The UK is commonly thought to be poor at developing new businesses, lagging behind Silicon Valley and other countries in funding those with great, world changing, ideas. And that problem is laid at the door of the financial community. There is thought to be a lack of early venture capital support to start up businesses. This is erroneous.
According to the eighth year of the Small Business Equity Tracker, published by the British Business Bank, the venture capital was involved in more projects that ever before, a growth which has carried on into Q1 of this year.
During 2021, venture capital deals provided £18.1 billion in equity funding to 2,616 companies across a range of sectors. Printing does not appear to be one of them. The rate has continued into the early part of this year with £7.6 billion finding its way to 765 companies.
British Business Bank CEO Catherine Lewis La Torre calls 2021 “an exceptional year” for venture finance. The funding comes as seed capital for start ups, as second or third round funding at the venture stage or as growth funding to help a business ramp up.
Unsurprisingly tech companies attract most attention with 1,019 deals counted in the year. Fintech and Life Sciences are the most attractive investment targets with professional services, subscription led businesses, retail, leisure and entertainment also attracting big money.
The idea is to find the next unicorn, the business that achieves a $1 billion valuation. And there are a good number in the UK, contrary perhaps to the perception that only companies emerging from Silicon Valley achieve this status.
La Torre comments: “The UK’s small business equity finance market has continued to grow, achieving a new record last year. The momentum continued in Q1 of this year – a clear sign of investor confidence in UK smaller businesses following the pandemic.
“The Bank supported 18% of all announced UK equity deals in 2021, showing that the work we do, and our focus on investing with purpose, has never been more important. The UK’s position as a hub for the technology sector is apparent and the growth in clean tech deals shows an increasing investor demand for sustainable businesses to grow. We will continue to provide businesses of the future with the capital they need to start up and thrive in the UK.”
London is the hub for these deals though the Bank is pushing money towards deals in the regions and to women led start ups. It makes London third in the world for venture funding behind New York and San Francisco. And while the UK continues to be the biggest market in Europe, France and Germany are growing fast.
There is the report, says a Golden Triangle, between London and universities at Oxford and Cambridge, where spin out start ups attract support from London’s financial centre.
Within the technology sector, life sciences companies attracted £1.7 billion in 2021, more than double the £800 million raised in 2020. Software start ups attracted £4.8 billion (£2.3 billion), while 72 clean tech deals shared £436 million and is set to become more popular as requirements for carbon reduction technologies increase.
The growth in venture capital funding is the formal end of support for development of the UK economy. During the last year, Companies House says it has registered 85,000 new businesses in the UK. There is no guarantee that these will trade let alone succeed, or perhaps reach the point where venture funding is required.
Companies requiring seed capital attracted £1.7 billion, a 12% increase on the year before. This amounted to 982 deals, a 5% increase. This has continued in the first part of this year with 272 deals recorded in Q1.
Venture funds last year reached 1,163 deals amounting, 22% more than in 2020, to £5.7 billion, a rise of 85%.
Growth deals tend to require larger sums in order to ramp up and seize the opportunity. There were 471 deals of this nature in 2021, up 32%, followed by a further 130 in Q1 this year. And while recession is expected to have an impact in the amounts available for funds during this year and the valuations for companies when the venture funders cash in, will be lower, it has not stopped the deals.
It has though stopped the IPOs this year, the favoured means of converting the investment into cash. These have been delayed until market conditions are more favourable.
The conditions are not suited to venture funding for print businesses, unless print is incidental to the core proposition, a subscription, drop shipping, or other online enabled business for example. Even then the companies that have attracted this sort of investment have been software companies from the Nordic region: Gelato from Norway, Printify and Printful from Latvia.
This does not rule out equity investment for print, but companies will probably be better off looking to other sources of investment to fund expansion of a print led business.
Alternately, the companies that receive funding will for the most part require print services in some way.
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