Duncan McFadzean

"Funding Collapse sends investment in start-ups to six year low" The Times today covering the shocking stats that VenturePath uncovered, with our partner Beauhurst. Great quotes from supporters Michael Moore CEO, BVCA and Julian David CEO, techUK. * UK VC funding at Series A is -44% from last year, and worsening * Q3 24 is down a staggering 57% from Q2, itself down from Q1 * 9 in 10 seed funded startups cannot access Series A VC funding, the next 'rung on the funding ladder' * Just 32 future scaleup companies across the whole of the UK were able to access their first VC funding round in Q3...a 6 year low * Half a billion less capital is going in to UK scaleups at Series A, than just 2 years ago! As the UK scaleup funding gap widens, we are losing ground against other countries, at both startup stage (a position the UK worked hard to achieve, since 2011), and for scaleup support. OECD data: 13th in the world for scaleup support, and that's before Series A funding access dried up. I get that its confusing. Another report (BBB, Nations & Regions) released this week spoke of positive trends in private investment, stating "The data for Q2 2024 shows that investment value has continued to grow". Great, I love to see optimistic data. But under analysis that bundles venture with private equity (later stage), where a few megadeals skew the numbers. Otherwise the exact opposite is true. Our independent research here, for the UK ScaleUp Investment Mission, is laser beam focussed on Series A. The funding round where companies move from the c.1m startups launched each year, through the 2,179 that access seed funding, into the rarefied category of being recognised as future scaleups, attracting Series A funding (£2-10m). The UK venture landscape is currently funding just 248 pa of these companies, and declining. We've been sharing this urgent call for support with the new Government since the day after the election. I've personally met with several Ministers, and spoke to all the relevant Government departments. I will shamelessly repeat loudly what is at stake. UK scaleup funding at Series A has nearly halved in a year, and continues to decline steeply, more than halving in the last quarter. VenturePath developed The UK ScaleUp Investment Mission to convene the scaleup support ecosystem and £7bn of funders to help address this problem, to improve nationwide access to VC investment, and create more venture-backed successes. We have clear support, clear recommendations to reverse this decline in UK scaleup investment, and have made a clear ask of Government for participation in this, to ensure immediate action is taken to create the conditions for success for UK scaleups, ensuring the focus on growth isn't undermined by lack of capital, or equitable access to it. Government decision makers, we'd love your interest, to progress to action. HM Treasury: Rt Hon Rachel Reeves Spencer Livermore James Murray & CC Poppy Gustafsson (welcome to the debate).

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Taavet Hinrikus and I made the Financial Times Due Diligence email. https://lnkd.in/ez2AuGQx One 'unintended consequence' is that if there is a 45% tax on carry and CGT (raising £40m per year, remember) it for all intents and purposes closes the door on new VCs in the UK. Especially started by teams from non-traditional backgrounds. To meet the GP commit, you need to be already part of the 'wealthy' as you cannot rely on the value you create - nearly half of it will disappear - to fund it. We have both had extremely successful startups which are few and far between. The smaller number of new VCs will therefore more likely increasingly be for people who have inherited the capital or can draw it from their already rich family. Probably not want they have in mind with this policy.

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Great to see SIS Ventures make this list by TechRound https://lnkd.in/eDtRbggM A bit more about what we look for below. If you're a founder and these hit the mark 👇 then please get in touch Investment targets SIS Ventures is focused on high-impact, high-growth potential businesses our investee companies are innovation-led, often spun out of Scotland’s leading university innovation programmes. Portfolio companies are also carefully selected for their commitment to developing their environmental, equality and diversity, social impact and governance practices. SIS Ventures seeks to provide equity investment to: ✔ High growth potential with a global scale and intent to provide significant impact ✔ Focus on social and/or environmental impact, aligning with impact themes / at least one of the UN SDGs ✔ Product or service backed by defensible technology or proprietary know-how ✔ EIS or SEIS qualifying ✔ Low capital-intensive businesses ✔ Sector agnostic, but historically invested across Life Sciences, MedTech, Climate Tech, Circular Economy, Biotech ✔ Pre-seed – Series A ✔ Headquartered in Scotland

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Major Barloworld shareholder rejects R120 offer, demands R130! Silchester says consortium’s offer is undervalued. UK-based SILCHESTER INTERNATIONAL INVESTORS LLP, a major investor in JSE-listed Barloworld, does not believe the offer from the consortium that is proposing to buy out all the ordinary shares in the JSE-listed group is “compelling”. A firm offer by the consortium last week values Barloworld at R23 billion and comprises a cash offer of R120 per share that will not be reduced by the R3.10 per share dividend already declared by Barloworld on 22 November. However, Silchester director Tim Linehan said the firm is unwilling to tender its Barloworld shares unless the consortium offers at least R130 per share. Linehan said a full privatisation of Barloworld is unlikely to succeed without the support of the group’s primary shareholders, including Silchester. Silchester owns 33 531 795 ordinary shares in Barloworld, which represents 17.7% of Barloworld’s issued share capital. The consortium comprises Entsha and Gulf Falcon Holding Limited, a wholly-owned subsidiary of the Zahid Group, a multidisciplinary conglomerate headquartered in Saudi Arabia and an effective 18.9% shareholder in Barloworld. Entsha is a newly incorporated company that is ultimately owned by The Katlego Le Masego Trust, an inter vivos trust established for the benefit of Barloworld CEO Dominic Sewela and his family. The scheme of arrangement requires the support of 75% of eligible voters who participate in the meeting – in their own capacity or by proxy – for it to succeed. The holders of about 22.92% or 43 367 048 of Barloworld’s shares are not eligible to vote on the proposed transaction. These excluded shares are those held by the Zahid Group (35 834 624), Barloworld Foundation (6 578 121), Dominic Sewela (653 207) and Katkego Le Masego Trust (401 096). Lineham said Silchester intends to exercise all rights available to shareholders in South Africa to protect the financial interests of Silchester’s clients. https://lnkd.in/dfqbFvix

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Today’s budget announcements reveal a challenging landscape for UK entrepreneurs and SMEs, as Chancellor Rt Hon Rachel Reeves’ first budget underscores a range of new tax measures set to impact business owners across the country. With a community of over 30,000+ SMEs, E2E Enterprise has been a vocal advocate for the needs and growth of small and medium-sized enterprises, yet today’s budget highlights a concerning shift in government support for the business sector.   The proposed increase in Capital Gains Tax (CGT), along with the hike in employers’ National Insurance (NI) contributions to 15% starting April 2025, directly affects larger SMEs, who are the backbone of economic growth and job creation. Additionally, changes to Business Asset Disposal Relief, and the capping of Business Property Relief at £1 million (with a 50% discount on the remainder), could challenge the sustainability of family-owned businesses, further straining SME cash flow and growth prospects.   Moreover, the 20% Inheritance Tax (IHT) now chargeable on most AIM shares, previously a 40% benefit, threatens to reduce market liquidity and limit funding options for SMEs reliant on AIM investments. Combined with the end of Non-Dom Status, VAT charges on private schools, and increased stamp duty, these policies may deter foreign entrepreneurs from considering the UK as a viable location for new ventures.   These changes have sparked significant concern within the E2E Enterprise community, with many members expressing frustration and even reconsidering the UK as their primary base of operations. The sentiment from our network is clear: the government’s stance may lead to a decline in new business formations and a potential exodus of high-growth SMEs to more business-friendly regions.   E2E Enterprise stands committed to advocating for a business environment where entrepreneurship can thrive, calling for policies that recognise and support the essential role of SMEs in driving economic growth, innovation, and employment across the UK. #E2E #AutumnBudget #TheBudget #CGT #SME

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📣 We’ve got a big ESG_VC event planned for Tuesday next week – featuring the latest updates to our measurement framework, news of our 2025 benchmarking with the British Private Equity & Venture Capital Association (BVCA), and an introduction to our new platform partners… 📣 On the afternoon of Tuesday 26 November, we’ll be gathering 200+ VCs for the latest update on the ESG_VC Measurement Framework – from what it covers to how it informs industry-leading research, and how you can now work with our accredited data collection partners. This will be our first event delivered in partnership with our cohort of platform partners: Apiday, Novata, and PortF. I’m excited to share with our members how these partners can support a big step up in your ESG initiatives. Join us for a jam-packed event that will feature: 🟢 An update from Suzi Gillespie of the BVCA on how you can take part in our 2025 research – we analysed ESG performance in c.600 VC-backed companies in 2024 and we’re looking to deliver an even more ambitious piece of research next year… 🟢 Insights from Emily Havers of Fidelity International Strategic Ventures on the updates that have been made to the framework and what it means for our members, their portfolio companies, and the broader ecosystem. 🟢 Perspectives from Emily Matthews of Oxford Science Enterprises and Nina Foote of Volution on how the ESG_VC Measurement Framework has supported their work on ESG. 🟢 Presentations from our platform partners: Edouard Audi of Apiday, Conor O'Laoire’Laoire of Novata, and Alex Lu of PortF. It’s going to be a good one so do register. Link to sign up in the comments! #ESG_VC #sustainability #venturecapital

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NOTWICS would like to alert founders to this lovely message I got from my good mate Tom Britton @ SyndicateRoom This excellent Cambridge based pre-seed and seed stage VC is looking for top founders and hopefully this is the first of many funds ringing the bell saying they are now deploying 💥 - akin to top man Dan Bowyer’s LP post yesterday. The winds of change are coming - funding is coming back From Tom “Hey Chris - We've partnered with Carbon13 to launch their next Climatech SEIS fund. The fund will open to investors on Tuesday and aims to deploy in the current tax year. And on Carbon 13 Carbon13 companies have gone on to raise up-rounds totalling more than £38m. The average age of their cohort participants is 37, a quarter hold PhDs and 63% of their teams are mixed gender”. Their portfolio now has 71 ventures across five key sectors: chemicals and materials, energy, food systems, enabling platforms and the built environment. Founders find out more here and get applying https://lnkd.in/es6EvuN5 Or Direct Message Tom for more Apologies for spelling mistakes - rushing to host a huge defence tech breakfast with FieldHouse Associates and others #startups #scaleups #vc #angel

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A few reflections on last week's Budget, from me, and a bunch of our fabulous FieldHouse Associates' clients. https://lnkd.in/exrefrpt #tech #innovation #investment #venturecapital #startups #scaleups #regulation #government #PR #publicaffairs #consultancy

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The British Business Bank produced a great report last week on the performance of UK VC funds (link in comments) over the last 20+ years. As with all reports like this, it's really important to dig into the detail and not just rely on the headlines. In particular, I was keen to compare the performance of the best UK funds to those in the US. While accepting the limitations of the data (all performance data on VC is based on a very low sample size), it's still interesting to see how the UK funds in the BBB report compare to the Cambridge Associates US VC benchmarks. As you can see from the chart below, the top quartile benchmark for UK funds exceeded the US funds for the period 2002-2007. But the sample size for UK funds in this period is particularly low (eg just five funds for the 2004/05 period). Since 2008, the top quartile UK funds have underperformed the US benchmark, and since 2010 are much closer to the US median return than the upper quartile. There are some outstanding founders and companies in the UK and some strong-performing VC funds. But the reality of VC is that performance is driven by a small number of outlier investments. Without these, it's almost impossible to deliver 3x net returns to LPs. For the UK to really become competitive with the US, we need to see more UK-based companies able to scale and exit at valuations in excess of $5bn. Unfortunately, there are no easy solutions to achieving this. We consistently hear from our VC managers that there is no shortage of capital for the best UK companies. Where there is a shortage is in the number of world-class founders looking to build in the UK. Get this right and the capital (and returns) will follow.

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Extremely worrying data about VC funding in the UK. While we all understand that taxes must go up to pay for the mismanagement of the Covid crisis by the then administration - allied to economic headwinds caused by Brexit - surely we must also protect the parts of our economy that can stimulate jobs and growth...ie - early-stage business?! In my opinion the most impactful and simple way to do this would be to increase the SEIS allowance to £1m from £250k and make it applicable to companies upto 5 years from their initial trading date from the current 3 year limit. This will bring a huge amount of fresh capital into the early-stage investment market...especially if the govt increases CGT overall. If we don't protect early-stage innovation we will never get out of economic trouble. #earlystageinvestment #venturecapital #SEIS #funding

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Useful and timely analysis Overall: could have been worse

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Not quite sure what to make of my appearance with Chris on stage yesterday at SuperVenture being described as the 'Morecambe and Wise of ESG'... Hopefully we weren't too slapstick, but it was great to represent ESG_VC and the British Private Equity & Venture Capital Association (BVCA), sharing the key findings from our latest research. It was also great to be joined on stage by Giulia and Grace to reflect on these findings and discuss how and where ESG is now being embedded throughout the venture ecosystem, particularly within portfolio companies. A few key takeaways for us all: 1️⃣ Don't let perfection be the enemy of progress... One that applied to both VCs and portfolio companies - quick and efficient solutions will be more impactful than long and detailed processes. Identify your objectives and move quickly to find a good solution, as you can always refine and improve over time. 2️⃣ Think about your 'ESG mindset'... Giulia shared an insight into Sofina's screening process for GPs, which includes an analysis of the firm's ESG mindset - how seriously are you embedding an ESG strategy and translating policies and processes into long-term progress? 3️⃣ The commercial case for ESG is strong, and growing... Grace highlighted the importance of stressing to portfolio companies - particularly those selling into large corporates - that regulation and reporting requirements are making ESG data and carbon accounting critical to winning contracts and customers. Ps: photo credit to Tony Greenham!

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Well done to Alex Chalmers for publishing a really well researched look at EIS/VCT funds. These themes have been bothering a lot of us for years: the fees, the mediocre performance, the misalignment of incentives. I thought I'd add some broader context. 👉 EIS funds :: like everything in VC, it's about the manager. There are some EIS funds that I'd choose to work with over GP/LP funds. I think Fuel Ventures 🚀 (🚀 Mark Pearson, Oli Hammond) are great, real energy and value. Same with MMC Ventures - a firm thesis and very professional approach. These are 2 great examples of funds with an identity & direction. They act like VCs, not 'fund managers'. Generalist funds are difficult to operate in any model, tax efficient or otherwise - it's hard for founders to get value add beyond capital when their investors don't have the specific expertise in a sector or model. The EIS/VCT industry has always been heavy on fees, but 'deal' & 'board' fees have also been common with GP/LPs too for a long time. That doesn't make it good practice, but it's not unique to EIS funds. One of the good things about EIS funds are the access they give to retail investors to a portfolio of tech companies - and that's been incredible for the industry over the last decade. The downside is that some fund managers are clueless, at best, malicious at worst. I've seen atrocious terms from EIS funds (5% exit warrant on entire share capital of a business + mega fees + participating prefs) - but that's a case of buyer beware - and maybe more of a stand from the BVCA. (BTW, the funds that take this approach have the worst fund performance.) It's easy to look at EIS funds after years of LPs backing new funds galore, but don't forget that these operators have been around for years, some (inc. Oxford Technology Management) were pioneer investors for a long time before 'deeptech' became fashionable again. 👉 When it comes to VCT, there's a context. The 'VC' bit has been a misnomer for the past 20 years. VCTs were launched in 1995 when venture capital looked completely different. Before 2015, managers could invest in MBOs through the scheme, for businesses of any age - it was the more edgy end of private equity, but nowhere near what we now consider as VC. A few classic PE managers like NVM & LivingBridge moved of the market, but for those who have stayed, the PE culture often remains and VC as we know it is sometimes an anathema. My own experience of VCTs has been largely poor. £100k+ in external DD, general misunderstanding of the venture model and finicky compliance with VCT rules that can hamper a company's flexibility. Since 2017, money has poured into VCTs via IFAs. I've wondered if the retail investors understand the industry, or even care. But again, as always, it's buyer beware. TLDR; EIS funds just need to shape up. VCTs need some innovation. WDYT? -- 📍 I advise scale-ups on fundraising M&A and often help their investors, too. 🤝 📧 [email protected]

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The next Quarterly Apollo meeting is on Monday, September 2, from 18.00 to 20.00 in Central Edinburgh. If you would like to pitch your company and fit our criteria, please upload your proposal to our platform. We expect at least one founder/director to be permanently based in Scotland. Our members will vote on which companies they want to see present at our meeting on 23 August. The two companies with the most votes will be selected. Please upload your investment before Wednesday, 23 August. We have a strong preference for two types of investment. - Proposals that are too early for most investors with the potential to build defensible solid IP (ideally with Grant funding that needs to be matched). The aim is to create enough traction to become attractive for a larger investor with an exit in 7-10 years. -Companies that will become cash-positive after our investment and don't necessarily raise again. The founders can generate returns for the investors via Dividends and/or share buybacks. Apollo is a group of over 60 UK-based investors who invest together, helping each other with Due Diligence and growing the investee companies. We usually make 3 to 4 new investments a year. Please message me if you'd like to become an Apollo member. #seis #angelinvesting #startupfunding https://lnkd.in/eAccNAn

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Not all venture firms are created equal - at Playfair Associates & Principals write cheques and lead deals 💰 Why? Because they have the ability, drive and passion to do so And what we care about most is building optimal partnerships with founders that deliver results This means matching them with the right investor who then continually leverages the diverse experiences of our entire team I spend a lot of my time nowdays supporting these investments as well as leading my own I love doing both Founders: don't assume only partners lead deals and don't be afraid to ask how decision making works during your pitch call #venturecapital #startups #fundraising #founder #entrepreneur #entrepreneurship #technology #innovation #business #ceo

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techUK recently asked me to share views on #scaleup #investment challenges, which are condensed into a 3 minute blog post below. Hopefully an interesting read for UK tech entrepreneurs, VCs and policy makers... The opportunity to improve the landscape is clear. 🇬🇧

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It was 30 years ago today... that Chancellor Ken Clarke introduced VCTs in his 1994 Budget! Since then they've raised over £12 billion to support the best of British innovators. To mark the occasion, we have launched a report, 'Giving great companies a flying start' to highlight the crucial economic role VCTs play in nurturing high-growth companies, providing finance, business expertise and ongoing support to help entrepreneurs bring their vision to life. Find out more here: https://lnkd.in/e9sJ7YKn Annabel Brodie-Smith Vanessa Booth Nick Britton, CFA, MCSI Nick Gardner Juliet Webber Richard Stone Chris Lewis Venture Capital Trust Association (VCTA) British Smaller Companies VCT2 PLC BRITISH SMALLER COMPANIES VCT PLC Blackfinch Group Blackfinch Ventures AMATI VCT PLC Hargreave Hale AIM VCT OCTOPUS AIM VCT PLC Octopus Ventures AlbionVC Baronsmead Venture Trust plc Baronsmead Second Venture Trust plc CALCULUS VCT PLC Foresight Group Fuel Ventures 🚀 Gresham House Ventures Gresham House MAVEN INCOME AND GROWTH VCT PLC MAVEN INCOME AND GROWTH VCT 4 PLC MAVEN INCOME AND GROWTH VCT 5 PLC MOBEUS INCOME & GROWTH VCT PLC Molten Ventures NORTHERN 3 VCT PLC Octopus Titan VCT Oxford Technology Management Pembroke VCT Praetura Ventures Proven Growth and Income Vct Plc Proven Vct Plc Seneca Growth Partners THE INCOME & GROWTH VCT PLC Triple Point #VCTs #VentureCapital #VentureCapitalTrusts #InvestmentCompanies #Investing

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🚀 New BVCA Data: VC funding can drive innovation – but more domestic funding is needed...   As highlighted this morning in City AM, UK #venturecapital is not attracting enough funding from domestic investors compared with the likes of our European competitors. https://lnkd.in/eyDRbu89 The BVCA’s new report, Venture Capital in the UK shows that the fundraising environment remains challenging. Over the long-term average, only around 40% of capital raised by UK venture funds typically comes from domestic sources, compared to over 70% in France and Germany and over 80% in Spain and Italy.   This is despite VC backed companies delivering an internal rate of return of 11.2% per annum since 2002, outperforming key market indices like the FTSE All-Share Index and MSCI Europe Index.   However, the report also found that an increasing share of VC investment is going to businesses located in the UK’s nations and regions - almost half (49%) of businesses backed by VC in 2023 were located outside the Capital.   The UK should be the best place to both start and scale a business, and this new report contains some exciting information about the state of the UK’s venture capital market.   The report shows: 🏢Almost half (49%) of businesses backed by venture capital in 2023 were located outside of London. 💷VC-backed companies attracted £8 billion of investment in 2023 📈 Venture capital-backed businesses added £20 billion in GDP to the UK economy in 2023   There is much more to discover in this report so why not have a read for yourself https://lnkd.in/eBrB5S8a.

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