Latest News

  • Home /
  • Latest News

It is fair to say that 2023 to date has been a slow year across the Venture Capital (VC) sector

17 October 2023
By Dr Savvas Neophytou (Chief Investment Officer, Deepbridge Capital)

It is fair to say that 2023 to date has been a slow year across the Venture Capital (VC) sector, representing a period of challenges, but has ultimately also been a period of considerable progress and maturity for the Deepbridge tech and healthcare portfolios.

Whilst all investors crave the big ticket returns and, like us, want to see considerable growth and returns, it is important to understand market context when analysing performance.

In June, Dealroom.co reported that the UK retains its third-place global ranking for attracting VC investment and ranks first in Europe.  Whilst this is great to hear and is testament to the fantastic innovators here in the UK, as well as the impressive ecosystem we have, it is important to temper this excitement with the estimate that this is ~50% down on the same period in 2022.

Like many VCs, including EIS managers, our focus over the past 12 months has been to support our existing portfolio companies and ensure they are well capitalised and ready to take advantage of future market improvements. This has, thus far, worked well and despite high inflation, rising interest rates, tough trading conditions and fewer external funding opportunities, a good portion of our investees have nonetheless made commercial, scientific and international progress.

During 2022 ‘tech’ stocks faced a rationalisation in terms of valuation.  It can easily be argued that ‘big tech’ such as Twitter (whatever it is called these days), Meta, and Tesla witnessed overdue corrections given that their valuations were uncorrelated to profitability, revenue or any other traditional valuation barometer. As discretionary spending has been squeezed, many of these consumer facing stocks faced a challenging time.

The story in 2023 has been somewhat different, with tech stocks rallying to new heights. As illustrated with the NYSE FANG index, an index that provides exposure to a select group of highly-traded growth stocks of next generation technology and tech-enabled companies, showing a +77% total return year-to-date. However, earlier stage portfolios have not yet caught up. When you consider unlisted equities, many of which are in the high-growth part of corporate life cycles, the scarcity of capital availability for over a year has undoubtedly led to a squeeze of valuation multiples across many sub-sectors. Unlisted company valuations tend to lag listed companies for a variety of reasons, but it helps unearth resilience and help refine business models if companies can engage into a period of ‘self-help’. Like any investment, valuations may fluctuate along the stock’s lifetime but ultimately our focus is firmly on providing profitable returns for our investors over the long-term.

Throughout the past 12-months, our team has been working closely with third-party corporate finance advisors, investment banks, private equity and family offices to ensure we leave no stone unturned in support of our investees. Whilst many in the market acknowledge the constrained funding environment and bemoan the lack of merger & acquisition activity, indeed EY reported in July that “2023 IPO [Initial Public Offering] activity on the UK main market and AIM [Alternative Investment Market] saw a 31% drop in deal numbers compared to the first half of 2022,” the forward-looking views suggest that capital will return in due course, with some anecdotally suggesting Q4 of 2023 whilst others are more cautious. 

The theme at present is not missing the ‘early bull cycle’ and a wide range of economists point out that the recent slow-down seems to be economic-cycle related rather than anything more structural, which means the probability of a systemic financial crisis is diminishing. However, we are not out of the woods yet, indeed some point out to the unwanted prospect of a second wave of inflation (much like the 1970s economic cycle) but the bond markets have had 2 years of negative growth and have since shown signs of becoming more stable which can be seen as a positive, although a record 3rd consecutive year of negative returns in the US 10Y bond market is not out of the question yet.

Given these global challenges, our approach of supporting and capitalising our existing portfolio appears to still be a sensible approach.

One appreciates that the macro might all sound like doom and gloom, but I am delighted to report that entrepreneurship and innovation in the UK remains very much alive and kicking.  The volume and quality of early-stage deal flow we see is unabated, with the UK tech and life sciences sectors continuing to create astounding devices, applications, therapeutics and software.

To date we have supported spinouts from 17 UK universities and over the past 24 months almost 90% of our capital has been deployed outside of London.  With HM Treasury reporting in July that 80% of venture capital provides funding within the ‘golden triangle,’ being London, Oxford and Cambridge, we are pleased that we are bucking this trend and helping democratise the distribution of capital across all regions of the UK and supporting spinouts from universities regardless of location.

We are delighted to now be welcoming a number of new companies into our EIS portfolios and there continue to be great long-term investment opportunities for our investors.

Earlier this year we deployed our final tranche of capital from British Business Investment’s Regional Angels Programme, who awarded Deepbridge a £15m mandate to coinvest alongside our EIS capital. This has been extremely useful capital to help our portfolio companies, for which we have been extremely appreciative.  With organisations such as the British Business Bank (of which British Business Investments is a subsidiary) and Innovate UK, as well as Scottish Enterprise, the Development Bank of Wales and Catalyst NI within devolved nations, providing invaluable support to business owners and entrepreneurs, the UK remains a fantastic place to start and scale a business.

In summary, the past twelve months have been a challenging period, but I am delighted with the work undertaken by our investment teams to support our portfolio companies.  This is, of course, not all about us and my closing remark is to recognise the outstanding founders and management teams who make our investee companies appealing, and scalable, investment opportunities.  Running a business is stressful at the best of times, but in a world where funding is in short supply and unpredictable, this is particularly true.  Therefore, the funding our private investors provide has never been more gratefully received to empower great innovation.

Thank you for your ongoing support.


8 July 2024

Triple Point – Join our CPD webinar: helping investors plan for big life events


1 July 2024

Intergenerational wealth planning for difficult times


24 June 2024

Liontrust Sustainable Investment: Annual Review 2023


19 June 2024

Investing in the energy transition


18 June 2024

Triple Point is partnering with ESG Accord to host a webinar: "A Practical Guide to SDR and Investment Labels for Advisers."


17 June 2024

Latest PruFund monthly investment updates


13 June 2024

Defaqto MPS Comparator: the UK's only accurate MPS performance tool


12 June 2024

Hear about Triple Point Venture VCT - 18th June 2024


6 June 2024

The Nucleus Retirement Confidence Index


24 May 2024

Join us for our Breakfast Briefing with Foresight! June 4th at 9:30am


17 May 2024

Looking forward with optimism


8 May 2024

The retirement income advice red paper


8 May 2024

Liontrust Views: Why smaller can be beautiful for US equities


7 May 2024

CPD Horizon Series: Tax planning for life’s key events


18 April 2024

Liontrust: Opportunities from secular growth trends


15 April 2024

Defaqto Roadshow - The challenges and opportunities of pursuing Income


11 April 2024

Liontrust: US small caps are overlooked and undervalued


4 April 2024

Q1 2024 Rebalance – we think the backdrop is good for stocks


21 March 2024

25 years of ISAs: a quarter of a century of tax-efficient savings and investing


4 March 2024

Stepping out of cash needn’t be daunting


26 February 2024

Managing lifetime wealth – trends in the UK retirement advice industry


23 February 2024

Empowering advice for women in finance


14 February 2024

Tech Matters is here!


5 February 2024

Defaqto upcoming event – Engage webinar 22nd February


1 February 2024

The gender divide in retirement confidence


30 January 2024

SDGs in focus: climate and nature


26 January 2024

Tax year end prep. We’re here to help.


8 December 2023

2023: Another momentous year for markets


8 December 2023

2024 investment outlook


7 December 2023

The 2023 Nucleus UK Retirement Confidence Index


4 December 2023

Paradigm's brand new Technology hub is here


4 December 2023

New service for advisers - Do you have UK clients with overseas assets/liabilities?


30 November 2023

Defaqto Upcoming events - Engage virtual


28 November 2023

Deepbridge Celebrate 2023 Growth Investor Awards Success


22 November 2023

5 reasons why EIS deployment timescales are so important


21 November 2023

November 2023 Asset Allocation Changes: Bonds looking better


20 November 2023

Blackfinch portfolio company Tended named ‘one of the best inventions of 2023’ by Time Magazine


10 November 2023

Value tracker: Where are the cheapest/most expensive stock markets?


9 November 2023

The Asia opportunity – looking for smarter growth


3 November 2023

The big headlines of quarter 3 2023


1 November 2023

Just launched: Octopus Titan VCT


24 October 2023

Understanding Portfolio Management


17 October 2023

It is fair to say that 2023 to date has been a slow year across the Venture Capital (VC) sector


11 October 2023

VCT’s evolving client profile: take another look at your client bank


6 October 2023

Death Benefits


5 October 2023

intelliflo - Building stronger client relationships through technology


4 October 2023

Puma Investments opens £50m fundraise for Puma VCT 13


3 October 2023

Family wealth planning - connected through you


29 September 2023

How well do you know your clients? (Survey + Amazon voucher offer)


25 September 2023

NOW OPEN – Octopus AIM VCTs are open to new investment


14 September 2023

Defaqto ‘Asset allocation – stick or twist’ roadshow


1 September 2023

New maternity law – are you ready?


17 August 2023

Artificial Intelligence: Jobs created or jobs destroyed?


10 August 2023

The big headlines of the second quarter 2023


7 August 2023

Cashflow modelling integral to the advice process


2 August 2023

Asian and emerging markets


28 July 2023

Investment Intelligence Seminars


25 July 2023

Embrace technology to focus on the value of advice


25 July 2023

Emerging-market debt: a potential source of protection and diversification?


21 July 2023

2023 Mid-year Investment Outlook


18 July 2023

25 years of the £2 coin - worth half its value to UK consumers since circulation


5 July 2023

Product and Platform Switching and The Consumer Duty


28 June 2023

How do we invest in the ESG themes range


16 June 2023

eAdviser Index proves the transformative power of technology


8 June 2023

10 tips for the countdown to Consumer Duty


1 June 2023

The easiest financial product to promote


31 May 2023

Invesco's flexible approach for navigating market uncertainty


15 May 2023

Our platform, your way


26 April 2023

Defaqto Spring Roadshow


24 April 2023

Adding value for your clients – Cash flow planning


21 April 2023

PruFund Growth and PruFund Cautious Client Facing Reports


19 April 2023

Puma VCT 13 hits £50 million fundraising target


17 April 2023

Book your free office lunch today


13 April 2023

What next for Open Banking?


22 March 2023

The future of adviser technology


14 March 2023

Property Insight: Commercial Real Estate is always late!


28 February 2023

Technology and the advice journey


23 February 2023

Get ready for tax year end


21 February 2023

Capability, low-cost and choice -retirement planning made easier


3 February 2023

Tax Year End Prep – PRU are here to help


1 February 2023

NOW OPEN – Octopus Ventures Knowledge Intensive EIS Fund


18 January 2023

Listed infrastructure… to the rescue


17 January 2023

Defaqto Engage – CIC Compare