KPMG study finds venture capital investment in the North East has more than doubled in Q2

The value of Venture Capital (VC) investment in North East businesses more than doubled in the second quarter of 2023, according to KPMG’s latest Venture Pulse report.

A total of £23.9m was raised by the region’s businesses from April to June, up 132% from the £10.3m raised in Q1, according to the report compiled by PitchBook.

Despite the volume of transactions dipping slightly quarter-on-quarter, from eight to six, a single fundraising round of more than £14m significantly raised the Q2 total value.

Newcastle-based businesses raised the vast majority of the £23.9m, with a £400k funding round co-led by Maven Capital Partners for Gateshead-headquartered warehouse operator The Storage Place the only investment based outside of the city.

At a national level, VC investment into the UK remained stable in Q2, as investment levels start to find a new normal following the record levels seen in 2021 and early 2022. £3.2bn was invested in UK businesses between April and June, with 551 deals completed during that period, down from £3.6bn from 715 investments in Q1.

Commenting on the data, Ian Beaumont, office senior partner for Newcastle at KPMG UK, said: “It’s encouraging to see that, against the background of ongoing economic uncertainty, the North East continues to attract robust levels of VC investment.

“This comes as the region establishes itself more as a real global player, particularly in the areas of innovation and technology thanks to further devolution, new investment zones, a burgeoning energy sector and enhanced 5G connectivity. Further afield, the more moderate levels of activity that we’ve seen in the first half of 2023, following two years of bumper global investment, most likely represent a new normal for the UK.

“In addition, investment levels so far this year are higher than those seen pre-pandemic which represents growth under difficult circumstances. The market is willing and many businesses have strong fundamentals, but we are going to need a period of stability in order to see continued growth in VC investment levels in the UK.”

The global picture

With no end in sight to market challenges, VC investors globally continued to hold back from making large mega-deals and late-stage deals in the quarter. More broadly, the steep decline in late-stage deal value and number of deals particularly for Series D+ deals continued in Q2’23. This continued pullback was not a surprise given ongoing investor concerns about valuations and a lack of exit opportunities the report found.

US-based payments company Stripe’s $6.9bn raise was by far the largest VC round of the quarter globally. After Stripe, Singapore-based online marketplace startup Shein raised the next largest deal ($2bn), followed by US artificial intelligence startup Inflection ($1.3bn) and India-based educational technology company Byju’s ($700m).

In the UK more than 60 per cent of completed deals in the first half of 2023 were at seed, early and series A stage, showing that innovative, high-growth potential businesses are appealing to investors.

By Mark Adair – Correspondent, Bdaily

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