The UK is still attracting record amounts of private capital post-Brexit as the number of investable companies continues to swell
EIS providers are still finding a pipeline of investable projects post-Brexit, with technology investments seeing particular benefit.
The British Business Bank, the UK government’s own investment bank targeting small and mediumsized enterprises (SMEs), saw the value of SME asset finance deals was up 12% in 2017, with the value and number of equity deals rose 79% and 12%, respectively. A record £2.99 billion was invested in technology small and mediumsized enterprises (SMEs) in 2017, while a record £46 billion was invested into tech-focused funds in the year – a 600% increase on 2016.
A survey of investors by the EIS Association (EISA) reveals the UK’s decision to leave the European Union, as voted on in June 2016, has done little to dampen enthusiasm for private investing.
A survey of investors by the EIS Association (EISA) reveals the UK’s decision to leave the European Union, as voted on in June 2016, has done little to dampen enthusiasm for private investing
A total of 29% of respondents felt Brexit would strengthen SME productivity. Another 28% felt that knowledge-intensive companies, as defined in the new government rules and incorporates energy-tech, medtech, and fin-tech, will benefit from Brexit.
While there is clearly stock market nervousness about investing in the UK, over a quarter of affluent investors feel more encouraged to invest in UK SME opportunities as a result of Brexit, while 18% are holding back until after Brexit.
A fifth of those with £75,000 to £100,000-plus to invest want to invest but are holding back to see the outcome of Brexit.
For EIS providers, Brexit has not stopped them from finding investable opportunities but in order to source these, they must have strong connections.
Tony Stott, Chief Executive of Midven, which invests in early-stage, technology and SME companies primarily based in the West Midlands, says the company’s local focus means it has built a reputation.
“We’re local, we’ve been here for 25 years,” he says. “We get a steady flow of enquiries, that’s been enhanced over the last six months. We run the new institutional fund, and that’s come with a whole new marketing budget.
“We’re drawing in a lot of deal flow from that. It’s more how we choose the companies. Companies come to us all the time.”
While there is clearly stock market nervousness about investing in the UK, over a quarter of affluent investors feel more encouraged to invest in UK SME opportunities as a result of Brexit, while 18% are holding back until after Brexit
He says companies come to them for investment but Midven also searches out new investment opportunities.
“We go to innovation centres and science parks around the area,” says Stott. “Other people don’t go there so we find better deals. There’s a lot going on in Birmingham. Students used to move away but more are staying.”
Andrew Aldridge, Head of Marketing at EIS provider Deepbridge Capital, says that connections are key to finding investments.
“Most deals come to us through our connections,” he says. “Again, being sector specific, in terms of the technology and life sciences sectors, we are renowned in those sectors.
“Our Head of Life Sciences [Dr Saavas Neophytou] is renowned in the market. Everyone knows him, and a number of our companies came to us as they want his mentoring.”
He adds that on the technology side, Deepbridge Capital team is well-regarded.
“We have other people in our team and on our board who are well connected globally,” says Aldridge.
“If a company requires global scalability then having access to Deepbridge’s international team is a massive bonus.”