Corporate VCs have South East innovators in their sights as investment levels reach new heights across the UK

• £19.5bn raised by UK scaleups so far in 2021
• Corporate Venture Capital (CVC) in businesses in the South hit £808k in Q3
• Deals in the South make up 10% of all UK deals in Q3, and 9% of all UK deal value
• Significant South East investments included Oxford-based Beckley Psytech, which secured funding in a round led by Adage Capital Management

The capital was raised across 73 deals in the region, representing 10% of all UK deals by volume during the quarter, and 9% of all UK deal value.

Among the significant investments in the South East, Oxford-based Beckley Psytech raised £58m from multiple venture capital investors, including Adage Capital Management, Bicycle Day Ventures and Delphi VC.

Beckley Psytech, which develops psychedelic medicines to treat those suffering from neurological diseases, will use the funding to support vital research programmes.

Sami Fairris, Corporate Finance Director at KPMG in the South East, commented: “It has been encouraging to see the strong investment in the region over the last few months, in part driven by the ongoing pandemic effect of accelerated digital transformation and disruption. Businesses in the region are continuing to showcase to international investors why the UK, and the South specifically, is such a valuable place to invest.

“In particular, it’s been great to see the role our firms are playing in international advancement. For example, the vital research Beckley Psytech is doing to support developments in treatment for mental and neurological health.”

National picture

The KPMG survey found that there was a record high of over £6.5 billion invested by Venture Capital (VC) in UK scaleups over the summer.

After two extraordinarily high quarters in 2021, UK scaleups continued to attract funding from across the globe in Q3 21, with eager investors prepared to pay premium prices for strong UK innovators with a proven track record. Nearly £20 billion of VC investment has been raised so far this year by scaleups in the UK.

While fintech was the hottest area of investment in the UK, a diversity of other companies also attracted funding – such as virtual event platform Hopin (£330 million), electric vehicle subscription service Onto (£175 million), AI/ML accelerator company Graphcore (£162 million), and flower delivery service Bloom & Wild (£125 million).

Commenting on the investment finding its way to UK innovators, Bina Mehta, Chair of KPMG UK and Head of the firm’s UK Emerging Giants Centre of Excellence, said: “The strength of the UK innovation brand is flying high with areas such as artificial intelligence (“AI”), cybersecurity and FinTech attracting interest and finance from greater numbers of new players to the UK market, driving up valuations for our most sought-after innovators.

“Our recent CEO survey found that disruptive technology was cited as the biggest threat to large corporates, so it is unsurprising that in order to accelerate their digital transformation or boost their digital capabilities, many are now partnering with, investing in, or acquiring innovative scale up businesses.

“Corporate Venture businesses have driven some of the largest rounds of funding for UK innovators.  The increased dependance we all have on technology has seen large amounts of funding flow towards fast growth businesses with a success story to tell around new products and services that are helping us all to adapt to a new remote world.”

VCs focus on sustainability

With all eyes focussed on COP26 next month, investor interest in sustainability-driven startups remains high.  In the UK over £750 million was raised by sustainability startups in Q3 2021 alone. The energy sector continues to attract the highest levels of investment from a range of sources.   This quarter for example, UK energy company Octopus Energy, raised £400 million from Al Gore Generation Fund from the US.

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 21 offices across the UK with approximately 16,000 partners and staff.  The UK firm recorded a revenue of £2.3 billion in the year ended 30 September 2020.

KPMG is a global organization of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 147 countries and territories and has more than 219,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

Venture Pulse Methodology

KPMG uses PitchBook as the provider of venture data for the Venture Pulse report.  Data is correct as of 1st October 2021. 

PitchBook defines venture capital funds as pools of capital raised for the purpose of investing in the equity of startup companies. In addition to funds raised by traditional venture capital firms, PitchBook also includes funds raised by any institution with the primary intent stated above. Funds identifying as growth-stage vehicles are classified as PE funds and are not included in this report.

A fund’s location is determined by the country in which the fund is domiciled; if that information is not explicitly known, the HQ country of the fund’s general partner is used. Only funds based in the United States that have held their final close are included in the fundraising numbers. The entirety of a fund’s committed capital is attributed to the year of the final close of the fund. Interim close amounts are not recorded in the year of the interim close. Mega-funds are classified as those of $500 million or more in size for the following fund categories: venture and secondaries.

The Venture Pulse does not contain any transactions that are tracked as private equity growth. PitchBook defines a PE growth round as a financial investment occurring when a PE investor acquires a minority stake in a privately held corporation. Thus, if the investor is classified as PE by PitchBook, and it is the sole participant in the recipient company’s financing, then such a round will usually be classified as PE growth, and not included in the Venture Pulse datasets.