Surging Private Equity: The Real Winners
Despite an uncertain domestic economic and political climate, a record level of equity investment is happening across the UK and Europe, enabling growth (or "scale-up") stage businesses to make a transformational investment in their pace of growth.
The team at The Summerhill Group have taken a look at what is happening in the market, and the barriers that founders and boards face in todays market.
EQUITY INVESTMENT IS HITTING RECORD LEVELS
Total fundraising in Europe in 2017 reached £82 billion (€91.9b), Europe’s highest level since 2006, and a 12% year on year increase.
The number of companies receiving investment increased by 7% to almost 7,000 -- of which, 87% were SMEs.
Source: Invest Europe
THE PERCEPTION THAT PRIVATE EQUITY & VC INVESTMENTS ARE LIMITED TO NEW, TECH STARTUPS ISN'T ACCURATE.
In the UK specifically, a plurality, or 34%, of growth stage businesses receiving equity investment have been in operation for over 20 years. This contrasts with 22% of 10-15 year old companies and 25% for 5-10 year old businesses.
The majority of scale-ups operate in non-technology sectors. The most common are professional services, industrials, infrastructure, retail, supply chain and technology firms. (Though there were plenty of deals for leisure, personal services, energy, transport, media and telecoms as well).
664 UK SCALE-UPS RAISED BETWEEN £500K - £10m IN GROWTH CAPITAL LAST YEAR
Outside of early stage venture capital, the largest number of deals were completed with a raise of between £2m - £5m in equity capital.
SCALE UP OPPORTUNITIES EXIST ACROSS THE UK:
Another mis-preconception is that all funding is ONLY concentrated in London and the South East. London businesses actually only account for 21% of deals, and the South East 14%,.
The rest of the UK sees a large deal flow with the North West and East of England both accounting for 10%, and the West Midlands and Yorkshire/Humberside both receiving 8%.
Also interesting is that the average 'scale-up' director is 54 years old. Just under 3% of scale-ups have a director younger than 30,
BUT THERE ARE BARRIERS TO ACCESSING EQUITY CAPITAL:
Despite record levels of equity capital investments going into scale-ups in the UK and Europe, businesses considering capital raises still face key challenges:
Putting together a compelling proposition. The reality is that record levels of investment have also seen private equity firms, VCTs, traditional venture capital firms, LPs, and family offices flooded with pitches.
Making sure that you've packaged your business and the investment opportunity in the most compelling possible way can make all the difference - but doing this properly can be challenging and time consuming without experience.
Finding the right investors is difficult. There are thousands of investment firms in London alone, all with their own criteria, all with their own track records, specialities and expectations.
Finding the right partners can feel impossible and pitching them without an introduction can cause frustration. Without a coherent strategy and a partner to manage the time consumer process, fundraising can take key leaders away from running their businesses for long periods of time.
HOW DOES THE SUMMERHILL GROUP HELP?
Our expertise is in helping entrepreneurs and growing businesses get investor ready and raise equity capital from investors.
Get in touch today!