There’s no escaping the fact that 2023 was a year of continued economic strain. While we saw some positive news in terms of inflation – specifically in the UK where falling energy and fuel prices brought the headline rate down from 4.6% in October to 3.9% in November – there was increased turmoil and pressure in other areas. In particular, geopolitical tensions have continued to escalate with conflict in the Middle East adding to existing global economic uncertainty caused by the war in Ukraine.
These pernicious external forces were some of the reasons why the poor fundraising environment we experienced in 2022 prevailed last year. According to Crunchbase, (www.crunchbase.com) there was £58 billion in global venture capital funding in Q3 2023, down 15% from the £68 billion in the same period the year before. In particular, seed and early-stage funding continued to decline year on year, an inarguable signal that venture markets have not opened up yet.
The downturn was punctuated by one major plot point in 2023. Seedrs has played a meaningful role in the EU startup ecosystem for 10 years and, as a business, we have rarely seen as impactful a moment for our industry as that which was caused by the demise of Silicon Valley Bank. And although the sale of the organisation to HSBC proved a stabilising transaction, the malaise of that failure is still being felt throughout the private equity space. We’re seeing this play out in the IPO market, where fresh listings are at an all time low and in mergers and acquisitions – another exit strategy for early stage investors – which saw the lowest annual level of activity for a decade.
But, despite these significant headwinds, the Seedrs platform in its first full calendar year as part of Republic continued to support Europe’s most innovative startups and provide industry leading opportunities to investors. Last year, Seedrs participated in 266 rounds totalling over £353m with 88 campaigns raising over £1m. Notable campaigns included Yonder – the credit card for adventurers – which raised £13.1m and GrowLab Organics, the innovative medical cannabis company that raised £6m and was featured in the Financial Times for its radical approach to sourcing investment.
In particular, I was pleased to see Seedrs continue to play a pivotal role in shaping the landscape of business to business (B2B) fundraising in 2023. 72% of businesses doing their first Seedrs round last year were either B2B or a mix of B2B and business to consumer (B2C).This is testament to the platform’s ability to adapt to evolving trends and cater to the diverse needs of both businesses and investors. I’m sure this evolution will continue into 2024 and I expect several businesses to emulate successful campaigns like Green Lithium, Fieldwork Robotics, Carnot Engines, Sonichem and BIOFACTORY.
Finally, 2023 also saw us launch our long awaited European regulated entity when, in October, we became licensed under new EU regulation for equity crowdfunding providers. This unified approach levels the playing field for the industry and lays the foundations for a thriving sector that is best able to support bustling European startup hubs as well as ambitious investors across the continent. Last year we were able to service business from 13 European countries in just 12 months.
As we look ahead to 2024, it is undeniably a year that will contain both economic uncertainty and (at least short term) market turbulence. Elections in both the U.S. and UK will have a direct impact on, for example, fiscal policy and an indirect impact on, for example, investor appetite. However, for our industry, we’re likely to see a rebound in VC fundraising from the depths of 2023, although not quite to 2021 levels just yet. I also believe that bridge rounds will regress from 38% of all rounds to roughly 25%. As VCs become less generous to current portfolio companies next year, this hopefully means more fresh cash and dry powder devoted to new and upcoming ventures.
The 2024 Seedrs Sector Report is written by members of our excellent campaigns team who have an unparalleled understanding of the startup fundraising landscape. It provides our unique insight as a private investment platform on the businesses and industries we’ve seen pique investor interest. As is outlined in the report, despite rocky trading conditions, there are specific sectors that have performed relatively well and that we see driving investment both on Seedrs and in the early stage ecosystem more broadly next year. These include ClimateTech which accounted for 27% of all venture capital in Europe in 2023, and in artificial intelligence, where the value of the UK industry alone is estimated to be north of $21 billion. As we look forward to next year, we hope that you consider the findings informative and useful.