Northern Scaleups Secure More Than £337m In Investment In Q2 2022
Businesses in the North attracted more than £337 million in Venture Capital (VC) investment in Q2 2022, according to KPMG’s latest Venture Pulse Survey. The money was raised across 64 deals in the region, with the largest type of financing deal in the North being later-stage VC.
Some of the most significant investments in Yorkshire & the Humber in Q2 include:
Sheffield-based Opteran, developer of reverse-engineered biological systems, who secured almost £10 million
Leeds-based Bidnamic, developer of a marketing technology platform designed to help retailers unlock the full potential of Google Shopping adverts, received £4 million in investment
York-based Salvaco, manufacturer and supplier of air-based valve systems and components intended to make aerosols environmentally friendly, received £2.5 million of investment.
Ben Taylor, Head of Technology M&A in Yorkshire & the Humber at KPMG UK, commented:
“Investment in the region has built up over the last six months, as Q2 investment reflected almost double that from Q1, showing promising signs for the last half of the year.
“Venture capital investment in the North in Q2 was boosted by a few larger deals but there is no doubt that there is a vast amount of innovative businesses in the region who are looking for investment as they look to scaleup.
“As VC firms start to take a more cautious investment approach, activity from non-traditional investors could increase in niche areas of investment. Heading into Q3 22, we could see some high-net-worth individual investors stepping in to help fund Series A and Series B deals that might have been funded by institutional money in previous quarters.”
The value of VC investment in UK businesses remained steady in Q2 22, as global VC investment dropped to a six quarter low, according to research by KPMG.
KPMG’s Venture Pulse report found that UK businesses attracted £7.2 ($8.6) billion in VC investment during April – July 2022, down on the £8.5 ($10.2) billion raised in the opening quarter of the year. VC investment for the quarter was up however year on year, with £7 billion ($8.4) raised in the same period last year.
More than £15.7 ($18.8) billion of VC funding has been invested in UK businesses in the first half of 2022, up on the £14.6 ($17.5) billion raised in the first half of last year.
However, deal volumes were down significantly, with 667 deals completed in the latest quarter – the lowest volume of UK VC deals recorded by the report since Q2 18. Overall, the volume of VC deals completed in the UK in the first half of 2022 is down by over 11% on the first half of last year (1768 versus 1568) as increasingly cautious VC investors renew their focus on late-stage deals and take longer to conduct due diligence on their investments.
VC funding levels globally saw a decline in Q2 22, falling to £100 ($120) billion (from £138/$165.3 billion Q1 22), as the war in Ukraine, high levels of inflation, and rising interest rates shook global markets.
Fintech remained the UK’s hottest area of investment in April – July 2022, led by a £522 ($626) million raise by SumUp and a £260 ($312) million raise by GoCardless. Health and biotech also continued to attract attention, in part because of their resilience to inflation compared to other sectors, whilst those businesses championing ESG continue to whet investor appetite including the £266 ($318.75) million raise by cleantech firm Newcleo.
The bulk of UK VC investment (£5.8/$6.9 billion) in Q2 22 benefited businesses in London, with £1.4 ($1.7) billion going to businesses outside of the capital, including the £84 million funding of Manchester based Freedom Fibre to accelerate the roll-out of FTTP to over 2 million premises in the Northwest. There was also a £49.8 million Series D funding for Brighton based MPB, the world’s largest reseller of photo and video kit to further international expansion into US and European markets. Meanwhile, Corporate VC investment in UK businesses fell from £4 ($4.8) billion in Q1 22 to £2.2 ($2.7) billion in Q2 22.
Warren Middleton, lead partner for KPMG’s Emerging Giant Centre of Excellence commented:
“Despite the global downturn, the value of VC investment in UK businesses continued at a steady pace in Q2’22. UK businesses have raised over £1.2 billion more in the opening half of this year then where we were at this time in 2021 – which went down as a record year for VC investment levels in the UK, driven by hot sectors such as FinTech and HealthTech.
“Continued challenging economic conditions could hamper levels of VC investment for the remainder of this year and there are already some red flags on the horizon as the volume of UK deals being done in the first half of 2022 is down more than 11% year on year. This is a strong indicator that while there continues to be a reasonable amount of dry powder in the market, investors are becoming more cautious, focusing on companies within their portfolios, businesses with strong paths to profitability, and those operating in sectors being put in the spotlight by the current Russia-Ukraine conflict. Companies that may have attracted funding from optimistic investors in the past, will likely face more challenges and require stronger business cases and paths to profitability to attract funding over the next few quarters.”