The Deal

A free report on equity investment in
startups and scaleups.

The Deal is our flagship yearly report examining equity investment in startups and private companies. 

We analyse investment from funders as diverse as equity crowdfunding platforms, venture capital and private equity firms, government and angel investors. 

By looking at equity fundraising activity across the country, we’re able to see the emerging trends and patterns from the perspective of investors and the businesses themselves.

The key findings from 2018

Deal numbers drop significantly

- %

Amount invested falls

- %

Seed-stage companies see biggest loss in deal numbers

- %

Crowdfunding platforms have record year of deals

What’s inside?

A detailed analysis of the size and frequency of investment over time

From venture capital and private equity, to government and angel networks, we look at who is backing high-growth companies 

We pay special attention to equity crowdfunding platforms, providing more data on their activity than anyone else 

Find out which sectors are getting most investment, with detailed breakdowns of verticals in technology, from fintech to adtech, blockchain and more.

See how regions around the UK are performing over time.

2018 in review: A near miss?

It was always going to be difficult for 2018 to match the unprecedented levels of 2017 – but it did come close. £7 billion was invested in 2018 – more than any year before 2017 and more than 2011 to 2013 combined. Nearly 1,600 investments were made in 2018, noticeably fewer than in 2017 but around the same as the number made in 2015 and 2016. As we enter a period of unprecedented political uncertainty, it is tempting to interpret these numbers as the beginning of a more pronounced decline. When looking into the data underlying these figures, the prognosis is much more nuanced.

Deals amounts drop, but remain high

Deal 2018 - main chart

We have introduced a new classification of a company’s stage of development: the established stage. These are companies that may well be experiencing significant growth, but are doing so from a position of greater commercial security than a company at the seed, venture or growth stages. The huge spike in the amount invested into established-stage companies in 2017 captures a large number of megadeals that could be considered unusual – the 19% fall in the amount invested between 2017 and 2018 must be understood in this context. Growth- stage investment has proven much more resilient: the number of investments has remained pretty constant since 2014.

A concerning drop in seed-stage deal numbers

deal 2018_stages of evolution

The amount invested spiked in 2017 but in 2018 only fell by 5%. The amount invested at the seed-stage and venture-stage reached record levels in 2018, so we might have reason to be fairly optimistic overall. When we look at deal numbers, however, we see a slight fall for the venture-stage, and really quite significant drop (15%) at the seed-stage – to nearly the same level as seen in 2014. The seed-stage can often be thought of as the canary in the coalmine: if seed-stage activity drops off, the pipeline of investable companies at venture and growth stages also diminishes in time.

But there are two reasons to think that the drop in deals at the seed-stage is short-term only. Firstly, the seed-stage is the riskiest stage and therefore most likely to be impacted by macroeconomic uncertainty. There is no doubt that these are uncertain times: for early-stage investors as much as anyone else – it can be no coincidence that the last quarter of 2018 saw the fewest deals of the year. Secondly, if we look at the types of investors completing these deals, we see the number of deals with angel networks participating fall the most. Compared with 2017, angel network investments had fallen by 35%. Angel networks are perhaps the investors with the greatest flexibility to adjust their investment preferences on an ad hoc basis as political events develop. These are the investors most likely to be deferring investment until there is greater clarity on what will happen next.

Crowdfunding continues to grow

deal 2018_investors

In the face of slightly declining investment figures for the country as a whole, certain areas are bucking the trend. The North West of England and Wales had record years for the number of investments made into their companies. Wales saw over 70 deals and the North West over 106. It must be pointed out, however, that the top investors in both regions were publicly- backed funds; in Wales, the Development Bank of Wales, and in the North West two Northern Powerhouse Investment Funds. But if the funds have gone to the right companies, this is great news for both regions. At a more local level – and outside of London – we see success for Cambridge and Edinburgh, both of which continue to see good levels of investment thanks to their strong Life Sciences clusters.

Positive signs for the North West and Wales

Other sectors in 2018 were also driving investment across the country but in London particularly. 2018 was a record year for the number of investments into Fintech and Blockchain companies (across the two of which there is significant overlap). Indeed, although Blockchain has been touted as a “hot sector” for some years, 2018 was the first year we saw significant investment activity in the UK. AI and Adtech on the other hand both peaked in 2016, with Adtech deals dropping significantly in 2018 – by 48%. Edtech and Proptech remained fairly level.

Fintech continues to grow and Blockchain begins to attract investor attention

deal 2018_sectors

So what does this all mean for 2019 and beyond? We saw last year some warning signals, but also signals for confidence in this important segment of the UK’s economy. We will need to see an uptick in the number of investments into seed- stage companies in 2019 – and soon. Individuals angels and angel networks will be the ones to drive that resurgence if it happens. It seems likely that any solution to overcome the paralysis that Brexit is inducing, rather than the specifics of any deal (or other outcome), will be the most important driver. This is because early- stage investments are an asset class for the long-term. If investors can start to see what the path ahead for the next decade might look like, they can gain the confidence to make investments that won’t be realised for the next decade. At the time of writing, however, the path has many forks – who can blame investors for waiting to see which one we take, quite apart from any consideration of whether it’s the right one.

About the authors

henry whorwood

Henry leads Beauhurst’s research and consultancy, and is an expert on equity finance and high-growth business. He has worked on briefs for clients including Barclays, Syndicate Room, Innovate UK, Smith & Williamson and the British Business Bank. Henry regularly gives presentations on finance and market trends at events around the country. Henry studied Classics at the University of Oxford.

Ella halmari

Ella is a visual design and data analysis specialist. She is an expert in data visualisation and content creation, playing a lead role in analysis and production of Beauhurst’s data-driven publications and brand communications. Ella holds a post-graduate diploma in Visual Communication from UAL and the IMC qualification from the CFA Society.

Where does the data come from?

All data featured comes from the Beauhurst platform, a searchable database of the UK’s fastest-growing startups and scaleups.