Recent analysis from PitchBook highlights shifts in the UK’s venture capital landscape, underscoring changes in deal sizes and valuations.
- Venture capital activity in the UK, while showing increased deal sizes, is experiencing a decrease in the number of total deals.
- Eased economic pressures, including reduced interest and inflation rates, have fostered a more conducive environment for venture investments.
- Prominent funding rounds in Q3 include Flo’s £156m Series C and Amber Therapeutics’ £78m Series A, indicating growth in certain sectors.
- Despite growth in valuations, disparities remain between the UK and broader European venture capital landscapes.
New data from PitchBook suggests that the UK’s venture capital market is exhibiting signs of recovery. While the number of venture capital deals has decreased, there’s a notable increase in the size and valuation of those deals. This trend is primarily observed as economic pressures, such as high interest and inflation rates, have lessened. Central banks have played a critical role in this recovery by reducing interest rates, which, along with favorable inflation trends, has created an improved environment for dealmaking.
Specifically, the report highlights some key developments in the third quarter of 2024. Notable funding rounds include a £156 million Series C for the women’s health app, Flo, and a £78 million Series A for the med-tech firm, Amber Therapeutics. Another significant round includes £60 million in Series B funding for the robotic warehouse technology provider, Dexory. These examples reflect the growing investment in technology-driven sectors despite an overall decline in the number of deals.
Although the number of deals has decreased, the valuations at various funding stages have shown interesting dynamics. In the UK and Ireland, median pre-money valuations have risen at pre-seed, late-stage, and venture growth stages, even as seed-stage valuations remained flat and early-stage valuations fell. For example, pre-seed valuations in these regions averaged £3.2 million, marking a 31% increase from the previous year. However, at the venture growth stage, the valuations averaged £16.8 million, a smaller 5% increase compared to 2023.
When compared to the rest of Europe, valuations in the UK and Ireland are slightly lower. For the third quarter, the median European seed valuation was £4.5 million, compared to the UK’s £4 million. Similarly, at the venture growth stage, the European average stood at £20.8 million, while the UK averaged £16.8 million. According to PitchBook, the dispersion of price points and higher activity levels in the UK may contribute to these variances, yet the UK continues to serve as a robust benchmark for European venture capital trends.
The UK’s venture capital market is navigating a landscape of larger deal sizes amid fewer rounds, maintaining a significant role in the European ecosystem.
