Simon Bumfree sees a silver lining after a tough summer in 2023
Is the UK startup investment ecosystem showing signs of recovery following a correction in 2022 and 2023? Now, HSBC Innovation Banking (formerly Silicon Valley Bank UK) and market intelligence provider Dealroom announce The latest set of figures show that cases are stable and there are some tentative signs of recovery, particularly with early-stage funding.
In the first quarter of 2024, UK startups attracted $3.9 billion in investment, down from $4.8 billion in the previous quarter. Early-stage pre-seed and seed funding accounted for $279 million of the total, and the Series A round raised $769 million. This shows an improvement with increased early-stage investments compared to his previous two quarters.
Series B raised an additional $742 million, about the same as last quarter, while Series C stage companies raised $715 million. Additionally, it has raised a total of $1.4 billion in six late-stage mega-rounds.
Fintech leads investment rankings
There were also signs that the old order was being reasserted. For many years, fintech has been a symbol of the UK’s innovation economy, regularly attracting the largest amount of investment. That changed last year. Energy is topping the investment charts as the climate crisis is recognized as the most pressing issue facing the planet. Financial technology was back in pole position in the first quarter, with companies in the sector raising $1.4 million, including challenger bank Monzo ($350 million) and payments company PPRO ($85 million). I have to say that the large round pushed up the total amount. ) and asset management platform Flagstone ($108).
This was followed by fintech, enterprise software, health and energy, which continued to attract significant investment. Breaking down the numbers into more specific segments shows that challenger banks, semiconductors, and quantum computing are all doing well.
But what does this mean? Is the UK innovation economy still surviving rocky conditions, or is it in better shape? HSBC Innovation Banking Head of Technology and Life Sciences We spoke to Simon Bumfree to get his thoughts on the factors influencing the market and the outlook for the year ahead.
Wherever he looks, there are encouraging signs. “Last summer was very tough,” he says. “However, in the fourth quarter, we (HSBC Innovation Banking) saw an increase in debt inquiries.” The bank saw this as a sign that the investment environment was improving. The logic is that debt transactions often take place in parallel with fundraising events.
So while Bumfrey doesn’t feel the market will skyrocket, he does think what we’ve seen so far in 2024 is positive. In particular, we welcome the stability of our current investments regarding Series B and C. “It used to be difficult,” he says.
One trend that Bumfrey finds particularly encouraging is the increasing ability of businesses to raise capital, not just in London but across the UK. “We’re seeing activity in places like Oxford, Cambridge and Edinburgh,” he says. “That’s great to see.” The data shows Edinburgh and Brighton have seen the biggest growth in investment, despite having a lower base than some well-known hubs.
What is the basis for optimism?
So what drives market sentiment? At a big picture level, it’s economics. Inflation in the UK is falling, and on the day I spoke to Mr Bumfree, the Office for National Statistics announced it was 3.2%. We’re still way ahead of our goal, but we’re moving in the right direction. Interest rates remain high, but are not expected to rise any further and are expected to fall slightly.
Meanwhile, Bumfree says VC is starting to introduce some of its notorious dry powder. “We have a lot of good companies. Many of them haven’t raised money in a while and are running out of cash. It’s time for incumbent venture capitalists to invest to support these blue-chip companies. I recognize that it has come.”
The question, however, is how VCs’ investments in portfolio companies affect other investors’ willingness to invest.
new dynamics
The investment environment is changing. The headline figure of $1.4 billion raised is driven by large deals involving established companies, so the resurgence in popularity for fintech startups may be a bit misleading. do not have. He said fintech always attracts investment, but it is a mature sector and the momentum lies elsewhere. In particular, he cites climate technology, quantum, AI, and biotechnology.
There are still ominous clouds on the horizon. Bumfree hasn’t seen much of an increase in IPO or exit activity for his M&A. “There’s still a lot of discussion,” he added. This is likely to put continued pressure on the amounts available to Series B, C, and beyond companies.
In the longer term, more efforts are needed to encourage UK-based start-ups to list on the London Stock Exchange. This is important to keep capital in the UK post-IPO.
Overall, it seems unlikely that investment in UK start-ups will surge in 2024, but after a tough period there is probably plenty of stability for now. The UK remains Europe’s largest investment destination.
