Investors are continuing to back Northern Software businesses due to a thriving start-up ... The backers here were MaxHe
Northern Tech Investment Q1 2018 April 2018
46
£61.4m
11
Growth investments
Total value of growth investments
Completed acquisitions
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2018 has got off to a positive start, witnessing a modest uplift in the total value of growth investments in the region on Q4 2017, with the overall value rising to £61.4m from £57.1m.
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Software remains the most invested in subsector, six of every ten businesses invested in were developing a Software based product. It also encompassed 45% of the total value of investments.
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Investors are continuing to back Northern Software businesses due to a thriving start-up ecosystem with supportive demographics such as a large graduate talent pool and the Northern region having the highest percentage of students studying STEM subjects.
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Med-tech and bio-tech was the second highest subsector contributing c.40% of the total value of investments. Much of this is down to a substantial £13m investment in the Manchester-based developer of a cervical cancer diagnostic system, Zilico. The backers here were MaxHealth Medicine Group and Deepbridge Capital. This was the biggest deal in the quarter.
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Northern Powerhouse Investment Fund (NPIF) continued to remain a frequent investor with three investments in this quarter. Notable investments included the Fintech startup Access Pay which received a funding of £1m followed by GradTouch, a jobs and internship search platform which also received a funding of £1m.
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There was a slowdown in the M&A activity in this quarter with only 11 completed transactions, but the outlook for the remainder of the year is very strong. In a recent survey by EY, 57% of global tech execs said they intend to pursue acquisitions in the next twelve months.
Sources: Beauhurst, S&P Capital IQ, KPMG proprietary research.
Featured investments Ditto AI
Ditto, a Manchester based artificial intelligence company which has developed a scalable workplace automation technology for creating software advisor bots which replicate the expertise and accountability of real humans. Its technology has applications in environmental, health and safety organisations, both in the public and private sector. In February 2018, the company raised £4m in funding from LSE listed private equity firm IP Group Plc, the developer of intellectual property-based businesses and Parkwalk Advisors. The funds raised will allow Ditto to extend its presence in the EHS market, further develop its core platform technology, expand its team and deliver new commercial applications in Tax and Healthcare.
Honcho Fintech
Based in Newcastle upon Tyne, Honcho has developed an online reverse auction marketplace for financial services. The company plans to roll out its technology first in the car insurance market where insurers will engage in real-time bidding to offer competitive rates to customers. The Insurers will pay a £1 fee to bid rather than the average £50 commission charged by price comparison websites. The company plans to launch in July 2018 In January 2018, Honcho raised c.£0.85m funding from 710 investors through the UK-based crowdfunding platform, Crowdcube. The company was valued at around £2.2m and gave up c.39% stake. The funds raised will be invested into completing Honcho’s technical integration with the insurer panel, launching the platform and acquiring users through digital marketing and social influencing campaigns. Later this year, the company plans raise between £2m and £5m as part of its Series A funding. The funds will be invested in scaling as well as research and development. The company plans to eventually move beyond insurance and introduce bidding in the utility and communication spaces.
ASK4 Internet Solutions
Ask4 is engaged in the provision of high speed internet solutions and managed data services for multi-tenant accommodation such as universities, private sector student accommodations, residential apartments and businesses. Headquartered in Sheffield, it serves over 160,000 customers across more than 400 sites in the UK and Europe. In February 2018, the management of Ask4, backed by the mid-market private equity firm Bowmark Capital LLP, acquired the company from Darwin Private Equity LLP for an undisclosed consideration. Darwin had acquired Ask4 in May 2014 for a consideration of £21.5m. The business has maintained strong growth by delivering exceptional customer service and investing in strong long-term partnerships. With this transaction it plans to continue expansion in the UK & overseas and also accelerate its roll-out of new products and services.
Gas Tag Utilities software
Based in Liverpool, Gas Tag is a technology company that has developed a scalable gas safety monitoring solution for landlords, housing associations and local authorities. It offers an endto-end gas compliance system that provides full, real time audit trails of all works carried out at a property and also validates the qualification of engineers carrying out the work. The software helps engineers reduce error and increase efficiency as it pre-populates common data and prompts engineers along each step of the maintenance process. In January 2018, Netherlands-based Waterland Private Equity invested c. £3.1m in Gas Tag in return for a minority stake and two board seats. The deal valued the company north of £20m. The investment will help Gas Tag scale up rapidly both in the UK and internationally and further its long-term business strategy to add new products aimed at safety compliance. The company announced that it plans to double the size of its team and add more project managers, account managers and software developers.
Source: Beauhurst, S&P Capital IQ, KPMG proprietary research.
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