SOUTH WEST FIRMS SECURED HALF A BILLION IN FUNDING LAST YEAR
Venture capital investment into South West businesses is rising with innovative firms securing almost half a billion pounds last year.
New data from financial services giant KPMG has shown companies in the region secured £455m across 124 deals in 2022. This represented a 9% rise from the £416m raised in 2021.
KPMG said almost half of the scale-up businesses that received investment were headquartered in Bristol. It added that some of the largest investments went into businesses in the AI, Cleantech, FinTech and Manufacturing sectors..
Among the standout deals was Bristol-based FinTech Moneyhub raising £40 million to accelerate the development and international growth of its payments platform.
Cornish marine engineering firm Integral Solutions also netted £3.2 million for its tech which collects and stores excess energy from boat engines, allowing it create new jobs.
KPMG said the South West’s gaming and e-commerce sectors were expected to “gain traction”with investors in 2023, as early-stage businesses in the region continue to grow.
Kay Drury, transaction services partner at KPMG UK said: “Despite concerns around the uncertainty in the economy and rising inflation, the South-West continues to attract a healthy amount of VC investment, especially in the tech enabled space.
While interest over the near-term is expected to focus on energy, interest in cleantech will likely accelerate as countries in the region work to meet their decarbonisation targets. This is particularly good news for the region which has a great track record of producing innovative businesses that can help solve some of society’s biggest challenges.”
Following a year of fundraising in 2021, which saw over £29.5bn raised by UK businesses, the first half of 2022 continued to see high levels of investment with more than £14.7bn raised.
KPMG said VC investment then began to “tail off” in the latter half of the year, amid the ongoing conflict in Ukraine, rapidly rising interest rates, high levels of inflation, and concerns about a global recession.
The year ended with £22.7bn being raised by UK businesses – the second highest level KPMG had recorded – though the £3bn raised in the final quarter of last year was the lowest level of fundraising seen since the second quarter of 2020.
Deal volume also fell, with the number of deals completed in 2022 down by around a fifth on 2021’s total.
Warren Middleton lead partner for KPMG’s Emerging Giant Centre of Excellence, said: “VC investment into UK businesses remains well above pre-pandemic levels, and as we look ahead to 2023 it is likely that we’re about to enter a period of “new normal” in terms of valuations and M&A.
Dry powder is still being deployed, what’s changing is the way it’s being invested. Soaring energy costs sparked a significant uptick in VC investment in new energy alternatives, electric vehicles, and cleantech. Heading into 2023, the acceleration of investment in energy alternatives is particularly exciting as such investment is critical for meeting the world’s climate change targets.”
He added: “There is some sense that IPO activity could make a broad return in the second half of the year, with some pockets of activity even before that. ESG businesses could be particularly compelling; while we might not see IPOs in the space right away, we could start to see companies beginning the work required to become IPO ready.”