Funds available for businesses with a strong path to growth

Last year VC investment into UK businesses fell by 45 per cent amidst a backdrop of geopolitical and macroeconomic challenges and a parched exit environment, and 2024 is likely to be as challenging as these factors continue and a general election leaves investors taking a cautious review of the market.

In the opening quarter of this year, nearly £335 million of VC financing was invested in businesses across East Anglia, significantly up year-on-year according to KPMG’s global Venture Pulse report.

It’s a strong sign that there‘s still finance available for scale-up businesses, particularly the types of innovative, tech-focused companies being started and nurtured in the East of England.

Our latest data shows us that there is particular resilience in early-stage investments up to Series-B, which underscores this idea that for investors there has been a shift towards sustainable growth and prudent unit economics over growth-at-all costs strategies.

The downtrend in Series C and D deal sizes likely reflects investor caution due to a lack of clarity on exit strategies in the current economic landscape. VCs and private equity players do have cash to spend but investors are hesitant to commit larger funds as they may need to maintain their stakes for extended periods or further rounds. This trend, suggests a strategic pivot towards value and longevity over rapid scaling.

That’s good news for startups, especially many of those that may be facing a difficult funding market. Competition for funding is fierce, but being able to demonstrate a strong business model, with robust governance and management will be vital in securing investors.

The new focus on strong gross margins and effective customer acquisition strategies underscore a balanced approach to risk management and value creation, favouring sustainable growth and financial stability.

These challenges will likely remain in 2024, but as economic conditions stabilise and once the uncertainty of the general election is cleared away, we expect 2025 will see a much improved finance environment for fast growth businesses.

From talking to investors, here are our top tips for businesses looking to raise finance in the current environment:-

• Funding rounds are taking twice as long as they used to so plan accordingly

• Make sure you have all your material ready and organised in a data room for an investor to review

• Try to engage with as many investors as possible; there are lots of founders chasing the same investors.

For further information contact Joe Faulkner.