The British Business Bank recently launched their 2019 Small Business Equity Tracker report. Our analysts Samuel Baldry and David Woods provide their insights on some of the key findings and what this means for British Patient Capital.
Equity investment in the UK has grown 72% in two years. Is it just more money chasing the same companies or are more companies getting the finance they need?
Median deal size is rising faster than the mean showing more capital is going to more businesses. The proportion of total investment value in deals greater than £10m has dropped, so capital is being more evenly distributed across companies.
We saw an overall decline of 12% in the number of Seed stage deals. Is this a problem for the market?
This is the first year the number of seed deals has fallen since 2011. There would be some concern if it were to continue to fall but deal level is still healthy. More capital was also deployed at Seed level than last year.
There’s been 29% growth outside London. Are the regions benefitting at London’s expense?
BPC: London is still the dominant place for funding: while it is home to 20% of UK high growth businesses, it has 50% of invested capital. The growth of the regions is beginning to redress the balance, while the recent decline in London has been due to fewer mega-deals, not fewer investments.
UK equity investment grew faster than the US in the last 10 years. Why? How can the industry ensure growth continues over the next 10 years?
UK growth has been from a lower base than the US. The UK now has a higher ratio of deals to GDP than the US, but still lags by invested capital to GDP, so there is still room for the UK to grow. Over the next 10 years it’s vital for the VC industry to attract more institutional capital. That’s why British Business Banks exists – to unlock funding and enable long-term investment in innovative companies across the UK.
What’s the most effective way to increase and improve diversity of talent in UK VC? What can be done to develop the skills and expertise of junior VCs?
There’s a need for training in VC to deploy more capital well. Cooperation across the industry helps to share knowledge and build networks and a centralised training scheme could improve development. The industry can work together to improve diversity and find the best talent.