Cash is still flowing into promising health and biotech start-ups despite the harsh environment
Investment in start-ups has fallen by 50% to £1.6bn in the past three months compared with the same period last year, according to data firm Beauhurst. Valuations, previously inflated by a decade of benign economic conditions, have taken a hit as investors hold off backing companies that may not survive. Last week, the digital bank Monzo raised £60m at a valuation that was 40% lower than its previous funding round.
However, seed-stage investment – the first round of funding outside of friends and family – is down just 10%. Experts say this early funding has held up because the companies, typically tech-focused and recently spun out of a university, are not likely to start selling products for several years. Businesses addressing problems thrown up by the coronavirus and lockdown are also thriving.
Disruption creates opportunity, and the recognition that health systems have to radically change the way they work has led to a marked increase in ‘mission-driven founders’ who are identifying a core problem to solve.
From the investor/angel perspective, the global pandemic has made people think about the focus of investing as they look forward to rebuilding angel and early stage investment and how they can make a difference. Many investors now feel that impact and sustainability has the potential to be a core underlying objective for their investments going forward, whatever the sector or theme.
How can investments help to preserve and sustain the planet’s resources and address the many human and social needs that COVID has revealed? Many small businesses are bringing innovative solutions to impact on these global and societal challenges and many more businesses have seen the opportunity to innovate and disrupt the market, taking advantage of core technological developments at this time.
It is clear that there is no shortage of investment opportunities to back and that there have already been some significant deals done in this space across a huge range of sectors and themes. It is also known that Business Secretary, Alok Sharma, is planning to bring green technology and low carbon into centre stage for his plans on rebuilding the economy and this will include considerable investment to support innovation.
However, this approach needs to reflected across the whole investment value chain to create an effective ecosystem for investing in impact and sustainability if it is really going to make a difference in the post COVID world.
