Businesses in the Midlands attracted £241 million in Venture Capital (VC) investment in Q3 of 2021, raised across 27 deals, according to KPMG’s latest Venture Pulse Survey.
The type of financing seen in the deals were split between early-stage VC (37%), later stage VC (22%), angel (19%) and seed round (22%).
The most significant investments in the Midlands in Q3 included Birmingham-based Onto, developers of an electric car subscription platform (£180 million raised), Easol, developers of business/productivity software based in Walsall (£17 million raised) and regenerative medicine platform developers, Locate Bio, from Nottingham (£12 million raised).
Stuart Pilgrim, Head of TMT M&A at KPMG in the Midlands, said: “Businesses across the Midlands have shown great resilience and innovation to not only survive the pandemic, but to also attract this much investment. It’s clear that tech and tech-enabled businesses are very appealing to investors, and I expect this to continue for the foreseeable, especially as our region is home to lots of high quality scaleups.
“As these businesses continue to develop, their successes have a positive impact on the economy through growth and the creation of jobs. It’s an exciting time to be in the Midlands with all of the fantastic ideas and work that’s happening locally, and I know we’ll be watching this space as these businesses go on to become even bigger and better.”
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A record high of over £6.5 billion was invested by Venture Capital (VC) in UK scaleups over the summer.
The KPMG Venture Pulse report found that after two extraordinarily high quarters in 2021, UK scaleups continued to attract funding from across the globe in Q3 21, with eager investors prepared to pay premium prices for strong UK innovators with a proven track record. Nearly £20 billion of VC investment has been raised so far this year by scaleups in the UK.
While fintech was the hottest area of investment in the UK, a diversity of other companies also attracted funding – such as virtual event platform Hopin (£330 million), electric vehicle subscription service Onto (£175 million), AI/ML accelerator company Graphcore (£162 million), and flower delivery service Bloom & Wild (£125 million).
Later stage deals involving well established scaleup businesses took the bulk of funding from VC investors, but seed deal value remained steady. More than £290 million was invested in the UK at seed level over Q3 21, a slight decline from the record levels of investment seen in the first half of the year. Seed level investment remain significantly lower than pre-pandemic levels however, by both number of deals closed, and total amount raised.
Corporate Venture Capital (CVC) investment in UK innovators also reached a new high of £2.8bn in Q3 21, a 9% increase in value from Q2 21 – as innovation continues to dominate boardroom priorities following the pandemic.
The volume of CVC-affiliated deals completed over the summer increased by 8% on the previous quarter. US corporate investors such as Google Ventures and Second Century Venture continue to be the most active CVC investors in Europe, with 15 deals between them, more than the European corporate investors in the top ten combined.
Commenting on the investment finding its way to UK innovators, Bina Mehta, Chair of KPMG UK and Head of the firm’s UK Emerging Giants Centre of Excellence, said: “The strength of the UK innovation brand is flying high with areas such as artificial intelligence (AI), cybersecurity and FinTech attracting interest and finance from greater numbers of new players to the UK market, driving up valuations for our most sought-after innovators.
“Our recent CEO survey found that disruptive technology was cited as the biggest threat to large corporates, so it is unsurprising that in order to accelerate their digital transformation or boost their digital capabilities, many are now partnering with, investing in, or acquiring innovative scale up businesses.
“Corporate Venture businesses have driven some of the largest rounds of funding for UK innovators. The increased dependence we all have on technology has seen large amounts of funding flow towards fast growth businesses with a success story to tell around new products and services that are helping us all to adapt to a new remote world.”
