High growth companies across the north have secured more than £337m in venture capital money between April and June.
KPMG’s latest Venture Pulse Survey indicates that 64 deals took place across the North East, North West and Yorkshire as venture capital investment remained steady despite economic uncertainty. The research found the largest type of financing deal in the North was later stage venture capital investment.
Michael Downes, corporate finance director in the North East at KPMG UK, said: “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.
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"As venture capital 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.”
More broadly, the Venture Pulse report found that UK business attracted £7.2bn in venture capital money during the quarter, less than the £8.5bn raised in the first quarter. Year-on-year, there was a slight increase.
Deal volumes fell during the quarter as 667 transactions took place across the three month period – the lowest volume of UK venture capital deals recorded by the report in five years. Overall, the volume of venture capital deals completed in the UK in the first half of 2022 was down by more than 11% on the first half of last year as the report pointed to caution among investors who were focussing on late stage deals and taking longer to conduct due diligence.
Warren Middleton, lead partner for KPMG’s Emerging Giant Centre of Excellence, said: "Despite the global downturn, the value of venture capital investment in UK businesses continued at a steady pace in Q2’22. UK businesses have raised over £1.2bn more in the opening half of this year than where we were at this time in 2021 – which went down as a record year for venture capital investment levels in the UK, driven by hot sectors such as FinTech and HealthTech.
"Continued challenging economic conditions could hamper levels of venture 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.”
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