, head of KPMG Enterprise’s Innovative Start-ups team noted: “The UK government’s support and ongoing commitment for innovation has probably helped the UK technology sector retain attention of the VC community. In its recent budget, the UK government announced, amongst others, measures and the creation of specific funds to support start-up and scale-up opportunities, for instance in the areas of artificial intelligence research and the infrastructure and deregulation of autonomous driving.

“The start-up sector in the UK is now well established with a number of superb later stage companies based here which are proving attractive to investors. This is enabling companies to remain private longer, supporting them with the capital they need to compete at a very large scale.”

Patrick Imbach, head of KPMG Enterprise's Innovative Start-ups team

Financial Services surged onto the spotlight in Europe this quarter, attracting nearly 15% of all investment for the first time since at least 2015. Leading the charge were 9-figure investments in Transferwise and OakNorth which are both based in London. Pharma & biotech also attracted a significant amount of attention in Europe during Q4’17, reaching a record high approximately £1.73 billion. There was a considerable amount of biotech investment in the UK, where leading biotech hubs have formed in and around Cambridge and Oxford.

Looking ahead, Patrick Imbach commented, “as we head into 2018 VC investment in Europe is expected to continue to thrive. The implementation of PSD2 (Second Payment Services Directive) is likely to have a strong influence on investment patterns within fintech, particularly in Europe, as companies look to take advantage of the new regulations and requirements. In addition healthtech and autotech are expected to gain additional traction from VC investors which plays to the strength of some technology hubs outside of London.

“We are also expecting to see an increase in investor focus on cross-industry solutions, such as the applicability of AI across sectors, and the use of technology to increase the effectiveness and efficiency of less technology mature industries. Blockchain has been a huge talking point in the investment community over the previous quarters and we expect this to continue to be the case as we enter 2018.”

 

About Venture Pulse

KPMG Enterprise’s Global Network for Innovative Start-ups launched the Q4’17 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.

A robust Q4’17 propelled total annual global VC funding to  the third-highest quarterly tally of the decade. A number of billion-dollar mega-deals over the course of the year, including six $1 billion+ rounds in Q4, drove the significant funding upswing. VC funding was up year-over-year across all regions, including Asia, the Americas and Europe.

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