29.06.2020
The effects of the global pandemic and lockdown have been disastrous for many sectors, and the coming months and years will be difficult. However, figures from a study by Plexal and Beauhurt reports that UK start-ups have seen lockdown investment of £663m, 34% more than in the same period 2019.
On the face of it this seems surprising, very much against the trend of economic downturn. When we look at the fundamentals it is interesting to see the core facts behind it and this can give us some idea of where businesses should be focusing their fund raising efforts.
Despite recent events, the simple reality is that there is significant capital, particularly with professional, high net worth, and private equity houses, that is ready to invest and actively looking for a home. These investors will be looking to see which sectors have the most to gain post lockdown, and they will be spoilt for choice in opportunities making for a competitive landscape.
Of the £663m above, it is interesting to note that while new start ups did receive funding in their first rounds, by far the bulk of the investment was into existing companies, with investors helping to shore up firms within their current portfolio to ensure that they weathered the storm and could come out of the other side to create long term value.
The UK government have announced a £1.25bn rescue package for start ups, which is a welcome initiative, however it would be unrealistic to think that this will solve the problem. Companies need to look at their current offering, look at their cost base, and look at their business plan moving forward in light of the new world, and create a plan that puts them top of the list when raising the capital needed to fund growth and stability.
Another interesting facet of the pandemic is looking to figure out the winners and losers. We can all see the effects on airlines, hospitality and such like, yet in other ways it has brought the future of working to the forefront. Key winners are likely to be e-commerce, education, pharma, digital technology and online security. For many years there has been debate as to whether flexible and home working could still achieve productivity, but companies were never brave enough to test the theory in a wholesale way. Now that this has been forced on them, we are seeing numerous firms big and small seeing productivity stable, a happier work force, and questioning the benefit of a huge office bill. They can now significantly cut costs in a way that is for the benefit of employees, you would see an interesting time ahead for office providers.
The key now is about corporate strategy, reviewing business plan’s in light of the situation, and being able to present a coherent and compelling proposal to funders that will allow the right businesses can use the pandemic as a launch pad, not a death knoll.
Pat McCreesh, Partner, Vantage Corporate
pm@vantagecorporate.co.uk