The momentum of investors putting cash to work into growth start-ups continued into 2021 with another record quarter for VC investment thanks in part to a surge in larger rounds of funding
The UK’s start-up businesses shrugged off the pandemic jitters in 2020 to raise more than £8.8bn, according to research by the British Business Bank, marking a 9 per cent rise on the previous year as well as a record year overall for funding.
The second most popular area for investors’ cash was fintech which raised £1.6bn across 237 deals, followed by Software-as-a-Service (SaaS) which raised £3bn.
The momentum of investors putting cash to work into growth start-ups continued into 2021 with another record quarter for VC investment thanks in part to a surge in larger rounds of funding.
A number of UK fintechs achieved unicorn status during the period. These included Starling Bank, Blockchain.com and Zego which had a private valuation of at least £1bn in 2021.
Catherine Lewis La Torre, CEO, British Business Bank, said: The UK’s small business equity finance market had a record year in 2020 with activity ramping up in the second half. This momentum continued into the first quarter of 2021 with record-breaking levels of investment – a clear sign of returning investor confidence in UK smaller businesses and the country’s economic recovery.
The analysis comes from the British Business Bank’s Small Business Equity Tracker, which uses Beauhurst data which reveals the average pre-money valuation of a growth-stage private company reached over £100m. The average value of an unlisted UK growth-stage tech company increased by 102 per cent in 2020 compared to 2019 to reach £124m.
Ian Connatty, Managing Director, British Patient Capital, the investment arm of the British Business Bank says the figures demonstrate strong investor confidence in UK tech, and increased availability of capital to support companies achieve scale while remaining private.
He says this increase has been primarily driven by a small number of large, competitive investment rounds. These are most obviously seen where new unicorn companies have been created.