Précis - Corporate finance firm Ascendant has reported that venture capital of £596 million was invested in UK and Irish technology companies in the first six months of 2012. This investment represents a ten-year high for technology investments by venture capitalists.
What? Venture capital investment in technology companies reached a ten-year high of £596 million in the first six months of 2012 according to a recent report by corporate finance firm Ascendant which has been widely reported. When compared against investment figures in technology companies in the UK and the Republic of Ireland of £786 million for the full year in 2011, these reports represent an encouraging progression for the sector.
Whilst the overall investment rates are good news, much of the investment has been focused on particular segments of the market - internet, mobile and digital companies received investment of almost £250 million and clean technology companies raised £71 million. However, software and semiconductor/opto-isolator companies suffered a decline in investment compared to recent years (receiving £44 million and £12 million respectively).
So what? Put simply, an increase in investment is a positive sign as the sector looks to restore market confidence. However, whilst investment activity is a useful indicator of how investors view the marketplace, the overall financial performance of the sector at a macro level continues to be a more accurate barometer of the impact of the economic climate on technology businesses.
According to reports, Ascendant's report also draws attention to the differing fortunes of each discipline within the TMT sector. Whilst internet, mobile and digital companies in particular are showing increased popularity with venture capitalists, many other technology companies continue to face difficult market conditions and a struggle to attract investment. For those companies, a sustained upturn in investment activity within the sector as a whole will breed hope that further investment will follow to where it is needed most. And in the meantime, we continue to see newer companies following the money, and the more established players attempting to diversify away from legacy tech offerings, and move into the more lucrative and high margin services and new media offerings.