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Venture Capital Now and After the Dotcom Crash

Nesta's research team have just completed a review of the UK early stage Venture Industry.

So, here is the bad news. Over the last 2 years: 

  • Investment activity has seen a 40 per cent reduction. 
  • Number of exits dropped by 40 per cent.
  • Fundraising fell by over 50 per cent both in terms of the number of new funds and total invested funds.

Add to this the following:

  • Across the world, the time taken to successfully exit now averages almost seven and a half years, the longest time seen over the past two decades. 
  • Current fundraising activity is considerably lower than levels seen after the dotcom crash and consequently the lowest level seen in the last decade.

And now for the good news:

  • Where investors are exiting there is evidence they are making good returns. 
  • The significant amounts of capital invested in a large number of new companies between 2004 and 2007 mean there should be a flurry of investments bearing fruit over the next few years – hopefully coinciding with a wider economic recovery and growth in Mergers and Acquisitions activity.
  • The introduction of the Innovation Investment Fund provides opportunities for some VCs raising new funds. 
  • The introduction of Jeremie Funding in Wales, the North West, North East and Yorkshire has ensured that considerable amounts of funding are available in these regions.

Take the sum of the good and the bad news and there is no doubt that the UK Venture Industry has some tough times ahead.

Everything now rides on getting to successful exits and the sooner the economic recovery opens up the M&A market, the sooner Venture Capital will get the opportunity to prove their worth – until then, expect a bumpy ride.

Read the full report here: Venture Capital: Now and After the Dotcom Crash

Author

Matt Mead

Matt Mead

Matt Mead

Chief Investments Officer

Matt led the venture investing team which manages a £25 million portfolio which currently has 20 live investments and five limited partner positions. Following Nesta’s transition to ...

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