Funding for tech startups raising investment for the first time has fallen by 83% in lockdown.
British tech startups have raised £1bn (£1,037m) since lockdown, but only £52m has gone to those trying to raise investment for the first time, according to new research released today by Plexal and Beauhurst.
While investors are clearly still injecting capital into British businesses, it is early-stage tech startups and entrepreneurs who have never raised money before – often those that are most desperately in need of funding – that are being hardest hit.
Plexal, the innovation centre and workspace owned by clients of Delancey, and Beauhurst, the UK’s leading database for fast-growth companies, have analysed nearly 30,000 startups and fast-growth businesses (companies that have attracted equity or venture debt funding) to understand investment activity since lockdown.
The research is designed to provide an accessible, factually-driven window into the state of the UK’s startup community and tech sector and can be found at plexal.com/startup-tracker
The analysis shows there have been 61 deals for first-time tech startups, which represents a fall of 20% compared to the same eight weeks last year. The total value invested into tech startups raising investment for the first time has plummeted by 83%.
The total value of the 61 investments into first time startups is just £52m, meaning that investors are committing, on average, less than £1m into these companies per funding round.
While there were initial signs of resilience immediately after the country went into lockdown on 23 March, with considerable investment activity in early April, the impact of COVID-19 is starting to limit start-up funding. There were 35% fewer deals and a 50% drop in funding compared to the same eight-week period in 2019.
This is a trend that is accelerating, with the drop in funding reducing by 73% for the second four weeks of lockdown, compared to a 37% increase for the first four weeks of lockdown.
The biggest five deals for British tech startups since lockdown include:
• Cazoo £100m
• Onfido $100m
• Bought By Many £78.4m
• Privitar $80m
• Compass Pathways $80m
The biggest five deals for British tech startups that haven’t previously raised investment include:
• Audiens £6.4m
• Living Optics £3.3m
• Primer £3.2m
• Addionics £2.8m
• IRIS £2.4m
Andrew Roughan, Managing Director of Plexal, comments: “While tech companies are still raising funding in the UK, we risk losing a generation of tech entrepreneurs at the earliest stages of their startup journey. The research shows that government support can’t come soon enough for the early-stage tech companies that are unable to raise investment as a result of COVID-19.
“By only backing companies that have already raised funds, investors are ignoring the very companies that will define the future success of the British economy.”
Henry Whorwood, Head of Research and Consultancy at Beauhurst, comments, “Whilst investors injected the capital requited to protect their portfolio companies immediately after lockdown, we are now seeing a much more cautious and risk-averse investment landscape. The figures for first time funding shows a stark drop in the levels we’ve come to expect in the UK and suggest that the weeks to come will be very challenging for early stage tech companies.”