The private company funding market shows remarkable tenacity in the face of today’s strong, unpredictable economic headwinds. It’s bigger than many might realise; our research using data from Beauhurst suggests 2017 is on course to be a record year for private company fund raising.
The findings indicate that by the end of this year, a massive £4 billion will be raised from around 650 transactions, by ambitious British companies with cheque sizes of between £2 million and £25 million, a key fund raising range for established, growing companies.
Our process is designed to ensure companies only meet investors that are engaged with their story
Beauhurst data, from its extensive database of information on the UK’s start-ups, scale-ups and high-growth companies, reveals a story of phenomenal activity in the private company growth capital market – a big, high volume market that has grown every year since 2011.
Our key findings
- We predict that 2017 will be significantly ahead of 2015 and 2016, with nearly £4 billion being raised in growth capital in 650 deals – a record year
- Technology businesses account for a majority of the transaction activity
- London accounts for 50% of activity, with the North and East England also substantial
- Venture debt is running at 13% of the market
- Institutions provide over 60% of funds
Private company fund raisings by sector
Analysis of 2016 sector-specific data for private company investments, by number of fund raisings, reveals that technology businesses accounted for the majority of transactions. These figures have held for 2017 in the year-to-date; the market has been found to be consistent and predictable.
Transaction activity by sector:
- B2B tech: 38%
- Other tech: 28%
- Business & professional services: 11%
- Industrials: 9%
- Leisure & entertainment: 6%
- Other sectors: 9%
There are well over 100,000 growing companies in the UK
Private company fund raisings by location
Data from 2016 on the regional locations of headquarters of private companies that received investments shows that London took the lion’s share, accounting for half of transactions.
Proportion of fund raisings by regional location:
- London: 50%
- South East: 15%
- East of England: 9%
- North West: 6%
- Scotland: 5%
- Yorkshire & Humberside: 4%
- South West: 4%
- West Midlands: 2%
- East Midlands: 2%
- North East: 1%
- Northern Ireland: 1%
- Wales: 1%
Equity versus debt
In an equity versus debt analysis, Beauhurst 2016 data shows that debt – which includes mezzanine debt, convertible debt, debt provided by angel networks or venture capital firms – at 13% represents a significant portion of the overall growth capital market. Equity-based financing accounted for the remaining 87%.
Institutional investor activity
Most growth capital activity in 2016 was institutional in some form. These institutions included funds, companies, crowdfunding platforms and investor clubs with investment professionals involved.
Growth capital activity:
- Institutions: 61.3%
- Undisclosed: 31.2%
- Business angels: 7.4%
How finnCap can help
Despite the dynamism of the private growth market, investors and companies are frustrated. There are well over 100,000 growing companies in the UK, hundreds of investing institutions, companies and family offices, each with different investing criteria, and vast numbers of individual investors. Precious resources are wasted on meetings about transactions that do not fit the investor’s criteria.
Too often the investment story is not developed enough for an investor to commit or the right data is unavailable to do due diligence. This is where finnCap can help. Our process is designed to ensure companies only meet investors that are engaged with their story, are fully funded and are ready to deploy. Our team shares an intuitive ability to marry great investment stories with the right investors, and we do this for both public and established* private companies. Ultimately, what investors and companies want a process that is as efficient as possible, which is where we come in.
If you’re an established* private company looking to raise significant** funds, please contact firstname.lastname@example.org.
* By ‘established’, we generally mean companies with historic annual revenues of at least £1m, that are monetising their business models and have gained traction in a meaningful way beyond start-up or early stage development.
** We broadly define ‘significant funds’ as in excess of £2 million.