Institutional investors in the UK made 66 early stage investments worth £116 million during the fourth quarter of 2011, research finds.
Institutional investors in the UK made 66 early stage investments worth £116 million during the fourth quarter of 2011, research finds.
The findings, compiled by market intelligence source UKFunders, represents a drop from third quarter findings of £120 million from 75 investments.
Total deal count for 2011 reached 271, with data for 199 disclosed deals showing that investments totalled £450 million. The average deal size for the four quarters reached £2.26 million (see Table 1).
Source: UKFunders
Stephen Bence, director at UKFunders, comments, ‘We saw a large decline in the proportion of sub-£500,000 deals amongst institutional investors last quarter. It may be the case that, with renewed talk of recession, investors are, as a whole, shying away from the earliest stage (and usually highest risk) companies in favour of those that are more established.’
However, Bence believes that this trend could be attributed to investments at the lower end of the spectrum being made by angel investors, as opposed to early stage institutional investors.
He adds, ‘Certainly anecdotal evidence suggests that, thanks to low returns form other asset classes, high-risk and high-reward (and tax efficient) early stage investment looks increasingly attractive to many high net worth individuals.’
The findings also reveal that London leads the way for both deal numbers and amount invested. However, with average deal amounts of £2.7 million, London fell behind the likes of the East of England and the East Midlands, both of which posted higher averages.
Bence says that from a regional perspective, while London is the clear winner in both number of investments and total amount, outside of the capital makes for a ‘complicated picture’.
He adds, ‘We saw £86 million invested in the East of England whereas just £19.5 million went into the North East.
‘This could be viewed as negative for the North East as the capital continues to flow predominantly towards the south; but another explanation, that very early stage investment is being encouraged in the North East, could be seen as a positive.’
The study’s data is based on the monitoring of over 300 early stage equity investors and investment sums between £100,000 and £10 million.
UKFunders provides market intelligence on sources of business funding.
