Funding activity is on the up as the UK adjusts to a ‘new normal’
By Jonathan Keeling, VP Commercial. 20th May 2020
With over £650 million successfully invested through Crowdcube, our growing community of investors have funded 1,000 raises to help fuel the growth of the next generation of businesses.
Our experience of fundraising in the UK and across Europe gives us unrivalled insight into quantitative measures such as successful company valuations by size, stage and industry through to more broad emerging industry trends and key pitch themes.
What’s awesome is that this insight is real-time. We don’t need to wait to compile reports; we can see these trends emerge daily. There is no doubt the last few months have been a real roller coaster ride for businesses raising finance or planning their future funding strategy. Here is a short summary of what we have observed.
The immediate impact of the pandemic on the early-stage equity investment market in March was stark. Although the slowdown in investment was steady when compared to public markets, and there were a number of raises to celebrate such as Chip closing £2.6 from their community, the knock-on effect to founder confidence in the ability to raise finance was certainly hit.
Investment through Crowdcube in March was £5.9m, which was down 60% year on year (£14.6m 2019).
The general consensus would point to a lack of investor appetite, but what we are now understanding is that the main driver was the lack of founder confidence in raising finance, not to mention that for many, the focus was on putting in place plans to weather this storm.
The response to the crisis by companies in our process and preparing to go live was to, understandably, batten down the hatches, look after their staff and consolidate their positions. There is no argument that this wasn’t the correct approach. This is exactly what we did. Fundraising was put on the back seat.
For what is usually one of our biggest quarter businesses launching with Crowdcube, the site was half its normal capacity.
Fast forward through April and into May, and companies seem to have settled into the “new normal” and fundraising is creeping back up the priority list. The number of businesses pitching for investment is on the up and with that, so was investment. At the time of writing, we have 48 pitches now live on the site, 20 public live and 17 in overfunding. April 2020 investment into live pitches was £9.2m. This is up 58% versus March and although 15% down versus the previous year (April 2019 £10.9m), it's a strong nod that positive sentiment is beginning to return with the average daily investment now over £300k. We have also made a very positive start to May with £2.7m invested in the first 10 days.
A final thought and trend that we have seen over the past few weeks is the significant demand for sustainability focussed, health, wellness, and climate change focussed companies.
At the time of writing, four sustainability-focused companies, Pawprint, Clim8 and Almond Impact, have raised over £2.5million from nearly 3,000 investors. We have seen the demand from retail investors for high impact, socially conscious companies skyrocket, and this trend will certainly only continue. Sustainability, climate, health and wellness will certainly be big categories, but I also think with the latest government announcement to accelerate the uptake of cycling and walking in our cities, general smart city/transport and mobility innovations will also be big.
The broad conclusion here is that founder confidence to go ahead and push on with their funding plans is driving the uptick in investor activity and positive sentiment. For the right businesses, the investment appetite is certainly there, and companies just need to regain that confidence to go out and ask for it!
Although this has been a really tough time for UK SME’s, it is clear that both founder and investor confidence is returning. The companies formed out of this crisis have the opportunity to mould our future way of life. Let's hope the current innovation trends continue at pace so we can accelerate out of the crisis and build a smarter, cleaner and healthier future for all.