So far this year, U.K.-based startups have inked 1,015 deals, down 61.7% YoY from the same period a year ago, per Pitchbook. From the start of Q1 to date, U.K.-based startups raised nearly €7.6B ($8.1B) in VC funding. Deal value slumped by 245.2% from the same period in 2022. Startups raised €4.2B ($4.5B) in Q1. In the current quarter to date, startups in the region have nabbed €3.4B ($3.6B) in VC funding. Judging by the consecutive quarterly declines, funding for U.K.-based startups is expected to remain subdued for the rest of 2023. However, there is cautious investor optimism about a potential recovery in the market, with investors hoping that the worst of the market turbulence is over. The improved geopolitical and macroeconomic conditions could result in positive investor sentiment toward VC funding in the region in the second half of the year. Quarterly funding reached its peak value of €14.5B ($15.5B) in Q1 2022, surpassing the previous peak of €8.9B ($9.5B) from the same time a year ago. VC deal-making slump has hit the U.K. the hardest among European nations due to an unstable political environment, which further exacerbated the impact of the global VC funding pullback. Additionally, the nation has a higher number of mature late-stage startups, which investors are unlikely to invest in right now, given the macroeconomic headwinds. As a result, there were fewer outsized deals, bringing down the total capital invested. Per KPMG's Q1 2023 Venture Pulse report, investors remain optimistic about the B2B technology sector, which is a key driver of investments in the region. Business services and energy transition startups continued to attract significant investment from investors. On the other hand, investors' appetite for consumer retail and real estate startups waned. Funding is also expected to remain strong for alternative energy, cleantech, defense, cybersecurity, and generative AI sectors. Despite the dip, the region did witness a couple of mega-fundraising rounds, including British consumer lending platform Abound's £500M ($623M) funding from K3 Ventures and GSR Ventures and investing platform eToro's $250M round from ION Group and SoftBank. Other notable fundraisers include B2B fintech Bank of London's $160M round, EV automotive startup One Moto's $149M round, and autonomous vehicle software maker Oxbotica's $140.3M fundraiser. Checkout.com remains the highest-valued startup in the region. However, its valuation has fallen from its peak figures of $40B in January 2022 by 77% to $9.35B. Its nearest rival in post-money valuation is Revolut, which had a peak valuation of $33B. In April 2023, investor Schroders Capital Global Innovation Trust marked down the value of its stake in Revolut by 46%. |
