Thursday 10 October 2019 12:01 am | Updated: Wednesday 09 October 2019 4:45 pm

Venture capital investment in fast-growing UK businesses surges

BATH, ENGLAND - OCTOBER 13: In this photo illustration, £1 coins are seen with the new £10 note on October 13, 2017 in Bath, England. Currency experts have warned that as the uncertainty surrounding Brexit continues, the value of the British pound, which has remained depressed against the US dollar and the euro since the UK voted to leave in the EU referendum, is likely to fluctuate. (Photo Illustration by Matt Cardy/Getty Images)

Venture capital (VC) investment in fast-growing British businesses surged 19 per cent in the third quarter to over £2.4bn, new figures have shown, meaning the UK is on target to smash last year’s record investment levels.

Over £7.4bn was invested by VCs in UK scaleup firms during the first nine months of 2019, almost equalling the £7.6bn raised over the entirety of 2018, according to research published today by KPMG.

Scaleups are companies that have grown beyond the startup stage, and were defined in the study as companies that had received at least one round of institutional or series A investment.

The UK’s strong performance between July and September was spearheaded by two health technology companies: remote consultation app Babylon Health’s £368m funding round and the £195m raise secured by Cambridge-based medical device firm CMR Surgical.

“VC investment in fast growth UK businesses remains as robust as ever with the domestic economic and political outlook having very little impact on their appetite for our disruptive enterprises,” said Tim Kay, director of KPMG Enterprise.

“There’s no sign that sectors such as fintech, biotech and healthcare are slowing down,” said Kay. “The UK’s global reputation as home to the kind of disruptive businesses that are world leading in these spaces continues to attract the capital they need so that they can expand globally.”

Although investment totals are on track to break records, the number of VC deals made continued to fall during the third quarter. There were just 245 deals completed during the quarter – a 42 per cent drop on the 421 made in the previous three months, and on the 420 made during the same period last year.

“While there continues to be a significant amount of liquidity in the global VC market, investors are putting greater emphasis on governance, business models and expectations related to profitability,” Kay said.

He linked this shift in emphasis to the fall in overall deal numbers, as “VC investors appear to be changing their investment thesis with regards to the cheques they are writing”.