Plexal, the innovation centre owned by clients of Delancey and Beauhurst, analysed the UK’s investment activity from 23 March 2020 to 27 April 2020 to get an idea about startups during the first month of the crisis.
When the coronavirus crisis first began, the UK economy was at risk with many businesses being unable to continue running during the lockdown. Whilst almost a thousand SMEs were in administration or liquidation, according to research from Plexa of over 30,000 businesses, British business startups raised over £663 million in just the first month of lockdown.
Although the number of deals were down by 39% compared with March-April last year (2019), the total value of investments were up by 34% thanks to additional capital from investors to ensure their survival. This is also impressive when you consider the circumstances and challenges business owners have had to face in order to obtain funding.
The highest levels of investment have been startups in the tech sector, including artificial intelligence (AI), digital security, fintech and blockchain.
Of the £663 million raised, 7.6% (£50.2m) went towards companies who had never previously raised funds.
Although the value of investment increased, the fall in deals suggested that there was low confidence from investors. Henry Whorwood, Head of Research and Consultancy at Beauhurst said that this could “cripple the growth of the country’s most successful startups and fast-growth businesses.”
A Surge in Startups
However, this confidence must have grown as the number of startups shot up by 47% in June, with a record breaking 77,574 new businesses compared with 52,779 in June 2019.
Many of these came from ‘COVID economy’ businesses such as disinfecting services (+400%), medical goods (+317%) and specialised cleaning services (+85%).
Emma Jones, founder of Enterprise Nation said:
“We’ve seen a wealth of people start businesses. People across the land are spotting gaps in the market and seeing how customers are buying in different ways.”
With more consumers using the internet over going out shopping, there was an 110% increase in new internet retail businesses. It’s also clear that people are making more hobby related purchases such as sports gear (+89%), games and toys (+89%), baking goods (+58%).
Although there were startups all over the country, London and the West Midlands saw the most with 60% increases.
Oliver Pawle, chairman of the Centre for Entrepreneurs (CFE) said:
“With many businesses set to close, and unemployment rising, it is entrepreneurs that will drive Britain’s much-needed economic recovery and create new jobs. These figures provide reassurance that there is a ready supply of new ideas and growing sectors across the UK.
Fortunately, since April, the government has implemented measures to help SMEs survive despite the economic disruption. This included schemes such as the 1.25 billion Support Package for Innovative Firms, Small Business Grant Funds and the Coronavirus Job Retention Scheme.
With more and more parts of the UK going back into lockdown, we can’t help but wonder if this will spark an even greater surge in business startups should there be a second wave of coronavirus this winter.
Looking to start a business of your own?
It’s important now more than ever for you to seek professional advice when setting up a new business. At Ryans, we can provide advice on the best legal structure for your business as well as drawing up a business plan for you to get started.
A well thought out plan with help from an accountant also makes your idea more appealing to investors, which could be key for the long-term future of the company, especially in the current economic situation.