Investment in British tech firms to exceed £900m by year end
Internet companies are still attracting the most interest from venture capitalists
Venture capital technology investments in the UK are at a ten-year high, with between £900 million and £1 billion expected to be pumped into early-stage tech companies by the end of 2012.
A total of £297 million was invested in 60 British and Irish technology firms during the second quarter of 2012, bringing the amount of VC funding for the first half to £596 million, according to research by corporate finance advisory Ascendant.
This level of funding exceeds the last boom year, 2008, when £550 million was invested in tech companies in the first half, and represents over three-quarters of the total funding committed during the whole of 2011.
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Ascendant said that internet, mobile and digital media companies continued to attract the most investment, raking in almost £250 million during the first half – an increase of 30 percent from the same period last year.
The biggest deal of the year so far has been a £40 million investment in Just Eat, an online business that allows people to order takeaway food from restaurants in their area. Huddle (£15m), MedicAnimal (£10m) and Notonthehighstreet (£10m) also made it into the top ten list of VC deals.
Cleantech was another primary area of investment focus, with solar panel tech company Enecsys raising £25 million in venture capital funding. The category received an extra boost from an unexpectedly large investment (£7m) in renewable energy firm Tamar Energy.
The most active regions were London and Scotland, which were responsible for 33 percent and 17 percent of deals respectively. London claimed the lion's share of the money, with investment in the region amounting to 46% of total VC funds.
Stuart McKnight, managing director of Ascendant, said that a key driver of growth in the market has been an increase in the number of investors participating in deals. In particular, the number of active trade investors is expanding, bringing a new dimension to the marketplace.
However, he noted that many “well known names” have disappeared from the market as they have failed to raise new funds.
“The emergence of new funds is encouraging but it is very noticeable that many of these are small in scale. This raises 2 questions: how long will they last and where will the next round for their investee companies come from?” said McKnight.
“Shallow pockets have been a defining characteristic of UK/Irish Tech Investors for many years and we may suffer these issues for a little longer.”
Ascendant's figures show that private investors participated in 30 percent of VC deals, US investors in 17 percent, Euro investors in 10 percent and corporate investors in 13 percent. Over two thirds of deals involved more than one investor.
British VC firms have been criticised in the past for having a shortage of tech-savvy investors. At the InnoTech Summit in April, Pond Ventures co-founder Charles Irving said that many European entrepreneurs are still looking for investment in Silicon Valley rather than the UK.
However, universities minister David Willetts has defended the UK's tech investment credentials, pointing to the government's “bold deficit reduction strategy,” the increased focus on STEM subjects in secondary schools, and recent significant investments in the country's e-infrastructure.