British start-ups raised £663m in investment in the first month after the country went into lockdown, driven by high levels of activity in the tech sector.
New research from innovation centre and workspace Plexal and company database Beauhurst analysed UK investment activity between 23rd March and 27th April.
It found the total value of investments increased by 34% compared to the same period in 2019, as a result of investors providing additional capital to ensure the survival of companies during the economic disruption.
The technology sector has been leading investment activity since the lockdown began, with the highest levels of investment going to start-ups operating in FinTech, artificial intelligence, digital security and blockchain.
Of the £663m raised, £50.2m went to start-ups that had never raised funds before.
There was, however, a 39 per cent drop in the number of deals, which investment experts say is a more accurate barometer of investor confidence. Meanwhile nearly 1,000 small businesses are currently in administration (263) or liquidation (707).
The week after lockdown was announced – starting Monday 30 March – saw the lowest weekly amount of investment since w/c 28 March 2016, which was the only week to see less investment in the past five years (excluding Christmas weeks).
The value of investments fell by 89% compared to the same week in 2019. However, the total investment value from 23 March until 27 April 2020 was up by 34% on the previous year, suggesting this was a temporary shock.
Despite recent announcements from the government about a Future Fund for small businesses and loans being distributed by Innovate UK and the British Business Bank, these figures show that while some start-ups are continuing to attract investment, the vast majority are struggling to raise funding.
“While tech start-ups have shown remarkable resilience in their ability to continue attracting investment, the success of the few mustn’t overshadow the struggles of the wider majority of British start-ups,” said Andrew Roughan, Managing Director of Plexal.
“While the Future Fund is an excellent first start, it’s clear that more is required to protect the businesses that have driven job creation and economic growth in the UK for the last 10 years. This research is designed to cut through the doom and gloom and speculation to see which parts of the start-up ecosystem are thriving, and which need urgent support.
“If we don’t act now to stimulate the market and ensure funding is distributed widely and quickly, we risk a lost generation of start-ups and entrepreneurs. We’ll be closely monitoring deal numbers, liquidations and early stage rounds in the coming weeks and months to provide an accurate lens through which to judge whether the support mechanisms are working as desired.”
Henry Whorwood, Head of Research and Consultancy at Beauhurst, comments: “While the data shows an immediate downturn following lockdown, our hope is that the start-up and technology sectors will remain resilient during this economic disruption.
“The concern is that a reduction in the number of deals reflects a fall in investor confidence that could cripple the growth of the country’s most successful start-ups and fast-growth businesses.”
Plexal and Beauhurst analysed nearly 30,000 start-ups and fast-growth businesses (companies that have attracted equity or venture debt funding) to understand investment activity since lockdown.