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Investors look to professional service and technology firms

Business and professional service firms attracted increased interest whilst clean and environmental technologies fell out of favour in 2011, research has indicated.

According to UK Funders, the market intelligence organisation who research early-stage funding for UK-based startups and SMEs, institutional investors made 66 early-stage investments totalling £116m during the final quarter of 2011.

Toby Austin, founder of UK Funders, said: “We saw a large decline in the proportion of sub-£500k deals amongst institutional investors last quarter.

“It may be the case that, with renewed talk of recession, investors are as a whole shying away from the earliest stage (and usually highest risk) companies in favour of those that are more established.

“Alternatively, it may be that this lower end of the market is being increasingly occupied by individual angel investors as opposed to early-stage institutional investors.

“Certainly anecdotal evidence suggests that, thanks to low returns from other asset classes, high-risk high-reward (and tax efficient) early-stage investment looks increasingly attractive to many high net worth individuals.”

Technology businesses lead the way in attracting investor attentions, while media and retail businesses fell in popularity in Q4.

The report suggests that a declining interest in Q4 across clean and environmental technology investment could be due to Government cuts to feed in tariffs.

Geographically, London was top both in the number of investments and total amount, whereas the North East represented a smaller amount at just £19.5m.

Toby added: “This could be viewed as negative for the North East as the capital continues to flow predominantly towards the south; but another explanation, that very early stage investment is being encouraged in the North East, could be seen as a positive.”

This was posted in Bdaily's Members' News section by Tom Keighley .