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North West bucks national VC investment slump says KPMG

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The value and volume of VC investment in North West businesses weakened in the opening quarter of 2023, but at a softer degree than the overall slump seen at a UK level, according to KPMG’s latest Venture Pulse report.

A total of £67.25 million was raised by North West businesses in the opening three months of the year, down 15 per cent from the £79.2 million raised in Q1 2022, according to the report compiled by PitchBook.

Across the region, Cheshire firms attracted the majority of investment over the period, amounting £46.4 million. Manchester firms raised £16 million with £380,000 invested in Liverpool. Cheshire’s life sciences firm NeoPhore secured the largest deal in the region, with the completion of its £21.5m Series B financing, with a £6m financing extension.

Life sciences and artificial intelligence firms secured the largest values of investment in the region, accounting for 70 per cent of North West VC investment in Q1 this year.

At a national level, £2.9 billion was raised overall in the quarter, the lowest raised by UK businesses in the opening quarter of a year since 2020, and down 76 per cent on the £12.3 billion raised in Q1 2022.

A $602 million raise by London fintech player Abound was the UK’s largest deal of Q1 2023, with two-thirds of the UK’s total VC investment in the period flowing into London.

Commenting on the data, Warren Middleton, office senior partner for the North West at KPMG UK said: “Following the pandemic, 2021 and early 2022 saw huge appetite for VC investment into UK innovation and fast-growth businesses, and it really was an outlier period. What we are starting to see now is VC investment starting to return to more normal levels, but being compounded by a challenging economic environment.

“This is not just an issue confined to the UK, as our data shows market uncertainty has seen VC investment plummet globally. However, the UK remains the innovation crown jewel of Europe attracting more VC investment than France, Germany and Spain combined in the first quarter of the year.

“Investor sentiment in the UK is starting to turn slightly with some cautious positivity that the worst of the market turbulence might be over. The North West, where the downturn has continuously been less marked than the national average, is well placed to take advantage of a return of confidence. Innovative artificial intelligence and life sciences businesses continue to show solid potential even in rougher market conditions.”

The data comes as KPMG’s Private Enterprise practice launches its annual search for the world’s most exciting tech innovators, won last year by a Hull-based pioneer of hydrogen technologies, HiiROC.

The competition is open to scaleup tech businesses from early-stage to accelerated growth, which KPMG invites to pitch their innovative ambitions to panels of local and global industry experts. Regional heats will take place 22nd June for the North West, to find a final shortlist representing the best innovators from across the North.

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