Growth Capital Update: Q4 2024

31 January 2025 / Insight posted in Reports

Overall activity continues as bigger deals emerge

 

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228
deals completed

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-4%
number of deals

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£1.151 billion
growth capital raised

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Our view of the market

We had high hopes for the UK’s growth capital market in 2024, after a relatively subdued 2023. Market commentators expected 2024 to usher in lower inflation, a more stable economic environment and reduced interest rates – all of which should have led to improvements in the market for growth capital transactions, in particular leveraged transactions.

The first six months of 2024 followed those predictions, with Q2 showing a marked uptick in activity. However, the second six months revealed a rapid cooling in the market. Inflation did come down during 2024 but not as far as anticipated. More worryingly, it started to increase again in the final quarter. The UK’s bank rate was trimmed by 50 basis points during 2024 but, again, this was less than had been hoped for.

The net result is that our research into UK private companies raising between £1 million and £20 million of growth equity capital each finds that, in 2024, 1,030 UK businesses raised a total of £4.92 billion. This is almost identical to 2023, both in terms of numbers of deals completed and amount of funds raised.

As far as Q4 2024 is concerned, 228 UK businesses raised a total of £1.151 billion. This represents a 4% decline in the number of deals completing but a 4% increase in the overall amount of growth capital being raised, compared with Q3’s 237 deals raising £1.112 billion. The average deal size in Q4 was £5.05 million, which is the highest value since Q1 2020.

Regarding the types of deals that were most common in 2024, later-stage VC retained its top spot of the previous three years, accounting for 38% of all deals completed, and 46% of total funds invested last year. Companies with a proven track record were more attractive to investors in 2024 than early-stage businesses. This may help explain the increase in average deal size in Q4, since later-stage businesses tend to raise larger amounts.

Annual number of deals and aggregate funds raised

 

Annual number of deals and aggregate funds raised

Quarterly number of deals and average deal size

 

Quarterly number of deals and average deal size

2024 deal volume by deal type

 

2024 deal volume by deal type

Technology sector

Technology was the most popular sector for investors every quarter last year, just as it was in the previous three years, in Q4 2024 accounting for 44% of all transactions by volume and 41% by value. Investors are particularly interested in UK companies specialising in AI, which the UK government has identified as the key to delivering economic growth in the coming years. The UK’s AI market is the third largest globally, behind the US and China, and contributes £2.7 billion to the UK economy annually. The UK accounts for over 55% of all AI-related private investment from VC, PE and angel investors in Europe.

Notable UK tech sector deals

Logos 1 GCU Q4Robin AI, a provider of legal AI for large enterprises, raised $25 million in November from a group of customers and existing investors, including Paypal Ventures and the University of Cambridge. This latest funding follows Robin AI’s $26 million series B raise in January 2024 and a $10.5 million round in 2023.

 

Q4 2024 deal volume by deal type

Logos 2 GCU Q4Northflank, a London-based cloud deployment platform, announced $22.3 million in new funding in November to help software developers write code faster without having to configure complex infrastructure first. Bain Capital Ventures led the $16 million series A round, while Vertex Ventures US led an additional $6.3 million seed round.

 

“Artificial intelligence is the defining opportunity of our generation. It is not a technology that is coming; a future revolution on the horizon. It is already here, materially changing lives – preventing illness in our NHS, creating exciting new companies in our economy, pushing the boundaries of scientific discovery in our universities. It will turbocharge every mission in this government’s Plan for Change. And the potential for further innovation is vast.”

Sir Keir Starmer, Prime Minister
Source: Gov.uk

“AI is transforming the global economy and is expected to be a key investment theme in 2025. By streamlining complex processes and revealing valuable insights within massive datasets, businesses have the potential to achieve unprecedented levels of productivity. This revolution across numerous industries is still in its early stages.”

John Cowie, Head of Growth Capital, Moore Kingston Smith

Active investors

BGF topped our most active investor table in Q4, with the completion of nine transactions. Parkwalk Advisors came second, with seven transactions.

BGF’s Q4 investments included:

  • participating in the £16 million funding round for Cambridge-based Forefront RF, a company redefining how mobile devices, such as smartwatches, manage complex radio frequency environments;
  • investing £6 million in Signify Research, a specialist healthtech market intelligence provider;
  • backing low-carbon offshore wind specialist Sulmara, with a £15 million investment;
  • investing £9 million in Cirencester-based technology value-added-reseller Kubus;
  • backing website accessibility software business Recite Me with a £4.6 million follow-on investment.

Parkwalk Advisors, which describes itself as the UK’s largest investor in university spin-outs, backed several B2B businesses, including Imperial College London spin-out M-Spin and two University of Cambridge spin-outs: PervasID and Molyon.

Q4 2024 top investors
Q4 2024 top investors

 

 

“Despite having a busy 2024, in terms of new investment deployment, it feels like 2025 could go up another gear in terms of new investment opportunities. Our investment thesis remains the same, regardless of market conditions. We are confident in the prospects of the growth economy and are committed to continuing to support innovative and ambitious businesses that are vital to the country’s economic growth.”

Aaron Baker, Investor, BGF
Source: insidermedia.com

Outlook

2024 was essentially a repeat of 2023 for the UK’s growth capital market. While economic conditions did show some small signs of improvement, these were not sufficient to provide the boost to the market that we anticipated at the start of the year. In response to shifting market dynamics, growth capital investors are increasingly prioritising sustainable business models over ‘growth at all costs’ strategies. Investors are focusing on companies with solid economics, strong margins and clear paths to profitability. Fewer deals completed but average deal sizes were up, illustrating that well-managed UK companies with good prospects continue to attract investors. This shift reflects the broader trend of cautious capital deployment while macroeconomic conditions remain volatile.

As we move into 2025, we remain cautiously optimistic about the UK’s growth capital market. There is still plenty of growth capital funding available for well-positioned UK businesses, particularly in the technology sector and specifically for those focused on AI. However, there may still be stormy waters ahead, if concerns about the UK bond market, the higher cost of government borrowing and inflationary pressures translate into the Bank of England reversing previous cuts in interest rates.

Contact us

If you’re an ambitious entrepreneurial business with revenues of at least £1 million and are looking to scale, get in touch for an initial discussion. We can work together to assess the best action and then assist with finding the right partner for you. Contact us to find out more about our raising finance and growth capital services. We also assist investors and are experts at providing advice throughout the acquisition or investment process. Our team can help identify and evaluate potential opportunities and run the financial and tax due diligence process, allowing you to make decisions quickly and confidently.

Methodology

Moore Kingston Smith has analysed transactions by UK-based companies that involve the issue of less than 50% of equity share capital to third parties and funds raised of between £1 million and £20 million. Accordingly, these numbers do not include senior debt and mezzanine debt fund raisings and smaller fund raisings by companies and start-up funding unless more than £1 million is raised. Start-up funding is generally significantly less than this amount.

The research aims to capture all transactions by UK companies that fall within the criteria. Inevitably there will be transactions that have taken place but have not been captured. The research is based on data extracted from Pitchbook.

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