The value of equity deals into small Welsh firms is on track for a record year with the number of venture capital investors active in the marketplace also on the rise, according to new research from the British Business Bank.
The eight annual Small Business Finance Market report from the economic development bank of the UK Government shows that the value of deals in Wales increased by 14% in Q1 to Q3 2021 compared to the same period in the previous year. This was despite the number of deals decreasing by 29%.
At the end of Q3 the total value of investment deals in Wales totalled £63m, compared to £79m in the whole of 2020.
However, the value and number of deals in Wales remains lower than the size of its population base compared to the UK as a whole.
The number of deals in Wales over the nine month period was 42, compared to 1,811 for the UK as whole. This represented 2% of the UK total.
The value of deals for the UK as a whole totalled £14bn, of which Welsh deals accounted for 0.4%.
The average deal in Wales was £1.5m, with the biggest being the £14m equity investment by BGF into Ammanford-based Victorian Sliders.
The definition of a small firm in the report are those employing less than 250 or with annual revenues below £25m.
The report also indicates that Welsh businesses have largely weathered the pandemic well, with its business populations experiencing the lowest rate of decline in the stock of firms between 2020 and 2021 (0.7%) compared to other UK regions and nations. Northern Ireland experienced the highest decline (16.6%), double that of London (8%).
Welsh businesses remain open to using finance to fuel growth, second only to London, with 35% of Welsh smaller businesses happy to use finance to grow compared to an average of between 29% – 32% in other parts of the UK.
There has also been an increase in the number of venture capital firms operating at Wales since 2017. However, while at eight it remain significantly lower than in other regions and nations of the UK, including Scotland (65) and Northern Ireland (15). The figure of active investors in Wales doesn’t include the Development Bank of Wales.
Mark Sterritt, UK network director, Wales at British Business Bank, said: “The equity investment picture in Wales is very positive, with 2021 expected to be a record year despite the rigours of the pandemic.
“The report paints a generally optimistic investment picture across Wales, with numbers of local VCs on the up and deal values rising.
“Additionally, following significant amounts of debt held by smaller businesses as a result of pandemic lending, the economic recovery across Wales is facilitating a boost to cashflow which is reducing the proportion of debt repayments as part of turnover.
“It should also be noted that the fact Wales experienced the lowest rate of decline in the stock of firms between 2020 and 2021 compared to other UK regions and nations. This is an extraordinarily encouraging sign and is testament to the resilience of the businesses operating across the country.”
Breaking down barriers to accessing finance remains key to levelling up economic opportunity.
To help address this, British Business Bank will be administering a new £130m fund dedicated to supporting smaller businesses in Wales, announced last year by Chancellor Rishi Sunak in his Spending Review.
The bank said it will be working with the Development Bank of Wales and local stakeholders to deliver the new fund.
A further £150m for the bank’s regional angels programme, whose underlying investments include Hengoed-based Transcend Packaging, was also announced by the Chancellor.
In addition to the growth in equity finance, the report indicates that UK debt markets overall are returning to near pre-pandemic levels.
The research also looked at various factors impacting the willingness of entrepreneurs to access finance. This shows that while ethnic minority-led businesses are more open to using finance, they are less likely to obtain it, and twice as likely to see access to finance as an obstacle to running their businesses. Amongst female-led businesses, appetite for external finance has significantly increased to 31% in Q2 2020-Q2 2021, but remains lower than for male-led businesses at 39%.
CREO Interactive
The founding director of Cardiff-based creative agency CREO Interactive has sold 75% of the business to three co-directors in a management buyout.
Richard Ward sold his interest in the company to Jordan Thorne, Kat Shaw and Nick Coakley, while still retaining a 25% share.
The three co-directors become joint owners of the business with a six-figure loan from the Development Bank of Wales secured as finance. Funding for the management buyout came from the £500m Wales Flexible Investment Fund.
Starting out as a two-man company operating from a small bedroom in 1999, CREO is now one of Wales’ most established agencies with a team of 12 and a client portfolio that includes Microsoft, BMW, Welsh Government, NHS Wales and Snowdonia National Park.
Mr Ward first established the business with Andrew Ashton who he later bought out in 2019.
Mr Ward said: “CREO has been a massive part of my life for the past 22 years and making the decision to hand part of that over meant finding the right management team.”
He added: “Having benefitted from the support of the Development Bank when I bought out Andrew as co-founder, I knew that it made absolute sense to work with them again on this deal. It’s always been my exit plan to initiate a management buyout so we’ve spent the last few years preparing for a handover
Technical director Mr Coakley was the company’s first ever employee 20-years ago.
He said: “Seeing the company evolve and adapt to an ever changing technical and strategic landscape has been a rewarding and challenging experience and I am really honoured that I now have the opportunity to be part of the team leading the next stage of our journey with the on-going support of Richard as a shareholder.”
Creative director Mr Thorne said: “We’ve seen the organisation grow from working within Wales to expanding to the States and beyond but creating quality work that speaks for itself as we do it. We have a responsibility to highlight and promote how much creativity there is in Wales and bring that to the forefront globally.”
Daniel Kinsey, portfolio executive with the Development Bank of Wales, said: “CREO Interactive has evolved from a website development company into a leading full-service agency that is profitable and has longevity.
“Having bought out his co-founder in 2019, Richard has first-hand experience of the benefits of a management buyout. He has therefore focussed on investing in and developing an experienced management team to prepare them for the handover as well as incentivising them to want to be part of the future.”
Lovetovisit.com
Cardiff tech firm Lovetovisit.com, which is aiming to revolutionise how people book tickets for experiences and venues, has launched a new fundraising round to support its expansion plans.
The firm, which also has an office in London and whose digital booking solution goes live tomorrow, is seeking to raise £400,000 through the Seedrs crowd funding investment platform.
The start-up, co-founded by Fed Pereira and Georgia and Alice Aubrey, has already raised £1.7m. Following the month long Seedrs campaign it plans a further £1m raise in the summer to support its marketing activities.
Lovetovisit, which also has an office in London, is looking to become the Just Eat and Airbnb in the events and experiences market.
It is on track to having a workforce of 60 by the summer and which is forecast to reach 120 next year.
The UK’s marketplace for events and experiences, from major attractions to smaller operators, is worth £3.6bn annually and growing at a rate of 15% per annum.
However, the sector suffers from a lack of digitisation with only 8% of attractions having mobile optimised websites. It is estimated that over half of attractions and experiences have no online booking capacity.
The start-up already has 1,600 tourism and culture venues signed up, as well as partnering with industry heavyweights such as London Theatre, Encore, and Tiqets. Projections for the platform estimate monthly users of between three and five million.
Its revenue model will see it taking a fee from each ticket sold.
Mr Pereira said: “We believe Lovetovisit.com is the first of its kind in the world, thanks to the development of an algorithm that is specific to the events and tourism industry. Great tech should enable people to find the information they need, make a booking and get on with enjoying their day. Think Airbnb, Insta, Just Eat, but for tourist attractions and events.
“We already have the support of some heavyweight private funders and in keeping with our commitment to inclusivity, we want to open the opportunity out to likeminded investors, who share our vision and want to join us with this venture.”
On the Seedrs fundraising Alice Aubrey said: “It will enable us to invest more in our marketing and quickly spread the word about Lovetovisit.com far and wide. We also plan to implement an equality and diversity strategy, ensuring that inclusivity is at the heart of everything we do, from our partners to our users, to everyone involved, which is why the Seedrs campaign is perfect.”
