Q4 2013 ended on a rather positive note, with global economic conditions seemingly being favourable for the growth of the UK venture capital market. US private equity markets closing at record highs, eurozone economic recovery accelerating and UK productivity, an indicator of domestic economic recovery, also increased. However since the turn of the year, US equity markets have become volatile and the eurozone has become considerably more risky due to the Ukraine and Russia conflict, indicating a less-than-positive outlook to 2014 than what was being projected in the previous quarter. Has this left venture investors stand-offish in Q1?
Q1 2014 saw the largest quarterly number of venture capital-backed IPOs of UK-based companies in the last eight years, with three exits with an aggregate exit value of $505mn. However, trade sales dominated the quarter’s exit opportunities, with six accounting for 60% of total number of Q1 2014 exits, with an aggregate exit value of $592mn. It is noticeable that when comparing Q1 2014 to previous Q1 exits since 2007, the first quarter of this year comes out on the top, with $1.1bn in aggregate exit value, a 240% increase on the next most successful start of the year, which was $477mn in Q1 2011.
The first quarter of 2014 has also seen the largest quarterly number of venture capital deals in comparison to the last eight years’ first quarters, with 117 deals at an aggregate value of $715mn, only second to Q1 2008: $776mn. 2014’s Q1 aggregate deal size is also larger than each quarter in 2013, which had an average quarterly deal size of $506mn.
The internet sector harboured the most venture capital deal activity in Q1 2014, 41, accounting for 35% of all deals, and in terms of aggregate deal value, $226mn. Software followed with $98mn, with clean technology having the third largest aggregate deal value: $96mn.
Since 2011, seed investments represented the largest number of any venture capital rounds in Q1, with 28 such financings taking place in Q1 2014 and attributing to the overall dominance of early stage deals (angel, seed and Series A) - 48 of 117 total deals for the quarter. Seed deals, not surprisingly because of the smaller nature of these rounds, account for $28mn (4%) of the total in Q1 2014, but all early stage deals represent 25% at an aggregate value of $181mn. The most interesting figure here, however, is a leap of 1500% in number of growth capital deals from Q1 2013 to Q1 2014, with an $114mn increase in aggregate deal value.
Despite the uncertain start to the year in the global economic picture, these figures indicate an extremely positive outlook for UK venture capital activity moving forward in 2014.