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Research commissioned by Parkwalk Advisors shows record equity investment of over £2.5bn into spinouts

by jcp

Despite this record funding, Parkwalk believes that deeptech is still hugely underfunded at the scaleup stage, especially from UK investors

London, 23.03.2022 – Parkwalk, the UK’s largest growth EIS fund manager, has once again commissioned research into equity investment into the UK spinout sector over the past year. The report  has found that the total volume of equity investment secured by spinouts between 2012 and 2021 is £10.9bn, a record amount. The total number of equity deals secured by spinouts between 2012 and 2021 now stands at 3,207 and the number of first-time equity deals secured by spinouts in 2021 is 102. The number of international investors who participated in equity deals in 2021 has also increased to 40%, whilst the number of exits via IPO or acquisition undertaken by spinouts between 2012 and 2021, stands at 166.

The record levels of foreign investment into spinouts in the UK during 2021, was likely bolstered by the government’s new £1.4bn investment fund to help encourage overseas investment in key, knowledge intensive sectors including electric car manufacturing, offshore wind and life sciences. Whilst encouraging overseas investment is critical there is still a large amount of dry powder in the UK that can be deployed into EIS funds to help innovative UK businesses that are looking to scale up. Not only would greater encouragement for investors to make use of such funds help support key sectors within the UK, but it would help support the government’s R&D spending commitment of £22bn by 2024-25.

The jump in the number of first time deals can be explained by fund managers’ increased confidence as we emerge from the pandemic. 2020 saw greater focus on existing portfolio companies but the increase in first time funding is a positive step to ensure the growth of the next cohort of large university spinout companies.

Moray Wright, CEO, Parkwalk Advisors, said: “This year’s report shows an increased appetite for first-time equity deals and a record level of overall funding for spinouts. Whilst this is a positive step in the right direction for the sector, we still believe that despite the world leading research produced here in the UK, deeptech is still hugely underfunded at the scaleup stage, especially from UK investors.”

Moray continued: “As we look to the future, the government’s consultation on the relaxing of the regulatory charge cap for larger pensions schemes could have a positive impact on the spinout sector. Redirecting pension assets could, for example, help with their ‘levelling up’ ambitions and support the wave of green infrastructure and early-stage, innovative firms. This later stage funding could be a crucial tool as we look to create a sustainable, self-financing ecosystem for technology investment.”