Data from Pitchbook shows that deals from the first months of this year are down by half from last year’s figures. While Beauhurst reports unannounced fundraising is still taking place, there’s a delay in the availability of this data, as filings are still to arrive at Companies House.
As of 2 April these are the figures known to us courtesy of data-driven companies such as Beauhurst:
- Over the course of Q1 2020 just 344 announced equity deals have been made into private UK companies.
- Only 95 deals were announced in March 2020, which totalled £595m, compared to 174 in March 2019, which totalled £1.46b.
The disruption caused by COVID-19 has led to the following trends:
- Founders who pretty much had the deal in their bag pre-COVID-19 period are now experiencing investors pulling out funding agreements at the last minute.
- Some investors are taking advantage of early stage businesses which may be quickly running out of options by demanding them to slash their valuation.
- Startups in travel, hospitality and retail industries have seen their income evaporate, cash-hungry biotech start ups are having to go lean, and hardware firms have seen supply chains shattered.
- Most funds are trying to put more focus into their existing portfolios.
Experts at Beauhurst claim that while more established businesses are able to take advantage of the government, Coronavirus Financial Support Schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS), which requires a business to “have a borrowing proposal which the lender would consider viable, were it not for the COVID-19 pandemic”, equity finance will experience an increase in demand from early-stage businesses.
However, while schemes like the CBILS are not focussed towards the early-stage businesses in their first two years of trading. Young businesses still have an array of debt funding options available to them enabling them to not give into the investor’s unrealistic demands. As listed below.
- British Business Bank's Start Up loans programme: a government-backed personal loan available to individuals looking to start or grow a business in the UK. Start Up Loans offer an affordable source of finance to help new and early stage business owners bring their plans to life. One can borrow between £500 and £25,000 at 6% p.a. (You can register your interest here. Find more details about delivery partners here).
- Loan Finder: a platform that gives companies access to over 140 funders and products with funds available from £500 to £50 million! It's simple, efficient, free and fair. You simply need to register on the platform here and the team will review the form and assess funders best suited to the business situation, including funders delivering the CBILS support where appropriate.
And let’s not forget about the type of funding that has always been there for businesses, especially the innovative ones - Grants and R&D:
Given the pandemic’s impact on the Retail and Hospitality industry the government has announced the Retail and Hospitality Grant Scheme which provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.
Meaning, for businesses in these sectors with a rateable value of under £15,000, they will receive grants of £10,000. And for businesses in these sectors with a rateable value of between £15,000 and £51,000, they will receive a grant of £25,000.
Followed by the UK Chancellor Rishi Sunak’s plans to dramatically increase public R&D investment to £22 billion per year by 2024-25. This increase would be the largest and fastest ever expansion of support for basic research and innovation, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations and creating an innovation-intensive and technology-driven economy.
What does the future hold?
The overall number of deals completed will decrease in comparison to past years as investors will take a more guarded approach to risk than before. This means a decrease in the number of megadeals completed as well. However, investors might double-down on their existing investments, and put up more capital for their struggling portfolio companies in order to help keep them above water.
On the other hand we anticipate an increase in demand for debt funding where alternative sources of finance will become mainstream and there will also be an increase in competition for the available government grants.
Confused about your options? We have a strong team of experts that can provide advice on Grants & R&D, Business Loans, Investments and tailored support with Equity Funding. Simply drop us a line at firstname.lastname@example.org with your query. To make the process faster don’t forget to mention the type and size of funding you are looking to secure and in case of equity funding it always helps to send across a pitch deck so we can assess your options more promptly.