Seed Deals Drying Up as Venture Deals Rise

Last year saw deals worth under £500k diminish as megadeals shot up, as indeed an astounding 112 mega deals took place throughout 2021, and London seems to be the axis of this proliferation, according to Beauhurst.

Throughout the majority of the past 10 years, investors have been placing more and more capital in single rounds, signaling a maturing market as more companies are reaching the stage which they need to be at to be able to manage more weighty capital.

This trend throughout the past decade has occurred together with a diminishing in both the proportion and the number of smaller deals worth less than £500k taking place.

Compared to 2020 which saw 835 of these deals taking place and 2019 which saw 669 of them throughout the year, just 713 of deals in 2021 were below the value of £500k, representing just 29% of these deals in 2021.

Most commonly, these small-ticket rounds have been found essential for early-stage companies to gain momentum and build traction during its initial stages, but with capital so cheap and easily accessible, it looks as if many companies are managing well without these small rounds and jumping ahead to larger deals.

This is certainly made evident from the fact that fewer than 50% of first-time equity rounds in 2021 had a value under £500k.

Instead, megadeals – investments that are worth at least £50 million – dominated the equity fundraising scene of 2021 and have become an essential part of the UK’s innovative power, breaching the 100 mark for the first time last year.

In 2021, 5% of deals were worth more than £50 million, compared to just 2% in 2020.

In the face of this rapid increase in megadeals, there are significant regional disparities in the number of megadeals taking place within the UK, with 100% of these deals going to companies based in England, and only 25% going to companies based outside of London.

Owing to the sheer size of these megadeals, they often include funding from foreign investors. In fact, 87% of megadeals which materialised in 2021 have comprised of funding and participation from foreign investors, and 71% included contributions from at least one US-based fund.

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