Corporate Finance

UK scaleups finish 2020 with record rates of VC investment

The capital continued to be the main destination for investment coming into the UK, with four of the top European rounds seen in Q4 2020 invested in London-based companies

Fast-growth UK businesses closed 2020 in their strongest position, attracting more than £3.8bn of Venture Capital (VC) investment during the final quarter of the year, according to new figures out today.

Despite further Covid-19 related restrictions being in place, Q4 was the strongest quarter of the year for VC-backed deals, according to KPMG’s Global Venture Pulse Survey. 

The £3.8bn raised was a 65% increase on the £2.3bn raised in Q3, although the volume of deals was significantly down. Some 343 deals were done from October through to December, with deal volume falling quarter-on-quarter throughout the year.   

Nevertheless, the report found that 2020 saw record investment, with more than £11.7bn of venture capital invested into UK scaleup businesses across 1849 deals. 

KPMG said the UK was the “jewel” in the European VC investment crown, with six of Q4’s 10 largest European deals involving UK scaleups – including digital health business LumiraDx (£285m), financial software company Molo (£252m) and Bristol-based Graphcore (£163m).

The capital continued to be the main destination for investment coming into the UK, with four of the top European rounds seen in Q4 2020 invested in London-based companies. This includes Cazoo (£228m) and OneTrust (£220m). The average investment value for a London scaleup rose over 176% in the final quarter of 2020 to £3.6m.

Bina Mehta, head of KPMG’s Emerging Giants practice, said: ‘The UK’s ability to produce successful, innovative businesses with strong management teams has yet again shone through against the most challenging economic backdrop.  

“Late stage deals continued to drive activity accounting for over a third of the deals as investors raised their appetite for scaling businesses, against the backdrop of a global pandemic.”

She added: “Unsurprisingly, however, given the economic headwinds, investors dialled back early-stage activity. This could hamper the UK’s ability to nurture those fast growth businesses in the future.

‘’As the pandemic caused a shift in consumer behaviour, there were big gains for innovative businesses operating in the IT, healthcare and consumer products and services (B2C) sectors. As the global pandemic continues, we expect VC investors to continue to focus on healthcare, biotech and consumer businesses, which is good news for the UK given our world- leading reputation in these fields.’’

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