Venture capital investment slumps amid Brexit worry
Fund-raiser: James Milroy of EnteroBiotix
Venture Capital investments in Scotland slumped in the first three months of this year amid growing uncertainty over Britain’s relationship with Europe.
Six deals were completed in the quarter with a total value of £4.8 million, compared to eight deals in the same period last year worth £8.6 million.
The trend was identified in a quarterly report on global trends published by KPMG. James Kergon, head of deal advisory at KPMG in Scotland, said: “Scottish businesses have remained relatively resilient up to this point, but it is clear business confidence is starting to waver as we continue on this uncertain Brexit path.
“That said, investment continued in Scotland’s newer businesses, demonstrating the potential of the country’s future economy.
“Investors have been operating in an uncertain climate for well over a year now and with the economic and political landscape unlikely to improve any time soon, we expect this trend to continue, with smaller amounts invested as an alternative to riskier large-scale investments, with investors hesitant to hold on to unspent cash.”
Across the UK, the picture showed that while deal volumes dropped by 57% year on year, VC investors were willing to pay premium value for innovative UK businesses as more than £1.9 billion was invested in the first three months of the year – flat on the same period last year.
Tim Kay, Director, Innovative Startups, KPMG UK said: “The UK has a robust startup ecosystem due mostly to its diversity – which keeps investors coming back. Whilst large volumes of VC investment are pumped into established startup hubs in London and Cambridge, it was great to see the largest UK deal so far this year was in Bristol, for OvoEnergy ($281.6 million).
“This diversity has helped keep overall VC investment in the UK strong until now and will hopefully continue once the uncertainty of Brexit has been resolved.
“The strengths of the UK in AI, biotech and fintech will continue to drive deals in the traditional hubs of London, Oxford and Cambridge. However, with valuations rising, and in many cases being out of reach for all but the top tier of VC firms, we expect to see more funds look across the UK ecosystem in 2019 for deal flow.
“Providing Brexit uncertainty can be curtailed, deal volumes should rebound as VC investors won’t want to sit on unspent cash and the UK still remains an attractive investment location for innovative businesses.”
Top deals in Scotland included online service providers and app developers, as well as drug development companies. Swipii, a Glasgow-based customer loyalty app for small businesses, generated £1.9 million in funding, while Edinburgh-based online compliance service provider, Amiqus Resolution raised £1.2 million. EnteroBiotix, a company harnessing good bacteria from the human gut to prevent and treat infections and diseases, received £700,000 in funding.