Series A in 2021 – UK Tech

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Introduction

We have looked at various sources to find out what the state of play has been last year for UK tech businesses, specifically

There has been an enormous increase in Venture Capital investment in Tech. with listed companies attracting eye-watering valuations, notwithstanding the recent ‘Corrections’ on Nasdaq and many Unicorns, valuations of $1b.+, being created in the private sector too.
We at ScaleUp Group specialise in Series A fund raises – defined as the first time a tech business goes to financial institutions for growth funding. Even here there is now a definition issue as most of our clients are looking to raise between £3m and £5m whereas the Silverpeak survey stretches to £10m + raises.

Findings

  1. Taking the Silverpeak definition £2.7 billion – 2.7 times 2020 number was invested in 215 deals last year, with an average deal size of £13m!!
  2. Beauhurst stats tell us there were 94 deals up to £5m , of an average deal size of £3.2m.
  3. Beauhurst refers to an average of 3 funds per raise, which is more than we would have expected, as typically we work with one, sometimes two, funds per raise.
  4. Based upon our own survey of funds last year, less than 1% of the deals they see are invested in. (In fact one fund stated they invest in only 10 out of 4,000 pitchdecks they get!) Even taking the 1% number it suggests that there are thousands of entrepreneurs who fail to get the funding they are after.
  5. Advisers like ourselves are involved in a minority of situations – around 10%.

Conclusions

  1. It is likely that this very high failure rate is in part because many businesses are not suitable to take on the more demanding expectations of Financial institutions.
  2. However our experience is that our clients, properly coached, do receive funding offers 100% of the time, not the abysmal less than 1%.
  3. We question if those other entrepreneurs who do finally get the Capital they seek, by visiting multiple Funds, have got the best possible deal anyway?
    Sitting on the other side of the desk and being drained by the effort, it is tempting to accept the first offer that comes along, so as to get back to running your business.
    Especially as the downside of not conducting a process to create competition amongst Funds is only discovered much later typically – often when the business is being sold or being re-financed. This is when the impact of excessive dilution hits home.

Getting funding on the right terms and valuation is one of the most important business decisions our clients will make. As specialists we ensure they achieve this. Next year we look forward to seeing a higher number of fund raises involving advisers and hopefully a reduction in the abysmal failure rate too!

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