Half of all equity investment goes to UK tech businesses
Nearly half of the total equity investment in UK SMEs last year went to tech firms, as the sector continues to remain attractive to investors.
Equity investment in the UK’s tech firms increased 27 per cent to £4bn in the last year, its highest level since 2011.
The growing tech sector in the UK remains incredibly attractive to investors, accounting for 47 per cent of the total investment through 691 deals, according to the British Business Bank’s annual Small Business Equity Tracker report.
Investment in software led the charge, with 425 deals worth £2bn, followed by life sciences with 78 deals worth £450m. Software as a Service (Saas) in particular remained attractive to investors with 471 deals completed worth £2.5bn. Its value rose 69 per cent in 2019 compared to the previous year.
The report shows that the value of total equity investment in SMEs rose 24 per cent to £8.5bn last year, the highest on record. Deal numbers rose four per cent to 1,832, while deal sizes jumped 21 per cent.
Chief executive of the British Business Bank Keith Morgan said: “This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business.”
Although it has been a strong year for fundraising, there was a softening in the small business equity markets before the coronavirus lockdown restrictions.
Investment into seed stage firms declined by one per cent last year after rising every year since 11, when the tracker was launched. The British Business Bank has warned that this has the potential to impact the future UK equity pipeline.
Investors’ caution is not limited to early stage firms, with an increase in equity “down rounds” in 2019, forming 12 per cent all deals in 2019 compared to nine per cent in 2018.
Alice Hu Wager, managing director of strategy economics and business development said the report shows a “strong interest in growth stage investment”.
“Ensuring our high potential later stage companies have the capital they need to compete on the global stage will be crucial to powering the economic recovery.”