Outlook for the UK
VC investment into UK businesses continued to slide in the opening quarter for 2024, falling to levels last seen in 2018. Coming off the back of $4.9 billion raised by UK businesses in the last quarter of 2023, just $3 billion in funding was raised in Q1'24 which is the lowest amount seen in twenty-two quarters.
Deal volumes were also down with just 519 deals completed, levels not seen since 2016. While deal volume was very subdued, deal sizes remained quite healthy as VC investors focused their funds on the most promising startups. The largest raises came from neobank Monzo ($431 million), Cambridge based drug discovery company Apollo Therapeutics ($260 million) and Nottingham based GeoPura (£56 million) to accelerate the UK's adoption of green hydrogen by expanding production capacity, growing the specialist workforce in the UK, and increasing the deployment of our power generation technology.
B2B businesses looking for VC investment faced particular challenges as companies across sectors felt pressure to tighten their pocketbooks and improve their internal efficiencies, however this slowdown is likely to affect the interest of VC investors heading into Q2’24.
Outlook for Europe
VC investment into Europe rose from $15.1 billion in Q4’23 to $17.9 billion in Q1'24, buoyed by a large $5.2 billion raise by H2 Green Steel in Sweden. With few exceptions, VC investors in Europe continued to show caution given the challenging geopolitical and macroeconomic environment, including the high interest rate environment; while interest rates have smoothed, there is little sign that they will decline to a significant degree in the near future.
The number of VC deals dropped considerably in Europe, falling from 2,419 deals in Q4’23 to 1,798 deals in Q1’24. This decline was particularly noticeable at later deal stages, with the number of Series D+ deals in the region dropping to just eleven. The geographic diversity of VC investments held strong during the quarter, with eight jurisdictions in the region attracting at least one $100 million+ funding round in Q1’24, including Sweden, the Netherlands, France, Germany, the UK, Spain, Israel, and Italy.
UK trends to watch in 2024
- B2B startups with embedded technology solutions will likely prove more resilient than those with additive technology offerings
- Focus on investment corridors, particularly in the fintech sector
Read more UK and global insights in the Global Venture Pulse Q1 2024 report.
