U.K. Tech Investment Quadruples as Deals Growth Outpaces Europe

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Equity investments in smaller U.K. “deep tech” businesses rose nearly three fold in the past five years, driven by deals growth that outpaced increases in the U.S. and the rest of Europe, according to a report from the British Business Bank.

Deals increased 78% in the U.K. compared to 66% growth in the U.S. and 73% on the continent, the report showed. Still, the amount raised from selling equity to investors lagged far behind the U.S., where the market is more mature, with the average small British tech company getting about 24 million pounds ($33.8 million) after six rounds of funding. That’s less than a quarter of the average U.S. business.

Tech investments helped push total small-business fundraising to 8.8 billion pounds in the U.K. last year, the highest level since records began in 2011, according to the report. First-quarter fundraising this year also hit a new high with companies getting 4.5 billion pounds in investment.

“The levels of investment vary widely by industry, with the U.K.’s thriving tech sector remaining the most attractive to investors and accounting for 46% of total equity investment in U.K. smaller businesses,” the British Business Bank said in the report.

Technology companies are seeing valuations soar as investors pour money into the industry, and British startup fundraising rounds have jumped to the hundreds of millions of dollars. Robotics maker CMR Surgical Ltd. is looking to raise more than $200 million in a deal that could increase its market value to as much as $2 billion, people familiar with the matter said in April. London-based health-care app Babylon agreed to merge with a blank-check firm this month at a $4.2 billion valuation just two years after getting $550 million from investors.

The British Business Bank is a U.K. government-owned development bank that helps smaller businesses access financing. The report used figures from the Beauhurst database of high-growth U.K. companies.

©2021 Bloomberg L.P.

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