Small Business Equity Tracker 2022 Report Summary


This is the eighth annual Equity Tracker report exploring trends in equity finance for UK smaller companies. This year’s report examines how UK VC markets compare to other countries, especially in relation to funding going to deep tech and R&D intensive sectors. The report also looks at the contribution overseas VC investors and Limited Partner (LP) investors make to the UK VC market.

This section provides an overview of recent trends in equity finance using data from Beauhurst on announced equity deals into UK SMEs. Annual comparisons are made by stage, sector, area and female founders up to the end of 2021. There were 2,616 announced equity deals in 2021, which is a 17% increase on the previous year. 2021 was an exceptional year for UK equity finance with investment reaching £18.1bn, nearly double its 2020 level. Growth has been seen across all three company stages, with the later stage growth activity increasing the most in 2021. Deal sizes and valuations have also increased sharply in 2021 as VC investors have competed for deals. Strong growth continued in Q1 2022 with £7.6bn invested, the largest quarterly amount recorded, despite emerging economic headwinds.

British Business Bank activity

This section presents evidence on the characteristics of equity deals completed by equity funds supported by the British Business Bank, with comparisons made against the overall UK equity market and against VC investors only. British Business Bank equity programmes supported around 14% of all equity deals between 2019 and 2021, but this increased to 18% in 2021. Funds supported by the British Business Bank were more likely to invest in technology/ IP-based businesses than the overall equity market (47% compared to 39%). British Business Bank programmes are more likely to fund academic spinout companies than the overall equity market. 53% of the Bank’s deals went to companies outside of London, which is similar to the overall equity market (53%), but higher than the overall PE/ VC market (48%).

UK VC market compared to other countries

This section compares the size and structure of the UK VC market against several countries using data from PitchBook. The UK remains the largest VC market in Europe with £28bn invested in 2021, substantially larger than France (£10bn) and Germany (£14bn) combined. The UK has relatively high levels of VC activity compared to other European countries but continues to lag behind US despite recent increases in VC funding. The UK has a lower proportion of deals and investment going to deep tech and R&D intensive companies than other countries, which means the overall UK-US VC funding gap is largely caused by differences in funding going to these two sectors.

The contribution of overseas investors into the UK VC ecosystem

This section explores the contribution overseas investors make at both the deal level and at the fund level. Overseas investors have an increasing role in the UK equity ecosystem with 29% of all announced equity deals involving an overseas investor in 2021, but investors having the largest role at the growth stage, where 45% of deals involved an overseas investor. US investors were involved in the highest number of deals per year, followed by European investors from Germany and France. The report explored whether companies that receive equity investment from overseas investors are more likely to exit overseas. The analysis shows companies that have received equity investment from an overseas investor were more likely to have exited abroad, either through an acquisition by an overseas based company or by listing on an overseas exchange. Overseas investors not only contribute funding at the deal level but also contribute the majority (56%) of LP commitments by value into UK VC funds.

Overview of Beauhurst announced deal data

The investment reported in the Equity Tracker are all publicly announced equity deals, excluding transactions on public equity markets and buyouts. Beauhurst captures the investment activity of business angels, equity crowdfunding platforms, venture capital funds, corporate venture and private equity funds.

Small Business Equity Tracker 2022

Our Small Business Equity Tracker 2022 Report provides a comprehensive picture of equity funding conditions for smaller businesses across the UK.

Small Business Equity Tracker 2022Download the report (.pdf, 1.79mb)