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Value of venture capital investment in South West soared in Q3, KPMG study finds

4 December 2023
The Business Magazine article image for: Value of venture capital investment in South West soared in Q3, KPMG study finds
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The value of venture capital investment in South West businesses increased almost sixfold in the third quarter of 2023, with Bristol leading in investment activity, according to the latest Venture Pulse report from Big Four accounting firm KPMG.

A total of £663 million was raised by the region’s businesses from July to September, up 482 per cent from the £114m raised in Q2, according to the report compiled by PitchBook.

'Deal volume down slightly, but holding steady' - KPMG

Despite the significant surge in value of VC investment in the region, the volume of transactions dipped by more than a quarter compared to Q2, from 31 to 23, with Bristol continuing to boast the highest investment activity in the region.

OVO Energy, based in Bristol, significantly boosted VC investment in the region with its substantial £599 million funding round. This round played a major role in bolstering the total investment value in the area.

At a national level, the value of VC investment remained stable in Q3, despite the volume of deals falling by over a third quarter on quarter.

$5.2 billion (£4.2 billion) was invested in UK businesses during the quarter, down marginally on the $5.6 billion raised in Q2.

Deal volume, however, continued to fall, with 469 deals completed during the period, down 34 per cent on the 713 deals completed in Q2, and 44 per cent down on the same period last year (845 deals).

Given the uncertain geopolitical and macroeconomic environment – including concerns about valuations, potential returns, the lack of exits, high interest rates, and other factors – the time to complete VC deals slowed considerably across most regions of the world during the last quarter.

David Williams, office senior partner for Bristol at KPMG UK, said: “While the recent picture reflects a measured approach from investors amidst geopolitical and economic uncertainties, the continued injection of substantial investment into South West businesses underlines their resilience and growth potential.

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"The market is receptive, and businesses are showcasing strong fundamentals, especially those in technology and consumer sectors, significantly driving investment and remaining buoyant in what is a challenging market.

“The jump in South West VC value, significantly strengthened by a huge funding round for OVO Energy, comes against the backdrop of a slow deals market nationally. Investments are taking longer due to heightened investor caution. Notably, investors are now looking for clear paths to profitability and are asking more questions before committing to deals.”

Peter Davison is deputy editor of The Business Magazine. He has spent his life in journalism – doing work experience in newsrooms in and around Bristol while still at school, and landing his first job on a local newspaper aged 19. By 28 he was the youngest newspaper editor in the country.

An early advocate of online news, he spent the first years of the 2000s telling his bosses that the internet posed both the biggest opportunity and greatest threat to the newspaper industry and the art of journalism. He was right on both counts.

Since 2006 he has enjoyed a career as a freelance journalist. He lives in rural Wiltshire with one wife, two children, and three cats.

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