Jack Wearne

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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"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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Interesting article: UK trades at a discount to US Election result has given certainty There is very low anti-monopoly concern Activity seems to be for relatively small companies being sold to foreign buyers My thoughts: Headline pitches this as good news - it’s not. We trade at a discount because growth potential is seen as limited. Companies are being bought by foreign interests before they have the opportunity to grow domestically. Deals are being done now because there is a “Labour discount” - everyone sees that Labour will not get another term so they buy now cheap and then trade out at a premium after the next election. LSE in underperforming - this is worrying.

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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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The latest (and most robust) guide to business valuation trends is out. (Usual hat doff to Simon Blake at Price Bailey for giving us the confidence to get started on these and all our customers for being good enough to submit data.) Customers can find the MarktoMarket H1 2024 Indices in the "Library" in your MtM app, along with all our other content. The TLDR is that multiples remained soft in H1 2024, more or less in line with 2023. The Nano Cap Index (sub-£2.5m deals) was flat. The other indices all show a small decline. It takes lots of work by our data team to bring these to fruition so thank you and well done to Thanh Nguyen for doing most of the heavy lifting and showing incredible attention to detail and perseverance. Big thank you also to Avril Bannister and Joshua Haselwood for the support in getting this over the line. We are about to publish our SME M&A Confidence Index which will give some indication of sentiment on a forward looking basis. #businessvaluation #corporatefinance #mergersandacquisitions #SME

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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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Thank you Funds Europe for including my voice in the new UK Budget coverage. VC industry was expecting the tax on carried interest - private equity managers’ share of profits on successful deals - to increase. However many of my fellow Venture Capitalists raised a concern about removing the right incentives for taking risks. These incentives are even more important for the founders creating strategic technology assets in the UK than for their investors. "Carried interest rewards fund managers who take long-term risks, which frees the capital needed to support early-stage innovation, particularly in R&D-intensive fields like quantum computing and AI. These sectors require sustained, high-stakes investment, where tremendous strategic asset value can be created, but the journey involves a great deal of risk-taking and patience." Thank you to everyone who led a dialog on this topic in the past few months and made sure that incentives are largely not removed for the founders and capital to stay in the UK. OpenOcean, British Private Equity & Venture Capital Association (BVCA), Michael Moore, Daniel Harrington

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Voodoo didn’t buy BeReal for €500MM. Per reporting, the cash consideration in Voodoo’s acquisition of BeReal is €166MM, with the remainder of the €500MM “valuation” being paid out if performance targets are met in an earn-out. I don’t think that Voodoo’s acquisition of BeReal is motivated by cross promotion. Voodoo states that BeReal features 40MM “active users,” which is vague. I’d estimate BeReal has MAU in the 5-10MM range, with the 40MM number representing a longer timeline. This isn’t enough MAU to justify the price solely on the basis of cross promotion, especially given that BeReal’s MAU is likely stagnant. Further, Voodoo’s own social media app, Wizz, is growing faster than BeReal in the US: it sits at Top Downloaded rank #17 in the Social Networking category vs. 27 for BeReal. The CEO of Wizz, Voodoo’s social media app, will become the CEO of BeReal. My sense is that Voodoo may integrate the functionality of BeReal into Wizz at some point to accommodate BeReal’s core demographic and serve a larger TAM. If cross promotion does factor into the equation, it’s likely from games into the social media properties. Voodoo is a much more valuable company with a scaled social media property than an operator of a hybridcasual gaming portfolio, the titles in which are volatile from a growth perspective (see the chart below). BeReal was something of a gimmick, and it may work better as a feature than a standalone app. If Voodoo can use BeReal’s core mechanic to grow Wizz into a scaled social media property, with strong retention and long-term engagement, it can pair its existing advertising infrastructure with Wizz to service ads not just in its social media footprint but against an audience network across its published titles. But in the meantime, I’d expect traffic to move from Voodoo’s games to Wizz as it scales that property.

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£40m per year is not going to make a big difference to a £22bn deficit. It is 0.2% of what is required. Economics and politics is about trade offs and the benefits of a strong VC sector are manifold. 45% tax on carried interest for VC will hit a small but economically important sector disproportionately hard. Excellent article today from Ivan Levingston in Financial Times with comments from Taavet Hinrikus and Matthew Scullion. Higher UK taxes will deter risk-takers, warn tech groups https://on.ft.com/3TfruTS (paywall) #ukventurecapital #ukgrowth #uktech #UKfuture

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🎯At our GTM Day earlier this year, pricing strategy was one of the key topics we discussed in a workshop with STELLA PENSO. ✅ There were loads of insightful discussions but the most interesting takeway was that whilst it can seem like a resource-intensive approach, investing early on in pricing and ensuring it is owned by a department and individual will provide a solid foundation for overall company growth and pay dividends in the long run. 💡From this session, we’ve created an overview of how to build the best pricing strategy and how to approach difference pricing scenarios. Find out more ⬇️ https://lnkd.in/eA8QfD-V #pricing #pricingstrategy #startup #scaleup #growth #vc #gtm #seriesa #seriesb

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Bumping this… I’ve had 5 or so interesting conversations, 2 that may lead to deals, in the past week. Demand > supply for quality IT MSP / Cybersecurity MSSP companies. We have options with UK, US and Gulf based buy-side partners. All quality buyers with good reputations. Timing good for UK based owners, given election and CGT uncertainty. There’s also potential for mergers / rollups, which is a nice, simple way for all to benefit from scale - without the need to build organically. DMs open for friendly and confidential chats. #openequity

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Despite England’s loss at the Euro 2024 last night in Berlin, the UK has retained its crown for venture capital investment! 🇬🇧👑 Data from Dealroom, a global provider of data and intelligence on start-ups and tech ecosystems, revealed that UK start-ups and scale-ups raised £7.4bn during the first six months of the year. That’s a 16% increase from the same period last year, accounting for nearly one-third of all venture capital funding in Europe! Some standout funding rounds include: • Wayve, the autonomous vehicles technology firm, raised £861m in May. • Credit technology company Abound secured £400m. • Highview Power, focused on long-duration energy storage, raised £300m. • Online bank Monzo gathered £150m. • Electric vehicle charging group Char.gy raised £100m. The second half of the year looks promising with Index Ventures announcing it has raised $2.3bn in two new funds to invest in start-ups, with a significant portion expected to be deployed in the UK. Tech companies specialising in energy attracted the lion’s share of funding, with £4.3bn across Europe, followed by generative AI companies, which attracted £2bn. Having been deeply involved in the UK tech sector, I’ve witnessed the resilience and innovation driving these impressive numbers. The UK continues to be a powerhouse for tech innovation and investment, and it’s exciting to see the impact these investments will have on the future of technology and sustainability. What are your thoughts on the future of UK tech investments?

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The British Private Equity & Venture Capital Association (BVCA) Accelerate conference 21 - 22 May is ground zero for the UK and Europe’s smartest investors and founders. With #VentureCapital money harder to find than Taylor Swift concert tickets, #venturedebt is having a moment! My panel on Day 2 moderated by Leon de Bono is a can’t-miss. We’ll unpack how founders can sensibly leverage debt to extend their runway and ease the path to an exit or next round. The seasoned investors joining me (Stephen Fahy & Stephanie Heller (Galantine) have deployed serious capital into some of Europe's biggest scale-ups. Whether you're a founder preparing to raise your next round or an investor, you need this VC alternative in your mental model. See you there. www.bvca.co.uk/accelerate #Fundraising #Venturedebt #venturecapital #acelerate2024 Fuse Capital BAFTA 195 Piccadilly

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Yesterday I had the pleasure of appearing on CNBC to talk about the state of tech in the UK and Europe, touching on the state of IPOs vs PE acquisitions, sectors to watch and where the opportunity lies. Thanks for a great discussion Arabile Gumede! Some thoughts from the interview: Signs of Success: The acquisition of UK tech companies by prestigious private equity firms like Thoma Bravo is a testament to the strength and success of the UK tech sector. It's a clear indicator that UK companies are building substantial value and attracting significant international interest. Vibrant Ecosystem: Despite challenges, the UK and Europe boast a vibrant tech ecosystem, particularly in AI, cybersecurity, and fintech. The market has now stabilised post-pandemic, offering a fertile ground for emerging companies to thrive. Opportunity for scale-up investment: Looking at investment into SaaS companies, Europe is on par with the US in the early stages. It is at the scale-up stage that a divide appears – support and more investment into Europe and the UK’s growth companies will further strengthen the region’s tech scene. Watch a clip from CNBC here: https://lnkd.in/d7J8_FNP #Oxx #UKtech #VC #growth

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From a Cash Flow Returns On Investments point of view, the UK looks undervalued. These are the largest UK companies excluding Financials and Real Estate. Please feel free to contact me if you want a full breakdown of companies on the list. We also have a list for the UK small, over 1,100 of the largest US companies, and 500 of the largest companies in Europe. #investing #finance #assetmanagement #investmentmanagement

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Speaking to tens of funds every month, one thing that stands out is the difference of opinion on the impact of follow-on funding for their portfolio. Some believe that doubling down on winners is the thing that'll make their fund a success, whilst others believe that the initial investment is key. To understand this a bit more, I've looked at three different scenarios: 1) Fund A - £50m fund, 20 companies, £2.5m investment per company, no follow on funding. 2 "winners" (20x return), 6 middle (3x return), and 12 losers (no return). 2) Fund B - £50m fund, 20 companies, 50:50 initial investment:follow on funding ratio. Initial funding of £1.25m, and due to the fact that only 40% (8 companies) will receive follow on funding, the follow on funding per company is £3.125m. 2 "winners" (20x return on initial investment, 10x on follow on investment), 6 middle (3x return on initial investment, 1.5x on follow on investment), and 12 losers (no return). 3) Fund C - £50m fund, 20 companies, 50:50 initial investment:follow on funding ratio but with slightly less successful follow on investment. 2 "winners" (20x return on initial investment, 10x on follow on investment), 3 middle (3x return on initial investment, 1.5x on follow on investment), 3 flat (1x initial investment, 0.5x on follow on investment) and 12 losers (no return). For all three scenarios, I've made the assumption that the fund in question is a top quartile seed fund in terms of Seed to Series A graduation rates (40% as per Dealroom.co report). You can see from the DPI calculations, the key of follow on investment, unsurprisingly, is how successful the companies that receive the follow on funding are. If they are a strong, consistent cohort with some stand out winners then it can enhance returns; however, if some of the businesses that receive follow on funding are not successful, it can really hurt returns. For any fund manager, the question is where your strengths lie, and with the information received from being on the cap table of the company, are you able to make great decisions on follow on funding, or is a more mature company not within your remit.

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You can now see news on when a fund has raised on shipshape.vc. Something we have been really excited about for a while. This helps you see: 💰 is a fund likely to have dry powder ⏳️ where a fund is likely to be in their deployment lifecycle* 🕳 whether their absence of deployment (investment) activity might be due to not having raised a fund recently 📰 check the original news source When you add this to existing features like seeing recent deployments, and where we have seen evidence the fund can lead rounds, we think this can save a lot of time in investor discovery/research. Caveats: * this won't apply/help with evergreen funds like Augmentum Fintech - who have a different structure (thanks Georgie Hazell Kivell for the early note on this) - our data coverage is improving but not perfect. The absence of evidence should not be interpreted as evidence of absence - but you can check the evidence we have from the original source. thoughts/feedback welcomed as always #capitalraising #startups #fundraising #founders #venturecapital #investors #vc #vcfunding #technology #startup #tech

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The vital role that the VCT industry plays in supporting UK economic growth and job creation is highlighted in this article from the The Association of Investment Companies (AIC) #vct #vcta #venturecapital #economicgrowth

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Prior to the UK Budget some investors had been holding off to see what the Chancellor would do with regard to Capital Gains Tax, and Carried Interest. Whilst not great the budget is not as bad as had been feared. These are the main impacts: 1) Capital Gains Tax will rise from 20% to 24% for higher rate tax payers. 2) Carried interest sees a 4% increase to 32% from April 2025, and starting in April 2026 will fall under the income tax regime, (subject to National Insurance Contributions) with an effective tax rate of 32.625%. 3) Entrepreneurs relief (now Business Asset Deposal Relief BADR) used to allow a 10% CGT rate up to £1m and this will rise to 14% April 2025, and 18% by April 2026. The changes are unwelcome because anything that stifles entrepreneurship cannot be seen as good nor promoting growth, despite Labour's assurances that they are pro-growth government. This may well translate to meaning investment in state controlled or near state controlled enterprises, which have a poor track record. This all being said the Private Equity, VC, Angel, Seed investing space remains intact. The time frame for returns in the asset class are relatively long relative to more liquid investments and most investors are prepared to ride the tide. What it means for our clients seeking to raise funding is that everything has to be more perfect, more thoroughly thought through to attract the right investors. The right companies always find funding, our aim at DFC is to select those companies that will fit the bill from start to finish. For more information contact [email protected]

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