UK tech is set to continue to attract capital from the VC industry in 2021 – from fintech, both B2C and B2B over impact tech to health and biotech we expect to see strong interest.
Despite the obvious challenges of Covid-19 the UK tech sector once again proved highly attractive for the venture capital industry throughout 2020. There was still appetite for large deals in the UK, across all stages, demonstrating that good companies will
always be able to raise capital, especially those positioned to prosper during and beyond the pandemic. In our underlying portfolio, companies such as Cazoo, Hopin and Graphcore were all able to raise rounds well north of £100m.
Tech is the great enabler
There are certain things I am confident about in 2021. Fintech – not just the consumer challenger banks and payment services providers– but B2B companies that improve underlying infrastructure and legacy systems, will continue to be a particularly exciting
sector for the VC industry. Data, and all that it underpins, from cybersecurity to the future of work, as well as quantum technology – tech that harnesses quantum physics to gain performance which is otherwise unattainable – will also be on the agenda.
Impact Tech
As will ‘impact technology’ and the structural shifts it is waging on the venture and venture growth asset class. As the market becomes more competitive, impact and sustainable technology solutions, will continue to play into fund managers’ search for distinction.
Distinction has come in many ways, but impact has added a new dimension to that. We expect both investors and managers to grapple with that next year.
Purpose driven founders, building companies addressing global challenges in healthcare and sustainability will be on venture capital managers’ radars. Climate-tech has attracted a significant amount of interest. While many venture managers got their fingers
burnt in capital intensive cleantech plays in the past, much in the way of infrastructure spend has already been made. So the application of digital, scalable tech solutions to address the climate challenge could well prove a fit with the venture funding model.
Markets are also far less dependent on the policy response of governments than in previous years.
Lifesciences and Digital Health
Another area is digital health and life sciences. We have backed four dedicated life sciences funds to date, and expect to make more commitments to funds that can commercialise the biotech opportunities developed in our universities, and develop the highly
specialist infrastructure required to get new therapies to market at scale. Non-specialist fund managers in our portfolio are also backing companies in areas such as telemedicine and the application of AI to drug discovery.
Dragons and homegrown heroes
Like many things in 2020, the venture capital industry has continued to move forward, despite adversity. The challenges 2020 has brought, such as the difficulty of undertaking due diligence on prospective investments, will continue to impact the sector in
early 2021, as will a Covid vaccine.
The focus on unicorns – those companies valued at over $1bn – has continued to hit new heights over the last year. But I ask myself how long this preoccupation will last. Certainly, it is one way to deliver a return (and a good one) – but it is not the only
way. In 2021, dragon chasing will be equally important for investors (LPs) and VCs alike. Dragons, companies that return an entire fund, are hard to find – but they are important lighthouses.
In terms of British Patient Capital, our focus will remain on selecting best in class venture and venture growth managers. We are optimistic for 2021 and expect the asset class to continue to attract more institutional investors.
We have £1.5bn still be to be deployed. And we are more ambitious than ever to help more home-grown and fully funded, high growth companies to fulfil their potential to be players on the global stage.