High-tech venture capital in the UK and Ireland ended the year on a high note with £209m invested in 60 companies compared to £129m in 48 deals in Q4 2011, says Ascendant, the tech-focussed investment company.
Over 2012 as a whole, £1.01bn (up from £788m in 2011) was invested in 232 UK/Irish companies (193 in 2011) by 248 investors (228 in 2011).
The stand out transaction of the year was Tamar Energy. A large syndicate of investors, including no less than the Duchy of Cornwall, provided just short of £100m to this developer of anaerobic digestion plants.
In the modern era (i.e. post internet bubble), this is by far the largest transaction Ascendant has recorded.
The next largest we have seen were Wonga (£73m, Feb 11), Plastic Logic (£51m, Jan 07), Spinvox (£50m, Mar 08) and Xchanging (£50m, Nov 02).No other UK/Irish tech deals have exceeded £50m in more than a decade – which highlights the extraordinary scale of the Tamar deal.
The money invested in Tamar Energy represents 9.6% of all funds invested in 2012 and it was responsible for the year breaking the £1bn barrier that has only happened twice since 2001.
Whilst this is a statistical outlier, our data shows that is the “tip of the 2 tier iceberg” that is UK/Irish Growth Capital market.
The average deal size at the top (20%) of the market is approximately £15m. However the average deal size for the rest of the market is just £1.7m.
This low average investment and relatively low number of “super exits” (company sales at over £100m) in the UK and Ireland (just 15 in 2012) does not seem unconnected to Ascendant.
London market
The booming market in London is reaching extraordinary levels. In Q4, 29 London based tech companies captured £151m representing 48% of volume and 72% of the value of the market in the quarter.
Ascendant has tracked the UK/Irish market since 1997 and whilst London has always dominated it has never been this high.
In 2012, 93 London tech companies received growth capital. There were 17 in Dublin, 14 in Cambridge, 12 in Edinburgh and 10 in Oxford. No other city or town had a significant number of deals.
Early stage investments generally perform better when the following are present: the idea/concept, people, money and proximity to an initial market. This is why capital cities tend to do better than regional cities – they just have more of these 4 key components.
Clearly, web-based businesses are less sensitive to "proximity to market" but their success is highly correlated to "people" issues and so again are drawn to larger cities.
2013 has started with some interesting deals and good levels of activity. Anecdotally most investors will say that they experiencing “strong” deal flow but it is rare for them not to say that.
Although there was an increase in the number of active investors in the market last year, there has been no growth in the number funds of any scale.
Many of the “newer” players tend to be small funds or niche investors. This leads us to conclude that we might experience some growth in the volume of transactions, but are unlikely to see much change in the value of funds invested.
So our best guess for the 2013 is that around 250 companies will receive £1bn. It is too early to say what the run rate is for Q1 but, as always, this quarter will set the “tone” for the year. Let’s hope that the good pace of activity is maintained.
The most active investors were Scottish Enterprise, Index, Accel, IP Group, MMC, Enterprise Ireland and Parkwalk - 66% of deals were syndicated.
Private investors participated in 28% of VC deals, US investors in 13%, Euro investors in 8% and Corporate Investors in 13%.
The 10 biggest deals were: Tamar Energy (£97m), Just-Eat (£40m), Mimecast (£38m), Housetrip (£37m), Enecsys (£25m), Bluewater Bio (£23m), Intelligent Energy (£22m), Skydox (£20m), Hailo (£19m) and Prosonix (£17m).
In the Internet/Wireless Services sub sector, 90 companies received £456m. Just Eat (£40m), Mimecast (£38m), Housetrip (£27m), Skydox (£20m) and Hailo (£19m) received the biggest VC cheques.
34 Cleantech companies raised £280m with the biggest deals being: Tamar Energy (£97), Enecsys (£25m), Bluewater Bio (£23m), Intelligent Energy (£22m) and Oxis Energy (£15m).
55 Software companies received £106m. The largest deals were: Openet Telecom (£14m), Datasift in 2 rounds (£14m), Open Gamma (£10m) Natural Motion (£7m).
Outside of the key subsectors, the biggest deals were: Prosonix (£17m), Sumup (£13m), P2i (£12m), STATS (££8m), Nujira (£8m), Seven Tech (£7m) and Pyreos (£6m).
The most active regions were London and Scotland which were responsible for 40% and 14% of deals respectively.
London’s share of the VC money was unusually high amounting to 59% of the funds invested in the UK and Ireland.
