HM Insights

Equity investment in the UK – alternative finance continues to rise in uncertain times

This month we have seen the unveiling of the most recent Beauhurst Report – The Deal - which provides data and statistics on equity investment in the UK in 2016. Beauhurst tracks the UK's non-listed high-growth companies and its 2015 report made a number of predictions which have proven accurate. The headline statistic was that that overall UK equity investment deals in 2016 were down on those in 2015.

Money Graph Investment Equity Crowdfunding Lawyer Scotland Alternative Finance

Although the 2016 figures at first glance show that investment in the UK is down, it's not all doom and gloom. There are certain areas and sectors where the figures have risen. Life sciences businesses, for example, saw an increase in investment by 19%.

Crowdfunding is the one source of equity funding which continued to see steady growth in 2016. In fact, Crowdcube and Seedrs have seen over 20% of all UK equity investment deals done come through their platforms. These platforms are recognised as the big players in the market, accounting for 86% of all crowdfunding activity in the UK in 2016 which meant 258 equity crowdfunding deals between them.

Crowdfunding – now for serious business

As legal advisers we are continually receiving enquiries from businesses at all stages in their life cycle, and we have acted for businesses which have raised equity funding through both Crowdcube and Seedrs. We began our involvement in crowdfunding back in 2013 which saw us advise a business on one of the most innovative crowdfunding deals to have been carried out in Scotland to date. Since then we have seen crowdfunding grow in popularity and it is something which we regularly discuss with our clients as a means of funding.

We no longer get the looks of horror from clients when we suggest such a means of finance, and people now are much better educated in what crowdfunding is all about, and some of the benefits of raising capital this way.

The Beauhurst report also highlights that the type of businesses using crowdfunding is changing, and it is seen as something used by larger and more established companies now too. It is not just something which is used for seed stage investment.

Land of opportunity? Scotland still at the forefront

2016 has been an important year from a political and therefore economic perspective, and inevitably the markets have felt the effects of this uncertainty. In the face of this, however, Scotland has seen the second largest UK equity deal in the UK, with the founders of Skyscanner exiting for £128million.

Edinburgh also features specifically in the Beauhurst report as having £155million invested in 29 deals, which puts it as one of only two regions outwith the south east to make it into the top 10 performing regions in terms of equity investment.

The latest Beauhurst Report leaves it open as to how 2017 might go in terms of deal numbers, but it is clear that businesses are having to take more innovative approaches to growth and funding and that options such as crowdfunding are increasingly relevant as a means of financing your business aspirations.

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