Venture Capital investment into the UK remains steady but deal volumes fall

Outlook for the UK

VC investment into UK businesses has continued to remain stable in the third quarter of 2023. However, investor caution still remains over the sustained cost of living crisis and the high interest rate environment impacting the UK economy.

A total of $5.2 billion was invested into UK businesses during July - September 2023, with 469 deals completed during that period. Whilst investment was down $0.4 billion on the previous quarter, the number of deals completed fell by 34% from 713 in the second quarter for the year.

Half of the VC investment made into the UK during Q3 23 ($2.6 billion) flowed into businesses based outside of London across 219 deals, whilst businesses based in London also raised $2.6 billion across 250 deals during the period. 

The UK also benefitted from a bevy of larger VC investments over the summer, accounting for five of the top 10 largest deals completed in Europe during the period, with the $631.6 million Series A raise for Birmingham based Conigital featuring in the top ten of all global deals for Q3 23. Other stand out UK deals included the $355 million late-stage investment in London based pet tech Butternut Box, $256.4 million deal with Bristol based Ovo Energy and $226.5 million Series C investment in Cambridge based Apollo Therapeutics.

Outlook for Europe

In light of the uncertain market conditions, many VC investors in Europe have raised the bar in terms of their investment criteria. This has likely contributed to some of the slowdown in deal volume as VC investors narrowed their focus to supporting the biggest bets and highest quality companies in more mature sectors and ones that have shown less resilience in the current market climate.

AI has been one notable exception; VC investor interest in the space only continued to accelerate during Q3’23, with quite a range of startups raising funds, including France-based AI platform company Poolside ($126 million).

UK trends to watch in Q4 23

  • Despite investor caution AI, cleantech and health and biotech are likely to continue to dominate the VC landscape in the UK
  • Early-stage companies with proven cash flows at seed, early and series A stages are likely to continue to constitute a large part of the deal volume for the remainder of the year

Read more UK and global insights in the Global Venture Pulse Q3 2023 report.

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