In 2022, in both the tech sector specifically and the wider finance market, there was a decline in the amount of equity investment in UK small businesses. According to the British Business Bank‘s annual Small Businesses Equity Tracker, both have seen a drop of 11 per cent in equity investment.
Despite the concerning trends, there are some silver linings. The Tracker found that three tech subsectors are growing during these rough times. Cleantech, nanotech and space tech have all continued to find success. Specifically, cleantech equity investment grew by over 50 per cent, amounting to £900million.
Furthermore, an argument could be made that the UK is leading the charge when it comes to nanotech innovation. According to the British Business Bank, global venture capital (VC) has increased by more than 130 per cent between 2017-29 and 2020-22. Meanwhile, the UK funding has grown by more than 220 per cent.
This should come as no surprise as the UK has raised more than France, Germany, Canada, Japan, Israel and Sweden combined. This is largely due to the fact the UK has had a large global market share in nanotech this last decade. In fact, it ranks as the third-largest market in the world.
The last subsector which is finding success is space tch. The space technology industry is entering a new era of commercial innovation. It has lower costs and is using new technologies to facilitate investment in new areas such as space tourism. VC finance increased in the sector by 223 per cent in 2020-22 compared to 2017-19.
Furthermore, the UK ranked third in the percentage share of space tech deals (seven per cent) in 2020-22. The US and China took first and second place. If the UK wishes to keep pace with those two countries, it requires larger funding rounds.
Louis Taylor, CEO, British Business Bank, said: “The tech sector is still attracting a healthy level of venture capital investment, but it has shown it is not impervious to the wider economic conditions. It’s promising to see cleantech bucking this trend as investors look to support environmentally motivated technology.
“At the British Business Bank, we are committed to backing innovation, ensuring innovative businesses can access the right capital to start and scale. The data in our latest report shows evidence that this priority is being felt across the small business equity market.”
A record year for university spinouts
University spinout deals acquired a total of £2billion in equity investment (a 12 per cent share of all investments). The average deal size was 33 per cent high than the wider market, averaging £8.9million per deal. Of all equity deals in the UK this year, eight per cent were in university spinouts, totalling 226 deals.
The creation of spinout companies is an important avenue. Through it, founders and universities can commercialise academic research. The development and increasing financing of these spinouts highlight the important role they play in creating high growth, innovative companies in the UK.
Looking at which institutions recorded the highest number of spinout deals:
- The University of Cambridge, with 33 deals
- The University of Oxford, with 31 deals
- The University of Edinburgh, with 15 deals
Spinouts from either Cambridge or Oxford raised £12.7million on average across 192 deals between 2020-2022.