Region still prime for investment as firms secure £520 million - report
A report released by KPMG had shown that Midlands are still a prime region for investment after securing 520 million of venture capital funding in 2022.
KPMG 's latest Venture Pulse report said a total of 145 innovative businesses, 62 in the West Midlands and 83 in the East Midlands, received investment showing that the Midlands remains a hub for fast growing businesses.
Despite the strong numbers, the level of investment fell by 34 per cent, when compared to the same period in 2021 which attracted £799 million ($959 million) across 154 deals, as global economic turmoil forced investors to take a more cautious approach.
Although many sectors saw VC investment fall, the Midlands saw several pockets of strong activity, including artificial intelligence, LOHAS and CleanTech.
Several other areas also continued to attract investors - such as Fintech, life sciences and real estate technology. Other areas such as gaming and ecommerce struggled.
Nationally, levels of VC investment into UK businesses fell by almost a third (30 per cent) in 2022 as a result of the ongoing challenges to the economy and political uncertainties that took hold in the third quarter of the year.
Standout deals in the Midlands from the year include consumer lending specialist Oakbrook Finance, who raised £142 million ($189 million) in capital from JP Morgan and Atalaya Capital Management.
Oakbrook has an in-house technology and analytics consumer lending platform that supports a multi-product, multi-brand strategy and digitally enabled customer services.
Electric car subscription service Onto also raised £50 million ($60 million), in a funding round led by Legal & General, to expand its operations to the European market.
Khush Purewal (pictured), partner and head of deals at KPMG in the Midlands, said: “While many sectors will likely face challenges over the next quarter, VC investment will continue in high priority areas, including ESG and energy.
“Following a successful Commonwealth Games, the region has shown itself as a unique place that can attract investment across many sectors.
“As economic challenges continue into 2023, investors are likely to be cautious which will be a challenge as there are a lot of businesses looking for funding at the moment.
“That said, we 're still seeing startups raising money and funds putting money out. However, there 's definitely been a flight to quality. Demonstrating a proper path to profitability, as well as the business model's sustainability, will take centre stage in companies' valuations.
“Unless a company can really prove the strength of its operations, it will most likely struggle. As we move into 2023, VCs are increasingly looking for fast growth businesses that are efficient, responsible with capital, and focused on revenue. When they find them, they 're willing to invest just as much as they have before, if not more. ”