Equity investment in the UK’s tech SMEs has shown a significant increase by rising 27% in 2019 to £4billion, the highest amount since the series began recording in 2011, this is according to the British Business Bank’s annual Small Business Equity Tracker report.
The tech sector continues to remain a highly attractive area for many equity investors and accounts for 47% of the total invested in UK SMEs from a total of 691 deals in that year.
Within the tech industry, the sectors receiving the largest share of the deals secured in 2019 was the software industry followed by the life sciences sector. The niche areas attracting the largest value of investment last year were the SaaS (Software as a Service) (471 deals worth £2.5bn), FinTech (193 deals worth £1.8bn) and AI tech(173 deals worth £880m).
SaaS companies are seen as particular w attractive to equity investors with may offering a subscription based model which allows for huge returns on investment if the proposition is desirable in it's particular field.
The Small Business Equity Tracker report from the British Business Bank, which analyses Beauhurst data on equity investments throughout the UK, provides an important benchmark of the market immediately prior to the Covid-19 pandemic.
It shows the value of total equity investment in the UK’s SMEs rising 24% to £8.5bn in 2019 – which is the highest amount recorded – and a record number of deals. agreed in a year.
Also, 52% of these deals took place outside London which is encouraging for regional businesses as London has dominated the tech sector for many years. The South West, Scotland and Northern Ireland showing a strong increase by deal numbers.
Keith Morgan, CEO, British Business Bank, said: “The UK’s small business equity finance market saw a record year in 2019 with investment amounts soaring to £8.5bn. This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business.
“The British Business Bank’s equity programmes are estimated to have supported around 11 per cent of all equity deals in UK SMEs in 2019.
“As the economic impact of Covid-19 continues to affect businesses across the country, the work of the Bank has never been more important. Ensuring a wide range of innovative and ambitious smaller businesses continue to have access to equity investment to support their growth plans will be essential to the UK retaining its world-leading position in science, innovation and technology.”
Unsurprisingly, the Covid-19 outbreak is expected to have a significant impact on UK SMEs’ ability to raise equity finance in the short-term. The Bank’s analysis of Beauhurst data showed that 43% of all UK equity backed SMEs have been at least moderately affected by changes in delivery and demand for their products and services due to economic factors following lockdown.
Alice Hu Wagner, the bank’s Managing Director, Strategy Economics and Business Development, said:“The Equity Tracker report illustrates a strong interest in growth stage investment in the equity market in 2019, with a particular focus on tech businesses. Ensuring our high-potential later stage companies have the capital they need to compete on the global stage will be crucial to powering the economic recovery.”