The amount of capital invested by venture capital firms in the UK technology market has fallen from £192 million in the second quarter of the year to £178 million in the third, new figures show.
Despite big-ticket deals including Shazam and NewVoiceMedia, venture capital takings are down on figures from earlier in the year.
Research compiled by Ascendant shows that, even after adjustment for seasonality, investment in the internet services and cleantech spaces has stalled.
Figures from the third quarter of the year reveal an investment total of £178 million from 54 technology deals of over £500,000. This is down on the £287 million from the fist three months of the year and £192 million from the second.
The busiest investors during the period included the Business Growth Fund, MMC Ventures and the government-backed Angel CoFund. The report also finds that there were three primary areas of investment: internet services (£67 million), software (£65 million) and semi/opto (£12 million).
Stuart McKnight, managing director of Ascendant, comments, ‘It is not quite as bad as it looks as activity is generally high in Q1 because of catch ups on deals delayed over the Christmas break and deals rushed through before the end of the tax year.
‘The most obvious explanation is that there has been a change in the nature and identify of the investors who are writing the cheques. Some of the institutional money which has been the mainstay of the market for many years has been expended leaving a gap which is only being partially filled.’
Ten biggest deals with disclosed values:
- Shazam – £26 million
- NewVoiceMedia – £22 million
- Calastone – £11 million
- Swiftkey – £11 million
- Movidius – £11 million
- Inoapps – £10 millino
- Bath Empire – £9 million
- Plaxica – £8 million
- Chemist Direct – £7 million
- Naked Wines – £7 million
McKnight adds that many venture capital investors have withdrawn from the cleantech space (£4 million invested during the third quarter) as they have found the returns too low.
The most active regions in the UK were London and Scotland, which were responsible for 38 per cent and 19 per cent of all deals respectively. London accounted for 40 per cent of funds invested, while the Thames Valley took 15 per cent.
Another trend discovered related to 30 per cent of deals involving private investors or angels. In the third quarter, 19 technology companies received over £30 million from angels and funds which co-invested with them.
‘It is too early to say that there is a long-term problem but a significant reduction in funds invested and reduction in syndication are not inductors of a healthy market,’ McKnight adds.