Amplifi Solutions’ first equity funders survey provides valuable insight into the marketplace, past challenges and future goals. Conducted over March and April 2024, the survey includes responses from investors at over 20 funding firms across the UK and provides an interesting snapshot of the current investment landscape.
Question: Which of the following factors influence your decision to invest in a certain geography?
When deciding to invest in certain geographical regions, “Availability of, and Access to, Talent Pool” was the predominant factor for all respondents, with nearly 80% of investors prioritising it. While, investors into the South East of England and Northern Ireland rated “Exit Opportunities” as highly as talent when it comes to geography.
Question: In the last 12 months, how challenging have the below factors been in fund management?
Challenges varied depending on the geographic region in which funders were investing. Those serving Scotland and England identified “Raising Capital” as their biggest hurdle, while investors in Northern Ireland cited “Achieving Successful Exits” as their primary concern. Meanwhile, funders operating across the entire UK ranked “Economic Conditions” as their top challenge.
UK Serving Funds
Scotland & England Serving Funds
Northern Ireland Serving Funds
Question: Rank the following due diligence obstacles your firm encounters from biggest to smallest
On average, all surveyed investors ranked “Validating Financial Projections” and “Assessing The Strength of IP” as the top two biggest due diligence obstacles they faced, with 72.7% and 66.4% rating.
However, drilling down onto a regional level, we see that investors serving the South East found “Validating Financial Projects” even more of a challenge, giving it an 83.3% rating. While investors serving Northern Ireland ranked “Time Consuming Data Collection” as their main obstacle with a 70.5% rating.
Question: What is the most significant pain point when evaluating potential investments?
Lack Of Differentiation
Over half of the funders surveyed stated that “Lack of Differentiation” was their most significant pain point when evaluating potential investments. This ran true across most regions and in all seed categories, making it the most frustrating issue in the entire process.
Question: Which of the following resources do you employ to stay informed about market trends?
Achieving 96.9% rating, “News and Trade Publications” proved it was the most frequent way all funders surveyed stayed informed about market trends, closely followed by “Networking” at 93%.
A similar result was seen across all regions, except for Scotland, where investors rated these two options equally, while investors into England were slightly more inclined to use “Paid for VC Tools & Databases” than those investing elsewhere.
The least frequent utilised across the board was “Market Research Firms”.
Question: In terms of fund strategy, in 2024 will your fund have a greater emphasis on?
Perhaps unsurprisingly, the majority of Funds across the UK will have “Equal Emphasis on Both” prioritising exploring new opportunities and investing in the existing portfolio; however, it is interesting to see that 40% of funds will be prioritising “Exploring New Investment Opportunities”.
Funds deploying into England (excluding the South East) have the least focus on solely “Exploring New Investment Opportunities”, an average of 19% lower compared to investment into the other regions of the UK.
Question: How challenging do your portfolio companies find the following?
Interestingly, funds concentrated on Series A/B & Buyout stages considered “Strategic Partnership” and “Accessing Talent” challenges almost equally significant at 69.4% and 70.4%, respectively. In contrast, those targeting Pre-Seed & Seed stage companies identified “Strategic Partnerships” as a more distinctive second major challenge.
While, funds investing into NI were the only ones who didn’t see “Internal Financial Management” as a top 3 challenge for their portfolio companies.
Question: Where do you expect the majority of your exits will come from in 2024?
Funds at both Pre-Seed & Seed and Series A/B & Buyout, see that a “Trade Sale” will be behind the vast majority of their exits in 2024 (average of 80%).
Pre-Seed & Seed Funders state that they expect 10% of their exits this year to come from “MBO/MBI through debt”. When examined geographically, Funds investing in Scotland are the only ones who see this as a driver of exits (in the region), whereas other regions expect 100% of exits to come from “Trade Sale”.
Question: Where do your portfolio companies tend to take their main financial advice from?
Interestingly, investors believed at both Pre-Seed & Seed, and Series A/B & Buyout stage, portfolio companies are more likely to take financial advice from their Funder (“Your Fund”) than they are their “External Accountancy Firm” or a “Portfolio/Outsourced CFO”, with “NED” even appearing higher on the list than external accountants.
This survey has lifted the curtain on Funders and their portfolio companies, and the challenges and opportunities they face – of which there are many.
Ultimately, many businesses still need an injection of capital to accelerate their growth, and Investors still need to deploy their funds, so the opportunity for non-portfolio companies remains. However, as this survey shows, that opportunity may be harder as Funders say they will be placing equal emphasis on investing into their existing portfolio as well as into new opportunities.
But the results highlight things that businesses can do to make it as easy as possible for a Fund to invest into them they have to:
None of this should come as a surprise to companies, but this survey serves as a timely reminder of what matters most to Investors, and of what is of key importance to get right in an increasingly competitive raising environment.
The challenges in the market remain, and the months ahead will still be difficult to navigate, but there is plenty of positive sentiment that this can and will be done successfully. And one thing we can be sure of – the Funds and the highly innovative companies of the UK will do all that they can to achieve success.
