Investment

Investment Index Q3: Best quarter for Northern tech deals since records began

9 Nov, 2017

A total of £202.5m was invested during Q3 2017 across the North of England. In addition, the largest number of individual deals also took place, with a total of 40 individual transactions. These are the highest levels of tech investment in the region since records by Pitchbook and Beauhurst began in 2007, and results continue to dampen fears of investment shortfall in the wake of Brexit.

This was an extremely busy period for Northern tech, and suggests the mood is positive despite the various market challenges in this youthful sector. August in particular saw a hive of activity. The period was also the first to see a significant amount of public money invested from the Northern Powerhouse Investment Fund (NPIF), which has further bolstered the capital available for growing digital tech businesses across the region. James Bedford summarises:

“The rapid growth of the tech sector is reflected by the continued growth in investment. Encouragingly there is an increase in both the amount invested and the number of investments. I believe the impact of the Northern Powerhouse Funds is beginning to show”

While investment has soared, the market continues to be dominated by individual large deals. This quarter it was the turn of Cheshire based The Hut Group who raised a huge £125 million, valuing the organisation at over £2.5 billion. This single deal dwarfs total investment in years gone by, but does reveal a market reliance on high value transactions. This single deal accounts for well over half of all investments during the period.

Deal highlights include:

  • £125 million – The Hut Group
  • £20.2 million – Push Doctor
  • £20 million – Cubic Motion
  • £13 million – eLucid mHealth
  • £8 million – My Parcel Delivery

Delving deeper

The tech sector is expanding in the North, and is starting to grow exponentially. Median deal size remains broadly constant over the past three years. During Q3 2017 it sits at just £264,000. The small size of median investment deal is often found in a young emerging sector, where there are large numbers of low value deals. However, overall investment has doubled in only two years, with a number of isolated large deals >£30m.

Investments thrive in the Manchester – Manchester Airport – Cheshire belt, and it seems this trend is set to continue. The visualisations reveal quite how centralised capital flow into the North West has been over the previous 5 years, with a high volume of deals at varying sizes. By comparison, Yorkshire and Humberside has seen far lower levels of investment over the same period.

Manchester based tech firm Blujay Solutions also raised $500 million during Q3 for both equity and debt servicing reasons. This is a far higher raise than ever seen in the region before. For the purposes of this analysis the raise has been excluded as research revealed the firm’s HQ is in the United States.

Northern Powerhouse Investment Fund

The NPIF was officially launched in February 2017, and the benefits of the fund are starting to be seen across the tech landscape. A total of five raises took place in this quarter. Whilst these small deals are generally seed raises, they provide the foundation for growth in a young emerging sector. Future quarterly analyses are likely to include further deals from the funds.

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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.

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