H1 2021 welcomed a surge in first-time fundraisings, following a six-year downwards trend, representing a sign that investor risk appetite is increasing and deals delayed by the pandemic are finally being completed.
The 445 companies announcing their first fundraising rounds overtook the record set in H1 of 2014, which stood at 402 deals.
Though H2 of 2021 did not achieve such figures in first-time fundraisings, the number is rising once more, with 394 first-time fundraising rounds in H1 2022, equivalent to a 9% increase from H2 of 2021.
Though the first half of 2021 saw a sudden spike in the number of first-time fundraising deals, followed by a sudden drop in the second half, the start of 2022 has seen the start of a gradual increase in the numbers.
These figures mark the general state of the high-growth landscape as healthy and growing, an essential point for the generation of startups and scaleups to come across the UK.
First-time private equity or venture capital driven deals – as opposed to first-time fundraising deals, followed a similar trend.
Between January and November of 2021, a huge 552 UK-based companies announced their first private equity or venture capital funding round – with some companies being the recipient of previous equity investment already.
The number of deals stood on a steady trend throughout 2021, but suddenly peaked in March, with 124 first-time funding rounds, backed by either private equity or venture capital funds.
This is in contrast to an average of 45 deals in other months of 2021, though the dramatic spike in March was aligned with wider market trends across the UK funding ecosystem and in particular, for deals with private equity and venture capital involvement.
The amount of funds raised also spiked in March 2021, reaching £322 million, due perhaps in part to delayed investments for 2020 which failed to complete in the thick of market uncertainty.
In 2021, 50% of investee companies which received their first rounds of private equity or VC funding were operating at the seed stage, meaning they were young businesses, holding a relatively low valuation and employee count, with little to no investment secured and with a pending product-market fit.
A little over a third, 34%, of companies achieving their first PE/VC deals were operating at the venture stage, being companies with an established business model, operating revenue flows that have been in place for several years and which are possibly in the process of expanding their product or service in some way.
That seed and venture stage startups were the regular recipient of first-time venture funding comes as no surprise, considering that PE/VC funds usually invest in such early-stage companies.
Though current growth trends still tend to favour investments in later stage companies, it is hoped that we continue to see further increases in first-time fundraising activity going forward.