July 27th, 2018 / Insight posted in Articles

Growth Capital Update Q2 2018 – Record quarter for UK growth capital market

UK growth equity investing in Q2 2018 reached a new peak. It was the strongest quarter ever recorded in Kingston Smith’s three year observation period. 144 deals worth £715.2 million were recorded, up markedly from 114 deals worth £481.1 million in Q1 2018. This year is now in a strong position to beat 2017’s full-year figures of £1.7 billion across 416 deals.

Venture capital is enjoying a renaissance in Europe and indeed the UK, with a number of firms successfully raising capital recently. The British Business Bank has contributed to this by scaling up on the back of the government’s patient capital review. Among other things, the bank acts as an investor into some UK funds through its Enterprise Capital Funds programme.

VCT’s are enjoying a record year with £728 million raised, a third more than last year’s £542 million. The sum marks the largest yearly total at the current level of 30% up-front tax relief, and only marginally below the 2005/2006 record of £779 million – though that was when tax relief was temporarily increased to 40%.

Technology deals remain the most popular for deploying capital. A high number of businesses looking to be the next big innovator are keeping investor appetite for digital strong. That VC and growth equity backers can bring expertise as well as capital to the table is now well understood by entrepreneurs, so investor demand is increasingly benefitting from these companies’ own demand for smart funding partners.

This year’s strong VCT fundraising, combined with a handful of new fundraises for mainstream venture capital, mean there is a sizeable sum of capital ready to deploy in attractive growth capital opportunities.

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