Our Small Business Equity Tracker 2021 report provides an in-depth assessment of equity finance for smaller businesses. It is intended not only to inform the development of the Bank’s own strategy, but also to inform wider developments in both the market and government policy.
This year, the seventh edition of the report, consists of four chapters covering:
- Summary of activity in 2020 and Covid-19’s impact, as well as a headline summary of deal and investment activity in Q1 2021.
- Deep dive into deep tech and R&D-intensive sectors in relation to the wider UK VC ecosystem, making comparisons to the US and Rest of Europe.
- The current environment for exits for equity backed companies with commentary on recent developments such as the emergence of SPACs and Government reviews on public markets for innovative companies.
- An overview of equity deals made by British Business Bank supported equity funds in 2020, including deals made by the Future Fund, with comparisons made by stage, sector, region and gender composition compared to the wider equity market.
- Equity finance in UK smaller companies reached record levels in 2020. Equity investment reached £8.8bn – up 9% on 2019 despite the Covid-19 pandemic. The number of deals also increased by 5% to 2,044.
- Investment in UK deep tech companies has continued to grow rapidly in the past five years, rising 291% to £2.3bn in 2020. The number of deals also increased by 78% to 440 in the same period. This is higher than the increases seen in the number of deals in the US and rest of Europe – 66% in the US and 73% in the rest of Europe.
- While overall investment in the UK has grown, UK deep tech companies are still lagging behind the US. UK deep tech companies receive substantially smaller rounds of funding than the US. The average UK deep tech company raises £24m after six rounds of funding, compared to the £113m raised by the average US deep tech company after six rounds.
- Levels of investment vary widely by industry, with the UK’s thriving tech sector remaining the most attractive to investors and accounting for 46% of total equity investment in UK smaller businesses in 2020. Investment into smaller UK tech businesses increased 7% to £4bn with the number of deals rising 12%, as the sector benefitted from an increase in digitisation and remote working caused by Covid-19. Within tech, software continued to receive the largest share of deals (500 deals worth £2.5bn).
- The Bank supported around 21% of all announced equity deals in 2020 up from 10% in 2019. This is due in part to the contribution of the Future Fund, which is estimated to have supported 11% of the UK’s announced equity deals last year.
- The concentration of deals undertaken in London by Bank supported funds has reduced sharply, from 68% in 2016 to 42% in 2020 and Bank equity deal activity is becoming more regionally diverse, with 58% of deals outside of London compared to 32% in 2016.
 Due to different methodologies, Beauhurst data on tech sector investment is not directly comparable to PitchBook data on deep tech investment.