Jonathan Coker, investment director at MMC Ventures, outlines his predictions for the UK venture capital market in 2011.
Hot sectors will continue to be well funded even in the equity gap. We are seeing strong demand for deals in digital media, e-commerce, mobile software, cloud, cleantech and digital security and this will continue for some time. However, companies that are reliant on old revenue models and that are not flexible with new routes to market will struggle to raise capital.
Large corporates with accumulated cash reserves are currently the most active players in the M&A market and this will continue to drive venture capital decision making processes. This is particularly evident in the technology space where groups such as Apple, Microsoft, Cisco and Google have large cash reserves are on a clearly demonstrated buying spree.
The new Government has continued the previous Government’s commitment to providing funding for early stage companies with the extension and expansion of the Enterprise Capital Fund and Enterprise Finance Guarantee schemes, which are an increasingly important source of funding for small companies.
MMC has seen more deals at the GBP1m level, funded by extremely high net worth individuals (“Super Angels”) and we expect to see this continue. There will be a rise in innovative early stage businesses waiting until they are generating revenue before going out to raise VC funding.
Companies relying on public sector contracts will struggle to raise capital because the public spending freeze means that virtually no new contracts are being won and it will be very hard for start ups to prove themselves.
