VC investment reaches all time high and set to boost to flexible office take-up in 2021

According to data* analysed by Workthere, venture capital (VC) investment in the UK has already reached an all-time high of £11.4 billion in 2020 (figures taken up to 15 December 2020), which is an increase of 8% on the previous highest figure recorded for the whole of 2019 at £10.6 billion.

The flexible office specialist confirms that the tech sector continued to dominate and also hit a new investment record of £4.6 billion, which accounts for over a third of total VC investment and represents a £629 million increase, compared to last year. VC investment into restaurant technology in particular saw a significant increase (+1675% yoy) as demand for takeaways rose across the UK this year with many food and beverage operators adapting their model to incorporate or enhance their offer. Deliveroo has nearly single-handedly driven the restaurant tech sector with a £471 million pound deal accounting for almost 91% of the vertical’s investment.

Nanotechnology (science, engineering, and technology conducted at the nanoscale) also topped the table for VC investment growth in 2020 seeing a year on year increase of 2433%.  Again, this has been strongly linked to the pandemic with companies such as Oxford Nanopore and LumiraDx, who have created rapid testing solutions, seeing a rise in investment.

Workthere notes that fintech however has seen a slowdown in interest. Only two core fintech companies have been featured in the top 10 investment deals this year, compared to eight in 2019. The maturity of several challenger banks that have emerged over the last decade has also contributed to a fall in activity. Molo Finance, one of the two fintech companies in this year’s top 10 deals, has driven the growth in Mortgage Tech as a vertical. Their £266 million deal accounts for 83% of investment in the vertical, with their online buy-to-let mortgages for first time buyers (buyers with under 4 properties).

Cal Lee, global head of Workthere, commented:

Despite the fact we’re not even at the end of the year yet, VC investment in 2020 has already set a new record, which is definitely encouraging, particularly as this type of investment is usually fundamental to the growth of a business in relation to headcount and expansion. Unsurprisingly, with the wider implications of Covid-19 to consider, we have not seen this rise in VC investment have a significant positive impact on flexible office take up this year as many companies continue to work from home. However, we do anticipate a spike in flexible office take up in 2021 as companies with funding look to expand into new space and more businesses return to the workplace. This increased demand for flexible office space should, in turn, drive further take-up from providers.

While this is dependent on the UK’s economic recovery, our latest sentiment survey shows an increase in both companies and individuals searching for more suburban space, which could mean that even if companies are reluctant to take more space, the continued trend of workplace flexibility could cause an uptick in demand for day passes outside of city centres.

The research from Workthere also shows a trend towards more risk-adverse investments into later stage companies, which has increased 32% yoy. Accelerator and incubator stage companies have also been another beneficiary of increased investment this year seeing a rise of 36%, representing its highest level to date and reinforcing the concept that investors have been keen to deploy money into companies innovating and thriving during the pandemic.

*Pitchbook data analysed up to 15 December 2020.

Read our full research report here.