Equity investment in the UK 2018
The Deal






1
from the ceo

A word from our CEO on a year

full of uncertainty.
3
2018 in review

The need-to-know: 2018's biggest

trends and headline statistics.

The biggest deals of the year. We

look at the years megadeals those

deals worth 50m+.
18
mind the gap

We crunch the numbers on

the female funding gap.
26
sectors in focus

Artificial intelligence is the word on
everyone's lips which areas are
companies innovating in?

Expanding horizons in EdTech
how is the sector broadening its
horizons beyond the classroom?

Mapping it out a closer look at
mapping innovation and location
based intelligence.
40
investors in focus

We take a look at the year's top

investors by deal numbers who

has been the most active?

Accelerators have become a key
part of the support ecosystem for

young companies. What's next?

Crowdfunding has had a record year

for deals and amount invested. We

take a closer look at the space.
48
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See how you could use our data for

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Contents
notes:
To be included in our analysis, any investment must be:

Publicly announced between 1 January - 31 December 2018

Some form of equity investment

Secured by a non-listed UK company
The Deal analyses equity
investment in the UK, which
helps many of the most ambitious
British companies fuel their
growth. By looking at fundraising
activity across the UK, we're able
to see emerging trends from the
perspective of both investors and
the businesses themselves.
This report allows us to see
which particular sectors,
locations and business types
are booming or suffering. It also
gives us a glimpse of where the
next generation of top British
businesses may arise, and where
investors see real opportunity.
Seasoned veterans of The Deal
will notice something new: we
have added an "established"
stage of company evolution. This
allows us to categorise slightly
older, more mature firms with a
greater track record of turnover
or profit separately from earlier
"growth" stage businesses. This
doesn't materially affect our
figures but allows more granular
analysis of larger companies.
Over these pages we aim to
provide a comprehensive view
of this important barometer of
business and investment health.
The top-level view is worrying at
first: by our main two metrics,
number of individual deals and
total amounts, 2018 saw a large
fall from 2017. However, this could
be interpreted as a "correction"
from the dizzy heights of the
previous year. Indeed, 7 billion
in equity investment is nothing to
be sniffed at, particularly when
considering that two years ago,
the total figure was just 4.1b.
What will the future hold? The
Brexit claxon sounds loudly at
this point it is the ultimate
macroeconomic theme of the
last decade for the UK. Predicting
how Brexit will play out and
the wider effects of it are well
above our pay grade here at
Beauhurst. But from a business
funding perspective at least, there
will likely be significant negative
pressure on available capital,
not least with the inevitable loss
of cash from the EIB, ERDF and
EIF who currently back a range
of VC funds and grant providers.
The Government is attempting
to address this gap, with the
British Business Bank and UKRI
creating schemes such as the
UK Innovation Investment and
Industrial Strategy Challenge
Funds, but some observers are
sceptical.
Only time will tell, but the clouds
are clearly on the horizon. When
it comes to the UK's startups and
scaleups, the star performers
will always attract investment
and interest. But the concern is
chiefly in two areas: firstly, that
earlier-stage businesses will
get left behind as investors' risk
appetites diminish, and secondly
that British leading lights will
begin to contemplate moving
locations to access both the EU's
single market and potentially
better funding opportunities.
Berlin, Amsterdam and Paris are
ready and waiting. It is up to the
UK's policy and decision makers
to make sure our environment is
as supportive as possible if this
outcome is to be avoided.
As always, a huge thanks to
our team for putting this report
together. We hope you enjoy
reading it as much as we did
putting it together. Have any
questions or comments? Get in
touch using the details below.
toby austin
ceo and co-founder
info@beauhurst.com
@Beauhurst
company/beauhurst
beauhurst
A word from our CEO
Henry Whorwood
2018 in
review
Despite political uncertainty throughout 2018, 7b
was invested into UK companies, just below record
levels set in 2017. A worrying fall in deals at the seed
stage will need to be corrected if the UK is to hold
on to its place as a leading startup economy.
4 In Reviewa strong year, but not strong enough
After a record year in 2017, the total invested has
fallen from 8.27b last year to 7b in 2018.
worrying signs at the seed-stage
Deals into companies at the seed-stage have fallen
by 15% - to the same level as in 2014.
crowdfunding has a record year
Equity crowdfunding continues its growth trajectory,
with a record number of deals and amount invested.
female founders need more
Only 16% of 2018's equity investment deals went
into female-founded companies.
blockchain is heating up
The number of blockchain deals has grown by 75%
from 2017, surpassing adtech for the first time.
north west and wales buck the trend
Deals fell across the board but Wales and the North
West saw the most investments on record.
5 In ReviewIt was always going to be difficult for
2018 to match the unprecedented levels
of 2017 but it did come close. 7 billion
was invested in 2018 more than any
year before 2017 and more than 2011 to
2013 combined. Nearly 1,600 investments
were made in 2018, noticeably fewer
than in 2017 but around the same as the
number made in 2015 and 2016. As we
enter a period of unprecedented political
uncertainty, it is tempting to interpret
these numbers as the beginning of a more
pronounced decline. When looking into
the data underlying these figures, the
prognosis is much more nuanced.
We have introduced a new classification
of a company's stage of development: the
established stage. These are companies
that may well be experiencing significant
growth, but are doing so from a position
of greater commercial security than a
company at the seed, venture or growth
stages. The huge spike in the amount
invested into established-stage companies
in 2017 captures a large number of
megadeals that could be considered
unusual the 19% fall in the amount
invested between 2017 and 2018 must
be understood in this context. Growth-
stage investment has proven much more
resilient: the number of investments has
remained pretty constant since 2014. The
amount invested spiked in 2017 but in 2018
only fell by 5%.
The amount invested at the seed-stage
and venture-stage reached record levels
in 2018, so we might have reason to be
fairly optimistic overall. When we look at
deal numbers, however, we see a slight
fall for the venture-stage, and really quite
significant drop (15%) at the seed-stage
to nearly the same level as seen in 2014.
The seed-stage can often be thought of as
the canary in the coalmine: if seed-stage
activity drops off, the pipeline of investable
companies at venture and growth stages
also diminishes in time.
A near miss?
2018 in review
6 In Reviewa silver lining?
But there are two reasons to think that
the drop in deals at the seed-stage is
short-term only. Firstly, the seed-stage
is the riskiest stage and therefore most
likely to be impacted by macroeconomic
uncertainty. There is no doubt that these
are uncertain times: for early-stage
investors as much as anyone else it can
be no coincidence that the last quarter
of 2018 saw the fewest deals of the
year. Secondly, if we look at the types of
investors completing these deals, we see
the number of deals with angel networks
participating fall the most. Compared with
2017, angel network investments had fallen
by 35%. Angel networks are perhaps the
investors with the greatest flexibility to
adjust their investment preferences on an
ad hoc basis as political events develop.
These are the investors most likely to be
deferring investment until there is greater
clarity on what will happen next.
In the face of slightly declining investment
figures for the country as a whole, certain
areas are bucking the trend. The North
West of England and Wales had record
years for the number of investments made
into their companies. Wales saw over 70
deals and the North West over 106. It must
be pointed out, however, that the top
investors in both regions were publicly-
backed funds; in Wales, the Development
Bank of Wales, and in the North West two
Northern Powerhouse Investment Funds.
But if the funds have gone to the right
companies, this is great news for both
regions. At a more local level and outside
of London we see success for Cambridge
and Edinburgh, both of which continue to
see good levels of investment thanks to
their strong Life Sciences clusters.
Other sectors in 2018 were also driving
investment across the country but in
London particularly. 2018 was a record year
for the number of investments into Fintech
and Blockchain companies (across the
two of which there is significant overlap).
Indeed, although Blockchain has been
touted as a "hot sector" for some years,
2018 was the first year we saw significant
investment activity in the UK. AI and
Adtech on the other hand both peaked
in 2016, with Adtech deals dropping
significantly in 2018 by 48%. Edtech and
Proptech remained fairly level.
the future outlook
So what does this all mean for 2019 and
beyond? We saw last year some warning
signals, but also signals for confidence
in this important segment of the UK's
economy. We will need to see an uptick
in the number of investments into seed-
stage companies in 2019 and soon.
Individuals angels and angel networks will
be the ones to drive that resurgence if it
happens. It seems likely that any solution
to overcome the paralysis that Brexit is
inducing, rather than the specifics of any
deal (or other outcome), will be the most
important driver. This is because early-
stage investments are an asset class for the
long-term. If investors can start to see what
the path ahead for the next decade might
look like, they can gain the confidence to
make investments that won't be realised
for the next decade. At the time of writing,
however, the path has many forks who
can blame investors for waiting to see
which one we take, quite apart from any
consideration of whether it's the right one.
7 In Review
8 In Review8 In Review2017 saw a giant year for both deals and amount invested, with amount invested more than doubling from
2016 to a record 8.6b. Although 2018's numbers have fallen from these record amounts, they still present a
significant jump from previous years. We suspect the market is adjusting to a new normal.
1572
equity investment deals
7.0b
invested into UK companies
5.4m
average investment size
Investment activity in 2018
-10%
-19%
-15%
both deals and amount invested remain high
how did 2018 compare with 2017?
2011
2012
2013
2014
2015
2016
2017
2018
1.5b
1.9b
1.8b
3.3b
4.1b
4.1b
8.6b
7.0b
749
1025
1420
1579
1542
1744
1572
Q1
Q2
Q3
Q4
1.3b
2.0b
1.9b
1.8b
495
390
454
373
355
9 In Review9 In ReviewInvestment stages
a fall at all stages
The number of deals fell at every stage of evolution, but amount invested increased at both seed and
venture stage. Deal sizes remained high, with the effect particularly prounounced at the seed stage. Only
50% of deals were below 500k, compared with 80% in 2014.
the trend for larger deal sizes continues
2011
2012
2013
2014
2015
2016
2017
2018
0.5b
1.0b
1.5b
2.0b
2.5b
3.0b
3.5b
2011
2012
2013
2014
2015
2016
2017
2018
50m+
10-50m
5-10m
2-5m
1-2m
500k-1m
<499k
SEED
VENTURE
GROWTH
AMOUNT INVESTED
NUMBER OF DEALS
Seed
Venture
Growth
Established
200
400
600
800
2011
2012
2013
2014
2015
2016
2017
2018
2011
2012
2013
2014
2015
2016
2017
2018
ESTABLISHED
10 In Review10 In ReviewGeography
number of deals per region 2011-2018
Deal numbers fell in most regions, with a few bucking the trend. Wales and the North West in particular stand
out, with both achieving record highs in 2018. Wales also saw its highest ever amounted, with 64.6m going into
companies in the region. Investments into London-based firms represented 47% of all deals.
LONDON
EAST OF ENGLAND
SOUTH EAST
YORKSHIRE AND HUMBERSIDE
EAST MIDLANDS
WALES
SCOTLAND
SOUTH WEST
NORTHERN IRELAND
WEST MIDLANDS
NORTH WEST
NORTH EAST
34
70
50
159
823
740
57
178
140
21
59
54
120
115
14
38
22
71
17
3
25
16
25
86
66
42
209
136
46
106
23
65
44
11 In Review11 In ReviewGeography
number of deals by local authority 2018
1-3
4-10
11-23
24-38
39-53
54-95
96-121
0
It comes as no surprise that the highest numbers of deals were recorded in London boroughs. Westminster
comes out on top with 734.8m invested over 121 deals, its highest number ever. Outside London, Edinburgh
and Cambridge saw the most deals, with 53 and 38 investments respectively.
westminster
734.8m invested
over 121 deals
cambridge
333.0m invested
over 38 deals
edinburgh
86.1m invested
over 53 deals
12 In Review12 In ReviewSectors and verticals
fintech deal amounts over time
The fintech sector continues to grow, with 10% of 2018's deals going into fintech companies, and the sector
achieving a record number of deals for the seventh year in a row. The adtech bubble appears to have well and
truly burst, with deal numbers falling by 48%, and surpassed by blockchain for the first time.
deals in selected verticals over time
2011
2012
2013
2014
2015
2016
2017
2018
0
20
40
60
80
100
120
140
160
Life sciences
Edtech
Proptech
Artificial intelligence
Blockchain
Fintech
Adtech
2011
2012
2013
2014
2015
2016
2017
2018
1273.2m
1288.5m
415.7m
99.2m
63.1m
128.8m
374.7m
575.4m
13 In Review13 In Reviewdeals by investor type over time
Investors and valuations
As ever, PE and VC firms led the way with number of deals completed. Deals by angel networks fell
significantly, by 35%, while crowdfunding saw steady growth, with a record 360 deals invested via these
platforms. The average pre-money valuation continued to grow, reaching 22.6m this year.
average pre-money valuations over time
2011
2012
2013
2014
2015
2016
2017
2018
22.6m
20.5m
11.9m
9.2m
7.3m
9.3m
8.9m
6.1m
0
100
200
300
400
500
600
700
2011
2012
2013
2014
2015
2016
2017
2018
PE/VC
Crowdfunding
Government
Angel network
Corporate
University
14 In Review2018 continued last year's trend for
increasing deal sizes and a large number
of megadeals. While 2018 didn't quite
match 2017's record of 30, there were still
26 deals worth over 50m. To put this in
perspective, the highest number previously
on record was 15, in 2015. The largest deal
of the year was General Atlantic's 189m
investment into Greensill, an innovative
invoice factoring business.
Indeed, a large proportion of the year's
largest deals went into fintech companies,
encompassing a wide range of challenger
banks and alternative finance providers.
A significant share also went into life
sciences companies, who also require large
amounts of cash to finance their research
and activity. All of these life sciences
companies are headquartered outside
London, lessening the capital's dominance.
The biggest deals of the year
2018 in review
deals over 50m in 2018
1 Feb
1 Mar
1 Apr
1 May
1 Jun
1 Jul
1 Aug
1 Sep
1 Oct
1 Nov
1 Dec
40M
60M
80M
100M
120M
140M
160M
180M
Seed
Venture
Growth
Established
15 In Review2018 50m+
regions
2018 50m+
sectors
Proptech
1
Media
1
Waste
management
1
Fintech
8
Travel
2
Life sciences
6
Telecoms
1
Hardware
1
Artificial
intelligence
1
Manufacturing
2
Energy
1
South West
1
South East
1
East of England
5
West
Midlands
1
North West
2
North East
1
London
14
16 In ReviewTransferWise
deal date
26 April 2018
amount
$250m (180m)
investors
Draper Esprit, Digital Sky Technologies,
Index Ventures, Ribbit Capital
total raised to date
244m over seven rounds
The Hut Group
Atom
deal date
18 December 2018
amount
$200m (158m)
investors
Amadeus, Atomico, BMW i Ventures,
C4 Ventures, Dell Technologies Capital,
Draper Esprit,M12, Pitango, Robert Bosch,
Sequoia Capital & more
total raised to date
244m over four rounds
deal date
16 July 2018
amount
$250m (189m)
investors
General Atlantic
total raised to date
189m over one round
deal date
8 March 2018
amount
149m
investors
BBVA, Toscafund, other undisclosed
investors
total raised to date
432m over eight rounds
17 In ReviewAtom
Secret Escapes
Atom
Atom
deal date
11 November 2018
amount
120m
investors
Balderton Capital, Northzone Ventures,
other undisclosed investors
total raised to date
166m over five rounds
deal date
22 June 2017
amount
$150m (118m)
investors
RTW Investments, Agent Capital,
ArrowMark Partners, Baillie Gifford,
Cormorant Asset Management, Cowen
Healthcare Investments & more
total raised to date
221m over three rounds, IPO in Oct 2018
deal date
18 December 2018
amount
$145m (115m)
investors
Felix Capital, Fertitta Capital, The Raine
Group, Undisclosed investors
total raised to date
115m over one rounds
deal date
20 March 2018
amount
100m
investors
China Construction Bank, Government of
Singapore Investment Corporation (GIC),
Hostplus, other undisclosed investors
total raised to date
493m over twelve rounds
Mind
the gap
Only 16% of 2018's equity deals went into
female-founded companies, 2% less than in
2016. Average deal size has hit a record high, but
there's still lots more work to be done to correct
the gender funding gap.
Hannah Skingle
20 The gapOver the course of the past eight years
female entrepreneurs have made
significant inroads into raising equity
finance, a world that has traditionally
been and remains to be dominated
by men. The overall trajectory of funding
into businesses with at least one female
founder since 2011 remains positive, but
progress is slow and inconsistent. 2018
has been a mixed bag, with a decrease
in the percentage of deals going in to
these companies, but a record high for
the average deal size secured by women
entrepreneurs.
In total, 570m was invested across 254
deals into female-founded companies
in 2018, down from 650m across 304
deals in 2017. As we've seen in previous
stories, there was a slump in both size
and number of equity investments across
the market in 2018, but male-founded
companies only saw a 6% decrease in
deal numbers, compared to 15% for
female entrepreneurs. Only 16% of 2018's
equity deals went into female-founded
companies, compared to 18% in 2016.
But women saw less of a decline in
investment amounts, with a 12%
decrease, compared to the 17% decrease
experienced by men. Female entrepreneurs
secured an 8% share of the amount of
equity invested, down from 13% in 2015
and 2016, but on par with 2017. Most
encouragingly, average deal size hit a new
record, increasing from 2.22m to 2.33m
in 2018. Of course, this still far below
that for male-founded companies, who
achieved an average deal size of 5.43m.
who is investing?
LocalGlobe tops the list of fund managers
most frequently investing in female
founded companies, with 7 investments
in 2018. They participated in an 8.6m
Funding female-founded businesses
mind the gap
21 The gapof deals involved
female founders
570m
invested in female-
founded businesses
16%
percent of total amount raised, female-founded businesses
percent of deal numbers, female-founded businesses
2018
2017
2016
2015
2014
2013
2012
2011
2%
6%
9%
7%
13%
13%
8%
8%
2018
2017
2016
2015
2014
2013
2012
2011
7%
12%
14%
13%
16%
18%
17%
16%
22 The gapgrowth stage round into market analytics
company Streetbees, a company they have
supported since 2015. Streetbees have
also secured investments from three of
the other ranked fund managers; Octopus,
Atomico and BGF.
Founder and CEO, Tugce Bulut, notes
that she has been very lucky to receive a
range of support throughout Streetbees'
fundraising journey. "As one of the few
female founders in the tech sector, I feel
very responsible for helping nurture the next
generation of female entrepreneurs, so they
can find their way through the VC jungle."
what support is available?
Indeed, more and more support networks
and organisations are cropping up. From
AllBright Collective, who support women
to achieve their career ambitions, to
Diversity VC, who are dedicated to creating
a fairer and more diverse venture capital
industry; and sector specific initiatives
like accelerateHER, a programme which
addresses the under-representation
of women in technology. In 2018, they
launched Male Champions of Change in
Global Technology to enable male CEOs,
founders and c-suite leaders to step up
beside women to create a more gender
equal future, and shift the conversation
from equality as a 'women's issue' and
instead tackle the systemic failings in the
industry.
We've also seen the rise of female-led
investment bodies, such as the female
focussed angel network Angel Academe
and VC firm Voulez Capital. Founded by
Anya Navidski in May 2018, Voulez Capital
invests between 500k and 2m into
female-founded businesses across Europe
- and invested into two UK companies in
2018. This includes leading a $1m round
in Sciapps, the creators of SkinNinja.
This company is bringing much needed
clarity and transparency to the skincare
market by giving customers an informed
understanding of the ingredients in their
products, and offers suggestions for
alternatives that are less harmful.
Citing the increase in the number of
support systems put in place for female
founders in the past few years, Navidski is
optimistic that 2019 will be a more positive
year, as the impact of these initiatives start
to reflect in investment figures. But she
maintains that the general perception that
top investors into female-founded companies
LocalGlobe
Albion Capital
Octopus
Innvotec
Atomico
Forward Partners
NVM Private Equity
BGF
7
6
6
4
3
3
3
3
the male-dominated VC scene is aggressive
and gender biased will continue to impact
this progress.
"For women, entrepreneurship is about
freedom and independence, and many
consider traditional venture capital to be
incompatible with this". She acknowledges
that shifting the perception of the industry
will take time and a concerted effort from
established VCs, who are more focused
on chasing unicorns and rapid growth at
any cost. "But the biggest change will be
prompted by new industry players who
can provide an environment that female
founders can trust and relate to and the
ecosystem is more than ready for it".
23 The gapcrowdfunding vs pe/vc investment into female-founded companies
Big changes will
be prompted
by new players
who can provide
an environment
female founders
can relate to.
"
5%
10%
15%
20%
25%
2018
2017
2016
2015
2014
2013
2012
2011
PE/VC
Crowdfunding
anya navidski
founder, voulez capital
24 The gapwhere is funding coming from?
This account of women having a cynical
impression of venture capital is borne out
when we compare funding sources. Whilst
the overarching patterns remain similar,
there is variation in the percentage of deals
secured from different types of funds.
Female-founded businesses secured only
13% of VC deals in 2018, compared to 20%
of crowdfunding investments.
Crowdfunding platforms have seen more
accelerated growth in the percentage of
deals going to female entrepreneurs since
2012, when 10% of VC investments went
into women-led companies, compared to
just 8% of crowdfunded deals. Still, venture
capital firms have seen a consistent and
stable increase. The funding sources were
most disparate in 2016 with 10% between
them, and the gap has closed by 3% in
the two years following, although in a
downwards rather than upwards trend.
Julia Elliott Brown, CEO and Founder
of female-focussed equity fundraising
consultancy Enter the Arena, suggests
that this discrepancy in investment figures
is in part due to the failure of firms and
corporations to recognise the gender
funding gap as an ongoing issue, rather
than a fleeting trend. "The crux of the
issue lies in the fact that many corporates
are more concerned with appearing to be
making a change than with undertaking
meaningful action and initiatives". But some
are making headway Barclays set up
the Female Founder Forum in partnership
with The Entrepreneurs Network (TEN) in
2016 to connect inspiring and successful
women entrepreneurs with those on the
cusp of their own rapid growth. Julia's own
initiatives include coaching, workshops
and a new podcast series aiming to
educate female entrepreneurs on the
funding landscape. Programmes like
these are providing the building blocks for
aspiring, early-stage women entrepreneurs
to access this market.
room for growth
However, female-led business are
struggling to grow past early stages,
with 40% of those that raised equity
between 2011 and 2018 remaining in
seed stage, compared to just 28% of their
male-founded counterparts. 16% of both
categories are dead or zombies, but exits
are 3% higher among male only founded
companies. This is unsurprising given male
entrepreneurs receive higher funding on
average, facilitating faster growth.
stage of evolution of female founded companies
Dead 13%
Exited 5%
Zombie 3%
Established 3%
Growth 8%
Venture 27%
Seed 40%
Dead 14%
Exited 8%
Zombie 2%
Established 8%
Growth 11%
Venture 29%
Seed 28%
at least one
female founder
no female
founders
25 In ReviewOn balance, 2018 was by no means a stellar
year for women-led companies securing
equity, but some were very successful and
gradual progress is taking place behind
the scenes. Female founders are certainly
ambitious and support needs to continue
to be put in place to nurture this talent
more effectively. Juliet Rogan, Head of High
Growth & Entrepreneurs at Barclays, says:
"we know funding is still a barrier for too
many women when starting up and growing
their business, but we've seen important
shifts towards female founders taking place
over the past few years".
In 2019, we hope to see the investment
figures reflect this, a growing number of
meaningful initiatives with long term goals
put in place, and the gender funding gap
taken seriously amongst more industry
players. After all, as Tugce Bulut puts it, "an
ecosystem that only represents one point of
view is ultimately poorer for us all."
An ecosystem that
only represents
one point of view
is ultimately
poorer for us all.
"
tugce bulut
founder, streetbees
Sectors
in focus
2018 has seen exciting developments across a
number of sectors, from artificial intelligence
to mapping software. We take a closer look at
some of the year's stand-out verticals.
28 Sectors AI to rule the world?
sectors in focus
In the last megadeal of 2018, a Bristol-
based startup known as Graphcore
secured $200m from a consortium of
leading investors, including the corporate
venturing arms of Bosch and Microsoft. The
round valued the company at over $1b.
Alongside those household names, this
round also saw participation from Sequoia
Capital, tech kingmakers who have backed
a range of now dominant technology
companies, including Apple, Google,
Youtube and Whatsapp.
What specifically does Graphcore produce,
to warrant such attention? Bucking the
broader "software is eating the world"
trend, Graphcore develops hardware.
Namely, new computer processors, known
as Intelligent Processor Units (IPUs),
which have been specifically designed to
handle the tasks demanded by machine
learning applications. Think of them as
computer processors for a new age of
artificial intelligence. Or, more basically,
the hardware that can run AI software.
artificial intelligence
amount invested and deals
2011
2012
2013
2014
2015
2016
2017
2018
686.2M
422.9M
222.1M
105.8M
22.2M
32.8M
4.7M
6.6M
54
37
103
22
102
4
87
11
Hi, how can I help you?
Ok, let me just ask you
a few questions.
I've had a headache for
a few days.. I'm worried
29 Sectorsthe start of something big?
In 2014, UK AI companies received 32.8m
of equity finance investment, over 37 deals.
In 2018 that figure had grown to 686.2m
across 87 deals. That's a remarkable
increase, especially when you consider
that total equity finance levels fell across
the board in 2018 (after a bumper year
in 2017). And, whilst funding for the
UK's fintech sector (widely considered
one of the UK's fastest-growing sectors)
showed a percentage increase of just 8%
in 2018 compared to 2017, funding for AI
companies increased by around 63%.
The inception of the artificial intelligence
sector in the UK should really be dated
to September 2010, when a group of
computer scientists founded DeepMind
in London. The team was led by Demis
Hassabis, a former child prodigy at chess,
who co-programmed the famous video
game Theme Park at the age of 17, before
studying computer science at Cambridge.
(According to Vanity Fair, an early investor
in DeepMind joked as he left a meeting
that he should shoot Hassabis on the spot,
because it was the last chance to save the
human race). DeepMind's activity was kept
closely under wraps. Indeed, even on the
announcement of its acquisition by Google
in 2014, journalists at TechCrunch were
still unable to ascertain what the startup
was actually creating. DeepMind has since
become Google's in-house AI unit, where
a lot of their efforts seem devoted to
creating computers that can beat humans
at video games. Other more practical uses
have been found - for instance in cooling
Google's city-like data centres, and in the
creation of a healthcare app (now part of
Google Health).
healthcare via the cloud
A range of other British startups have
developed their own AI-enabled apps for
the healthcare sector. Perhaps the best
known of these is babylon, which provides
smartphone focussed healthcare. The
company has used AI to create an artificial
symptom checker, which can then assign
you the most efficient treatment (be that
an online consultation with a doctor or
just to wait and see if symptoms resolve
themselves). Your.MD has created a similar
app, but has raised just 11m of equity
finance versus babylon's 64m. Meanwhile,
other startups are using AI to help in
social care, such as Belfast's Kraydel,
which uses machine learning to help
30 Sectorspredict the routines of care-receivers, and
automatically alert relevant carers when
these are disrupted.
Project Sapiens, meanwhile, has
combined machine learning with recent
advances in genomic testing and human
gut microbiota research to nudge users
towards a healthier diet. This early-stage
company recently released company filings
suggesting their value has grown three-fold
in just over a year, from 10m to over 30m.
Since 2011, AI startups in the healthcare
sector have raised 120m, across 12 deals.
ai armour
Darktrace, one of the UK's startup unicorns,
has developed a software tool that learns
the usual online behaviour of a company's
employees, alerting the company/user
when anomalous behaviour indicates a
potential cybersecurity breach. Tessian,
recently valued at over 80m, develops a
similar tool but for email communication,
identifying when suspicious behaviour
is taking place in an employee's email
account. Other less well-funded startups
operating in this area includes AimBrain,
which has developed a tool which learns
the patterns by which individual users
enter passcodes, adding the capability to
block people from using the device even
when they have stolen code.
Since 2011, AI startups in the cybersecurity
sector have raised 227m across 30
deals, making them perhaps the most
significant aspect of the UK's burgeoning AI
ecosystem.
the end of accountants?
Finance seems to be an even more
innovative arena for AI. Rimilia is using
artificial intelligence to automate basic
accounting functions, saving labour costs
for their users. Specifically, their software
learns when customers are likely to make
their payments, providing businesses with
greater predictive power when it comes
to cash flow issues. Other startups are
applying machine learning technology
to online transaction records, be that
Blockchain or other types of "ledger".
Fetch, for instance, have combined
blockchain and AI to create what they
claim is the world's first "smart ledger".
The smart ledger is home to "Autonomous
Economic Agents", who will purportedly
one day undertake "useful economic
activity for humans or machines",
somewhere in the virtual world.
Startups using artificial intelligence to
disrupt the finance world have raised
170m since 2011, across 34 deals. We
suspect this is an area to keep an eye on.
Tom Sheils
Cybersecurity
startups are
perhaps the
most significant
aspect of the UK's
burgeoning AI
ecosystem.
"
31 In Review
32 Sectors2018 was a strong year for EdTech, with a
significant jump from 2017's investment
figures. Far from just digitisation and
distribution of typical learning resources,
EdTech has continued to broaden its
applications beyond the classroom.
From knowledge sharing in professional
environments to innovative methods for
collaborative learning, EdTech is reaching
across sectors in attempts to adapt and
improve the ways we access education.
90.9m was injected into ambitious UK
EdTech companies over 2018, distributed
over 50 announced investments. This figure
marks the highest amount invested into
the sector to date, and a 140% increase
on the amount invested in 2016. Looking
further back to 2013 reveals just 9.9m of
investment, a tenth of this year's figure,
demonstrating just how much the industry
has grown so far.
turning students into teachers
"One of the key powers of EdTech is that
it can turn people that aren't teachers
into facilitators of education" says Jan
Lynn-Matern, Founder & CEO of Emerge
Education. Online learning communities
mean users everywhere can create and
share content with one another without
enrolling in traditional courses. Memrise,
an online platform designed for language
learning via games, also hosts a knowledge
sharing community for users to provide tips
and support for making progress.
Expanding horizons in EdTech
sectors in focus
33 Sectorsedtech amount invested
and deals over time
Having secured $15.5m (11.6m) in June
2018, Memrise brought on new investors
Octopus Ventures and Korelya Capital,
with additional participation from existing
backers Balderton Capital and Avalon
Ventures. Another company to watch
in this space is Aula, who raised $4.2m
(3m) in April this year. Aula promote
user networking in universities through a
learning management system, allowing
staff and students to share resources and
communicate online. With an increasing
student population seeing the number
of schools and universities struggling to
keep up with demand, solutions like these
are paving the way for greater access
to education across the world. 2018's
investments into this field demonstrate
investors' piqued interest in EdTech's
potential for transcending location and
resource restrictions.
re-training the population
As technology continues to advance and
the job landscape continues to change,
EdTech may provide a much-needed
infrastructure for individuals to re-train
and develop new skills. The UK's biggest
EdTech deal of the year ($20m [14.8m])
went to Fuse Universal who create software
to facilitate skills development and training
in the workplace. The year as a whole has
seen a surge in investments into learning
solutions for the business world; while only
9.2% of investments into the sector in 2017
went into this area, 2018 saw this rise to
14.2%. Though the amount invested into
EdTech pales in comparison to areas such
as FinTech, expansion into the corporate
market could provide the sector with a
boost if it leads to larger budgets being put
behind developing new forms of learning
technology.
2011
2012
2013
2014
2015
2016
2017
2018
30.6M
15.3M
66.9M
90.9M
52.0M
37.8M
9.9M
5.5M
7
46
47
50
23
50
49
20
34 Sectors
memrise
Memrise, founded in 2010, is a user-generated
learning platform using flashcards as memory
aids. The online and mobile versions offer games,
rewards, and crowdsourced content whereby
native language speakers provide insight into
how languages are most commonly used. Though
languages are its speciality there are 150 courses
across 25 languages they also offer content on a
range of other subjects. Memrise has more than 35
million registered users and reached profitability in
early 2018.
fuse
Fuse Universal is a collaborative learning platform
for enterprises, claiming to help organisations
increase learner engagement and business
performance. High profile clientele such as Spotify
and Vodafone use the platform for learning and
communications. Fuse plans to use its $20m
investment from Eight Roads Ventures to advance
work into AR and further develop FuseSchool,
the company's charity arm, which provides free
educational content for children across the world.
edtopia
EdTopia, an Oxford University spinout, have
developed a tutoring system that helps children
learn outside of school and addresses problems
with numeracy amongst the younger population.
The software offers an extension that can be
integrated into other apps, displacing traditional
advertising with personalised games and exercises
for kids. EdTopia makes use of artificial intelligence
so that users continue to come across personalised
questions through a range of applications.
35 SectorsJo Hawkins
One of the key
powers of EdTech
is that it can
turn people that
aren't teachers
into facilitators of
education.
"
Jan lynn-matern
emerge education
bigger and better use of data
EdTech is further disrupting and
augmenting the way that data is used
within education, creating technology
that provides insights into all aspects of
teaching and learning processes. EdTopia,
an Oxford University spinout, links a
tutoring system to gaming apps used by
children and makes use of personalised
questions and artificial intelligence to
extend the learning experience across
applications. As AI and big data continue
to expand, so should the potential for
EdTech scaling its use of data to tailor
the educational experience to a range of
learning styles and offer deeper insights
into user engagement.
what's next?
Though it has undoubtedly been an
excellent year for EdTech, there is certainly
room for growth. 90% of this year's
investments were into seed and venture
stage companies, leaving significant space
for the sector to mature. We hope to see
existing technology scale further in order
to offer high-level impact upon the ways
in which education is conceived, delivered
and received on a global scale.
36 Sectors Mapping it out
sectors in focus
Einstein once said: "you can't use an old
map to explore a new world". Cartography
and our understanding of location is
being amplified, enhanced and in some
cases, replaced by technology. At the
forefront of these developments are a
series of innovative businesses working on
everything from navigation, to analysis,
and even creating completely new ways
of seeing and understanding the world
around us. We've seen over 120 million
invested into such businesses since 2010,
hitting a yearly high in 2018 of 44.6m.
The sector is complex, with businesses
creating solutions in areas as diverse as
location and mapping.
new addresses
It is difficult to find a company that better
encapsulates mapping innovation than
what3words. Founded in 2013 by Chris
Sheldrick, the company has built an
algorithm that divides the world into 3m
x 3m squares, each assigned to a unique
3 word address. The idea of needing
a new address system seems odd to a
first-world western audience. But in large
swathes of Africa and Asia, addresses can
be inconsistent, and when combining the
need for precise locations (for example,
delivering high-value or critical goods or
services), the need for a universal system
becomes clear.
Investors certainly seem to agree. Since its
founding in 2013, the young company has
already reached growth stage, securing 10
rounds of funding from investors including
Daimler, Intel Capital and, most recently,
Sony. A 4m fundraising in June 2018 saw
a pre-money valuation of 110m, and their
latest deal, 7 months later, is highly likely
to see a significantly higher valuation still.
Why a corporate investor for this particular
round? "I think that they can see the appeal
of a product or service having some relation
to what they do, and they can immediately
create value and give you a leg up", says
Jack Waley-Cohen, Co-Founder and COO of
what3words.
"There's also definitely a sense that big
corporates are looking to do something with
their cash at the moment, and in some cases
are more prepared to invest in higher-risk
businesses than traditional investors and
some VCs."
Corporates can
see the appeal
of products with
some relation to
what they do, and
can immediately
create value.
"
Jack waley-cohen
what3words
alternative location systems
exploration tools
spatial mapping
map builders
geospatial data services
= raised funding in 2018
Developing new ways to map the world and pinpoint
exact locations. what3words have attracted international
attention for their unique method of dividing the world
into 3-word coordinates. They raised 4m in 2018.
Creating ways for devices to understand location.
A booming sub-sector. All three of these specialist
technology companies raised in 2018, the largest being
Scape's fundraising of 6m.
Tools and products that help build maps. Amongst this
sub-sector in 2018, Bath-based Living Map secured 1.2m
of seed investment from Committed Capital and Mercia
Fund Managers.
These companies help businesses make sense of
their location and geographical data. These are more
traditional B2B services augmented with geospatial
technology and analysis.
Tools and products that allow users to view 2D and 3D
maps, chiefly for navigation or exploration. Fatmap
raised 1.58m in venture capital in May from Episode1,
InMotion and Capnamic.
sector map. selected location and mapping companies
transport tools
Apps and products that allow users to understand
transportation links and journeys better. Citymapper
have raised most funding in this sub-sector, while Beeline
specialise in cycle routes.
38 SectorsAnd of course, there are other benefits
beyond pure investment: "Having a
big name on board also gives you great
credibility, and has been extremely
helpful to us, opening doors and giving
introductions to other opportunities."

What3words are only one example of the
UK's burgeoning mapping technology
sector. Locpin, a seed-stage company in
London are also seeking to map the world
with 3m x 3m squares, numerically, rather
than with words. Like what3words, they
have benefited from strategic corporate
venturing, participating in LMarks' Drive
with Belron accelerator, run by Belron
(parent of Autoglass). This programme
seeks to find disruptive companies that
help Belron improve their operations or
products, with the ultimate aim of driving
corporate innovation. Despite their early
stage, the programme has allowed Locpin
to sign a deal with Belron, meaning their
technology is incorporated across the
group's companies to help them deliver
services to precisely the right location.
new world, new maps
Google Maps reigns supreme as the most
commonly-used mapping platform in the
world, but other companies are looking
to take advantage of smaller niches.
London-based Fatmap provides detailed
interactive 3D maps of outdoor spaces,
particularly ski, walking and cycling routes,
so adventurers and casual skiiers can
preview routes before getting to a location.
They raised 1.5m from Episode1, InMotion
Ventures and Capnamic at a 11m pre-
money a 21% higher valuation than their
previous round in November 2017.
When it comes to more standard
navigation, particularly through urban
environments, there are a host of high-
growth British companies making waves.
Citymapper is probably the best-known
of this cohort, with the ambitious public
transit app attracting almost 35m
in investment from funders including
Greylock Partners, Index Ventures and
Balderton Capital. Travel AI have a similar
proposition with their "Catch!" app,
39 Sectorsmaking use of both equity investment from
London Business Angels and over 700k of
grants from Innovate UK.
what's in the future? spatial
awareness for robots
Location and mapping companies aren't
just looking at how to better serve
the consumer, or indeed, humans. An
increasing variety of British businesses
are looking to build solutions to help
autonomous vehicles, drones and other
devices understand their location and
position. This field, sometimes referred to
as spatial learning or spatial intelligence, is
growing quickly.
Scape is part of this movement, developing
a "Vision Engine" for devices to understand
their location based on 3D maps created
from images. An Entrepreneur First
alumnus, the Venture Stage company has
raised over 12m from investors including
Fly Ventures, LocalGlobe and Mosaic
Ventures. Similarly, SLAMcore is developing
its own spatial AI solutions. Since spinning
out from Imperial College London in 2017,
the Venture stage company has already
raised 200k of Innovate UK grants and
almost 5m in equity investment from
a variety of funders including Toyota
another example of strategic corporate
investment in innovative tech startups.
Fundamentally, location, and crucially,
location data, is becoming an essential
part of technical products in almost every
conceivable industry. We predict that the
number of new companies concentrating
on mapping and location solutions will
increase significantly over the next few
years, and these will require ambitious
backing from investors. Will more
corporates see the potential and enter the
ring, or will traditional VCs fill the gap? We
haven't yet mapped it out.
Jonathan Ross
Fundamentally,
location, and
crucially, location
data, is becoming
an essential
part of technical
products in almost
every industry.
"
Investors
in focus
Crowdfunding platforms continued to drive deal
numbers in 2018, with record levels in Q4. Regional
bodies have also ranked highly, with Scottish
Enterprise and the Development Bank of Wales
making significant investments.
42 Investors Top investors by UK deal numbers
investors in focus
DEVELOPMENT
BANK OF WALES
MERCIA
TECHNOLOGIES
CROWDCUBE
SEEDRS
SCOTTISH
ENTERPRISE
61
69
94
158
168
See
d
Gro
wth
Ven
ture
Esta
blis
hed
43 Investorscrowdfunding climbs
As in previous years, crowdfunding
dominates deal numbers. Three platforms
rank in the top ten, and have also taken
first and second place. Regional investors
Scottish Enterprise and Development Bank
of Wales have nabbed the third and fourth
places. Perhaps a sign that government
is starting to commit more seriously to
funding ambitious businesses, especially
those outside of London, where private
capital is less likely to venture into.
company stages
As has been the case in recent years, BGF
are the leading backer of established
and growth-stage businesses. For seed
and venture-stage businesses, the two
leading crowdfunding platforms fulfil a
large number of deals into companies
at this stage. Of the leading investors,
Foresight have the most varied deals by
stage, investing consistently across seed to
growth and established stages.
BGF
ADVISORS
PARKWALK
SYNDICATE
ROOM
53
41
35
29
25
MAVEN
CAPITAL
FORESIGHT
GROUP

44 In Reviewaccelerators and
accelerated companies
1
5
10
Accelerated companies
Number of accelerators
45 InvestorsAccelerators have become an important
part of the support ecosystem for young
companies, with a clear positive effect
on company growth, investment and
valuation. Our report earlier this year,
Accelerating the UK, found that companies
that attend accelerators raise 44% more
equity than those that don't, and are
also 75% more valuable. Entrepreneurs
have certainly caught on to the benefits
accelerators can provide our data
shows the nunber of companies attending
accelerators has grown significantly since
2011, reaching a peak in 2017.
So what next for the accelerator
ecosystem? We predict the range of
programmes on offer will mature to
include options for every business model
and at every stage of growth, much as
investors who specialise in a niche can add
value beyond a cash injection. Corporate
interest in accelerator programmes has
also been significant, with many of them
partnering with accelerator managers
to run specialised programmes, or even
running their own programmes in house.
We suspect we'll be seeing a lot more of
this activity over the coming years.
Accelerating the UK
investors in focus
number of accelerator attendances
2011
2012
2013
2014
2015
2016
2017
795
1,486
305
158
88
1222
26
2018
1125
46 Investorssteady growth wins the race
Although growth in crowdfunding deal
numbers has slowed from the meteoric
pace seen from 2011 to 2015, the general
trend is onwards and upwards, with a
healthy number of deals recorded in every
quarter. Indeed, crowdfunders were the
only major investor type to grow their deal
numbers this year. Interestingly, Q4 echoed
the broader investment trend for larger
deal sizes, with some significant raises
facilitated via crowdfunding platforms.
the maJor platforms
Both Crowdcube and Seedrs saw a record
amount of investment pass through
their platforms in 2018. The year saw
some interesting new developments,
such as Monzo's raise in partnership
with Crowdcube, which was open to
Monzo users via the challenger bank's
app. Seedrs facilitated a significant 10m
investment into TransferGo, a fast growing
international money transfer platform.
Crowdfunding in 2018
investors in focus
47 Investorscrowdcube
143.2m
168 deals
seedrs
81.8m
158 deals
syndicate
room
25.1m
35 deals
maJor crowdfunding platforms, 2018
Amount invested
Number of deals
Pre-emption, fund campaign, partnership
crowdfunding over time
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
105.7M
55.2M
53.8M
39.9M
53.8M
62.2M
49.6M
68.8M
88
112
95
83
82
82
106
78
48 Our data Driven by our platform
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51 In ReviewFind out more at beauhurst.com
52 In ReviewEditor
Ella Halmari
Contributors
Henry Whorwood, Hannah Skingle, Jonathan Ross,

Jo Hawkins, Thomas Sheils
Beauhurst 2018