Golden Triangle, golden opportunities? – European investors continue to flock to UK innovation

    Penningtons Manches’ new report into the UK’s thriving tech ecosystem has shown that the UK is set to hold onto its position as a pivotal player in the global tech economy. Golden Triangle: Golden Opportunities? maps international investment into the UK’s ambitious tech companies.

    It found investment from European funds reached a record high of £1.89 billion in 2018 (up from just £1.66b in 2017), despite the inevitable uncertainty of Brexit playing out in the tech community. And, while deal numbers involving European funds have remained the same (150 in 2018, up from 149 in 2017), the value of these deals has increased by 14%.

    EU investment rising
     

    Investment from EU countries has notably increased, with the total amount invested, from deals with at least one EU-based investor, standing at £1.53b in 2018, up from £1.26b the year before. Reassuringly, this is strong evidence that the EU remains confident in the long-term prospects of the UK’s tech sector, despite the uncertainties created in the market place by Brexit and the shape its future relationship with the EU takes. For the tech community, concerns around the impact on talent and freedom of movement remain unresolved.

    It also found that the number of first-time deals between European funds and UK tech companies has increased: almost 80% of deals (76%) involved completely new relationships, up from 75% and 73% in 2017 and 2016 respectively.

    An international growth story
     

    European investor enthusiasm for backing high-growth, innovative tech companies in the UK is just one part of a positive international story of growing appetite from overseas investors to deploy funds in the UK. The report shows that high-growth, tech businesses surpassed 2017’s record-breaking number of deals involving overseas funds last year, rising from 361 to 373 deals worth a total £4.24b.

    Deals into high-growth tech companies in the UK’s Golden Triangle – London, Oxford and Cambridge – made up 70% of all overseas-backed deals, securing a new record of 161 deals in 2018. Of these, 135 were US-backed deals, with investors attracted to the knowledge-intensive activities of the universities in these cities, as well as London’s particular draw as a fintech hub.

    Penningtons Manches’ own experience over the past year reflects what is seen in the report. As a leading law firm specialising in tech, it has worked on over 70 venture capital transactions in the past 12 months and approximately 20% of those transactions included funding from overseas investors.

    The special relationship
     

    It’s no surprise that the US remains the largest overseas investor in UK companies. Just over a third (34%) of the aggregate deal value secured by UK companies came from deals backed by US funds – suggesting they’re more likely to be involved in large deals.

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    Software companies received the lion’s share of deals involving foreign investors, netting 222 of the 343 deals in 2018, followed by companies in the life sciences sector, with 32 deals. In terms of emerging sectors, fintech attracted the most amount of attention from non-UK investors – pulling in 58 deals in total – followed by artificial intelligence with 39 deals, blockchain, digital security and eHealth.

    What this means for regional tech
     

    Looking at the report, the overarching message is that there will always be funds available for world leading science and technology. Certainly Penningtons Manches has seen this confident activity in the Thames Valley too; last year saw Reading-based Brand View acquired by Ascential for £38 million with £50m raised by tech scale-ups including Opsview, BetterPoints and TrackerSense.

    With Penningtons Manches embedded in these tech ecosystems, it’s unsurprising that it is seeing high volumes of deal flow, including investment from overseas investors. Hopefully, this bodes well for the future and golden opportunities lie ahead.

    Penningtons Manches is sponsoring The Thames Valley Tech Awards Innovative Tech category.

    For a copy of Golden Triangle: Golden Opportunities? go to:

    penningtons.co.uk

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