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UK VC funding ‘down slightly’ in Q1 of 2016 amid global decline in investment

KPMG CB Insights report

UK-based startups raised $1.3bn in funding across 105 deals in the first quarter of this year, down slightly from Q4 2015.

According to the ‘Venture Pulse Q1 2016: Global Analysis of Venture Funding’ report, produced by CB Insights and KPMG, UK funding accounted for approximately 36% of European VC funding throughout Q1.

According to the report, the global decline in VC activity, both in terms of total deal volume and deal value, could be attributed to factors including; an economic slowdown in China, rising interest rates, the upcoming US election and the UK’s Brexit referendum.

“While disconcerting to the VC community, the decline in VC activity is likely to be a short-term trend given the amount of liquidity in the market around the globe,” says the report, noting that “in the US, Q1 2016 was one of the highest quarters for raising VC capital since the dot-com boom of 2000”.

At the same time, the report adds, future VC investments are poised to become even more targeted.

Given the ongoing market uncertainties, the report predicts that investors will be more likely to focus on companies with strong balance sheets or business models that show a strong plan to achieve profitability.

“VC investors may also take a more involved approach to their funding, asking for more input and control over how their invested capital is deployed,” adds the report.

Spotlight on Europe

The report found that total funding in Europe rose by 8% to $3.5bn in Q1 2016, although the deal count for the period represented a sequential quarterly decline.

Seed deal shares, the report notes, also declined in Europe, falling below 40% of all deals for the first time in at least five quarters, taking only 35% of deals going to VC-backed companies.

Meanwhile, Series A rounds jumped up to take over a quarter of deals, says the report.

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