Investment Index Q2: VC deals flourish but with limited geographic spread

2 Aug, 2017

This post is part of the ongoing investment index series

Northern tech investment continues to perform well, although finance has reduced during Q2 2017 compared to the previous quarter.

A total of £63.7 million in capital was secured by Northern tech companies during the period. Although this is a significant reduction in finance compared to Q1, investments were more diverse and spread over more deals of a similar size. The previous quarter was bolstered by one large deal secured by Atom Bank.

Atom Bank continued to raise finance. The Durham-based fintech firm made a deal of £30 million in June. However, this was a deal to finance commercial debt for its retail banking operations, so does not feature in this index. Debt finance is a growing feature of Northern fintech investment markets.

Geographically, the Cheshire and Warrington regions continue to dominate, with the three largest deals over the period in this area. By comparison, Yorkshire and Humberside recorded only £2 million investment.

The following larger investments took place during the period:

  • afforditNow – £24.5m
  • MPP Global – £12m
  • VST Enterprises – £11.4m
  • ZeroLight – £3.3m
  • EnXray – £2.3m
  • ITS Technology – £2.3m

Year-on-Year analysis

2017 investment levels continue to alleviate fears of economic slowdown in the wake of Brexit. It is likely that the current year’s tech finance levels will outperform the record-breaking 2015 period. The market continues show higher levels of investment, despite smaller numbers of deals. This suggests that the ecosystem is maturing, and bringing in fewer, more valuable investment rounds.

Once again, the largest deal of the period was in fintech. Altrincham-based afforditNOW raised £24.5 million in its first investment round. The finance will be used for further product development and market expansion. The company has been trading since 2012, and is now attracting significant VC investment.

Regional differences

The Manchester/Cheshire region continues to dominate the market. Local infrastructure makes this area desirable for tech firms, and is now producing significant numbers of VC-backed business. Q2 was a quiet period for the Yorkshire/Humberside area. Hopefully this will improve during the second half of 2017.

James Bedford of Tech North summarises:

2017 is shaping into a great year for tech investments. The Northern investment ecosystem is evolving too, with companies based here demonstrating that they can raise increasingly larger amounts of capital. We need to continue supporting the investment ecosystem to ensure the benefits are shared equally by tech companies spread across all corners of the North.

Moving forward

VC deals continue to increase in number as a proportion of overall investment transactions. This is a positive sign, and suggests the ecosystem across the region is maturing. Financially, VC investment accounted for more than three quarters of all capital investment in Northern tech companies during the period.

While Atom Bank dominated Q1, this later period has seen far more evenly spread investment across deals.

Data was sourced from Pitchbook, Beauhurst and other manual web scraping tools. It is intended to offer a guide on trends in the digital technology sector in the North of England, and is for general information only. This may not include every digital technology deal in the region during the period.

Data was cleansed to remove any companies not classed by Tech North as a digital tech company. The data includes all VC stages, private equity growth/expansion, and ‘corporate’ deals. It does not include M&A deals, IPOs, liquidity or buyout deals.

This report is published for general information only. Although high standards have been used in the data sourcing, analysis, views and projections presented in this report, no responsibility or liability can be accepted by Tech North for any loss or damage resultant from any use of, reliance on or reference to the content of this document.

Past figures may fluctuate as further information is published and sourced. Deals of less than £0.5 million are excluded from the analyses. 

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