UK start-ups beat all odds to raise over half a billion during lockdown period

By: Auther Bett
Auther Bett
Auther V. Bett, CPA started reporting in the finance and accounting space in 2016. His interests span stocks, bonds,… read more.
on May 2, 2020
  • New research by Plexal indicates that UK start-ups raised over half a billion during the lockdown period.
  • Plexal in collaboration with Beauhurst sampled nearly 30,000 start-ups between March and April.
  • Compared to the same period last year, the research revealed a 34% increase in the amount of cash raised.

Recent research suggests UK start-ups have managed to raise about £663 million since the Covid1- lockdown began, overlooking the current economic slump.

The study was carried out by innovation and coworking space giant Plexal, in partnership with start-up data company, Beauhurst.

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The research sampled data from close to 30,000 companies between March 23 and April 27, and it revealed that British businesses raised 34% more cash than they did during the same period in 2019. The analysts attribute the increase in funding to investors’ efforts to ensure that more start-ups survive the pandemic.

In the last week alone, dozens of start-ups have raised substantial amounts. Onfido, a digital ID verification service announced it had raised about $100 million from investors within a couple of days.

In an exclusive interview with CNBC, Onfido CEO Husayn Kassai said that while uncertainty generally shrinks investor enthusiasm, some areas are still expected to do well and attract disproportionate attention.

“So far, they seem to be infrastructure companies (payments, identity access, communications) and areas related to security and AI more broadly,” Kassai said.

Less deals, more cash

The researchers noted that while a substantial amount of the raised funds went to established businesses, about £50.2 million of the total was bagged by relatively new start-ups that had not engaged in previous fundraising activities.

Investors were particularly intrigued by pitches from AI, fintech, security, and blockchain businesses.

“We believe that entrepreneurs will be at the heart of the world’s economic recovery as they find ways to address fundamental changes in the way societies live and work. It’s vital that they can access the funding they need to get their ideas off the ground,” Index Ventures partner Jan Hammer told CNBC.

While the funds raised during the period compared to last depict an increase, the number of deals was down to 114 or 39%, representing narrowing investor confidence. That further shows that as much as some start-ups can access funding, others are still strugglings to remain afloat. The research shows that at least 1,000 small businesses in the UK have been placed either under administration or liquidation.

On the brighter side, the UK government has been fighting to bridge the funding gap, with billions being pumped into various start-ups to boost survivability.

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