Add another layer to your #Business literacy. We at Serebral360° would love to know if the Forbes – Entrepreneurs article was helpful, leave a comment, like and share. Let’s dive in and discuss the information and put it to use to grow your business. #BusinessStrategy #ContentMarketing #WebDevelopment #BrandStrategy
Info@serebral360.com 762.333.1807 www.serebral360.com
Grap a copy of our NEW Business Stratgety Books #FFSS VOL1 and #FFSS VOL2
Here in the U.K. we’ve become accustomed to analysts and assorted number crunchers telling us that, despite the storm clouds bubbling up around Brexit, the UK tech startup sector is in robust good health. And often the buoyancy of the industry is evidenced by the sheer scale of investor cash being channeled into early stage businesses. Every year – usually in January or February – reports come out telling us that the previous twelve months broke new investment records.
On the face of it, 2018 wasn’t a bad year. A record £8.27bn was invested in 2017, which as Beauhurst points out was more than the combined total of the years 2011 to 2013. In that respect, the £7bn invested last year was perhaps disappointing. but arguably not surprising, nor any kind of disastrous implosion. Indeed, around 1,600 investments were made. Again. that was fewer than in 2017 but pretty close to the numbers of deals seen in 2015 and 2016. From a glass half-full perspective you might say that 2017 represented something of an outlier year. 2018 was something more normal.
Seed Stage Woes
But the devil is in the detail. Once you begin to break the numbers down a more worrying picture begins to emerge. Beauhurst’s figures – wriiten up by analyst Henry Whorwood - suggest that seed stage deals have fallen by a hefty 15%. And in terms of year-by-year comparisons, the number of deals fell to levels not seen since 2014. In other words, what the data reveals is that very early stage companies in search of capital were facing challenging conditions.
So is this a temporary downturn in a road that will ultimately resume its upward trend or are we seeing early signs that a Britain’s startup boom is has is beginning to run out of steam in the face of challenging economic conditions?
What Happens Next?
A lot depends on what happens next in the UK economy. As Beauhurst points out, Seed finance is particularly vulnerable to changes in investor sentiment, which is in turn strongly influenced by the economic outlook. Now, the UK economy has continued to grow despite Brexit concerns – but by the same token no one can deny that the complete lack of certainty surrounding Britain’s future trading status with the E.U. has created an environment in which investors are becoming increasingly risk averse.
The biggest impact has been on angel investing. Deals in this category fell by a whopping 35% in 2017 and as Beauhurst sees it, this was likely to be the result of individual investors scaling down their commitments in response to political gridlock over the direction of Brexit. And the report does find a correlation between a decline in investment in the second half of the year and an unfolding political stalemate as MPs backing different flavours of Brexit – hard, soft and not at all – squared up to each other in Parliament.
There is perhaps light at the end of the tunnel. If 2018’s pause for breath is simply a result of political and economic uncertainty, then any settlement of the Brexit issue should – in theory – pave the way for early stage investment to begin flowing again. But this is not guaranteed.
Meanwhile, the Beauhurst report does contain some bright spots. Crowdfunding had a record year with the number of deals beginning to rise. It was also rather a good year for Blockchain-related investments, which rose by 75%
And it’s important to note that headline figures disguise of a lot of variation. For some investors – and presumably the startups they invest in – optimism and confidence remain the orders of the day. Luke Davis, CEO of investment house IW Capital, dealflow has not abated. “In 2018 we have had more dealflow than ever,” he says.
And if the number of deals was down overall, businesses in Wales and the North West of England saw an upturn in volumes, perhaps indicating greater investor interest in the UK regions. And as Davis sees it, Britain’s regions offer new opportunities – not just to invest in tech but also in sectors such as engineering. He says his own firm has a growing regional focus. “We have been appointing new regional directors.”
But the Beauhurst report sound raises an important issue – there are economic storm clouds ahead and around us, and the tech sector, despite all the excitement it generates, can’t necessarily escape the heavy weather.
February 13, 2019 at 12:38PM
Forbes – Entrepreneurs