Fundraising Report 2023

Market predictions for venture capital funding in 2023 proved accurate, as the UK felt the effects of a global downturn in funding, attributed to high interest rates and a largely subdued stock market. However, an increase in funding during the final quarter of 2023 indicates a more promising outlook for 2024,
potentially offering a fertile environment for investors and entrepreneurs aiming to acquire, launch, or scale companies.

Key takeaways:

• Pitchbook’s year end data for global VC markets reported a 47% decrease in VC fundraising compared to last year and described 2023 as “a tough year, in which VC deals, exits, and fundraising all plunged”.
• Beauhurst reported that investment trends shifted, favouring the the AI and Life Sciences sector, while the Fintech and Blockchain sectors saw
  reduced investment activity. 
• With valuations on the decline, there has been an uptick in down rounds, where companies secure funding at valuations lower than their previous
  rounds. To avoid such scenarios, more companies are opting for bridge funding at flat valuations, primarily from existing investors.
• Pressure on valuations means more companies are making use of advance subscriptions and convertible loans as a means of raising
  capital without having to fix a valuation.

Deals: 
172 transactions

On average a deal completed every two days

Total raise of:
£524,848,720

Sectors:
Technology and AI 24%
Digital 23%
Health/Medtech 17% 

• We advised on transactions which involved the deployment of over £500 million in funding.
• We advised on 172 transactions, almost matching our record figure in 2022 of 178 transactions.
• Over 75% of our clients involved in these deals were based in either Cambridge, London or Oxford.
• Our most active sector by amount raised in the year was digital (which includes companies operating e-commerce / e-business platforms and those companies which provide supporting infrastructure such as hardware, software and telecoms), fractionally ahead of the healthtech sector.
• Our most active sector by number of deals was the technology and AI sector which this year ranked ahead of both the digital and healthtech sectors.

Mishcon de Reya advised The Veloce Media Group (Veloce) on its token subscription agreement. This agreement was an integral part of its recent funding round, led by GEM Digital Limited, which successfully raised a $50 million token facility. This significant investment is set to catapult Veloce into a new Web3 era of decentralised gaming and sports media.

Founded in 2018, Veloce is a London-based gaming and sports media company operating in the UK's innovative sectors. The brand includes Veloce Esports, Veloce Racing and the recently released VEXT utility token. As the world's largest digital racing media network, Veloce has over 35 million subscribers and one billion monthly views. It's a global leader in gaming media and a sporting brand focused on climate change, gender equality, and sustainable technology. Veloce partners with global teams like Mercedes AMG, McLaren, Ferrari and Yas Heat and runs multiple gaming and esports operations.

Veloce recently received a $50 million investment from Gem Digital Limited in exchange for VEXT tokens, positioning it as a leading decentralised gaming and sports media company. This partnership will fuel Veloce's growth, facilitating acquisitions in gaming and real-life racing sectors, enhancing VEXT utility and extending its influence within its community.

Daniel Bailey, CEO of Veloce Racing, said:

“It was a pleasure working with Callum Blundell and his team at Mishcon de Reya. Their team made the process as seamless as possible for such a ground-breaking deal. The introduction of VEXT tokens to the market and subsequent platform launches has been the focus of the business for the last couple of years and to attract the interest of a company such as GEM and subsequently conclude a partnership has been pivotal in creating confidence around the product. On a personal front it was also great to work with Callum whose father raced with my father back in the 1980s and 1990s. It was a coincidence but a poignant one."

Partner, Geoff Dragon, commented:

“We were delighted to work with both Veloce and are our colleagues at MDRx on this transaction. The token market is an exciting and still reasonable new space with lots of potential for companies looking at alternative and interesting ways to finance their business, and Veloce has paved the way as a true market leader in showing what can be done. The transaction itself is a great testament to what Mishcon Future can provide for clients, combining our legal expertise with the technical and sector-specific knowledge from Tom Grogan and the MDRx team."

Mishcon de Reya advised customer engagement platform Odore on its US$5 million seed round, led by Seed VC Fuel Ventures and with participation from existing investors including Blackfinch.

Odore was launched in 2020 by co-founders Armaan Mehta and Karan Gupta, both graduates of the London School of Economics. The Odore platform offers a range of solutions which integrate data analytics to enable direct-to-consumer brands to drive brand effectiveness in customer acquisition and engagement across various online channels. Odore's clients include world-leading brands L'Oreal, Clarins and Sephora. 

Corporate Partner Andrew Wolfin, who led the Mishcon de Reya team, commented:

"We are really delighted to have supported such an exciting and innovative business on this important fundraising. We're looking forward to continuing our relationship with Armaan and Karan, who are extremely impressive founders.”

Armaan Mehta, co-founder of Odore, said:

"We are very grateful to Andrew and the team at Mishcon de Reya who supported us on this round. We really enjoyed working with them and they always went above and beyond. Andrew was available whenever we needed him and provided us with no-nonsense advice and guidance throughout the process, which we found extremely valuable. We're looking forward to continuing to work with Mishcon as the business grows."

Mishcon de Reya advised femtech start-up Amilis on its pre-seed fundraising round, which was led by early-stage VC Ascension, backing the next generation of tech and impact founders.

Amilis is a digital egg-freezing platform that helps women to take control of their fertility journey. It provides comprehensive support, including a free initial consultation, helping women find a clinic tailored to their needs and guides them through the egg-freezing process from start to finish.

Corporate Partner Andrew Wolfin led the Mishcon de Reya team with support from Corporate Managing Associate Gayle Hawke.

Andrew Wolfin commented:

"We are thrilled to have supported Amilis on this first major fundraising step and are proud to be associated with such an important project and truly inspiring female founders. We're excited to be on the journey and are looking forward to continuing to work with Sarita and Yasmin as the business grows and develops."

Amilis co-founders Sarita Stefani and Yasmin Baba said:

"Collaborating with Andrew, Gayle, and the entire Mishcon de Reya team proved to be an exceptional experience for us. Their unwavering support and expert guidance throughout the fundraising process were invaluable, as they advised us in every conceivable aspect. We are overjoyed to have had such a dedicated team by our side throughout this journey."

Mishcon de Reya advised TextMine (Previously known as Legislate Technologies Limited) on their Series A funding round. The round was led by Parkwalk with further participation from other investors including Oxford Capital and other key angel investors.

Established in Oxford in 2020, TextMine structures unstructured data in documents using large language models and patented knowledge graph technology. This allows companies to turn their legal, HR, financial and strategic documents into a searchable knowledge base which can be used to solve a number of use cases including contract compliance, ESG reporting and obligation management.

The funding round is a significant milestone for TextMine, reflecting investor confidence in the company's vision and technology. It also highlights the increasing importance of technology in transforming traditional business processes, such as contract management.

This successful funding round has since provided TextMine with the resources to further enhance its innovative platform and continue to develop technology to create and manage complex contracts effectively and in a way that allows for the extraction of key data afterwards.

Partner in our Emerging Companies team, Attilio Leccisotti, commented:

"We are thrilled to have helped an exciting and creative company with their important fundraising efforts. We're looking forward to continuing our relationship with TextMine, a company that has really impressed us".

Charles Brecque, Founder of TextMine, commented:

“We are very grateful to Attilio and the team at Mishcon de Reya for their valuable advice on the closing of our funding round. They did an excellent job on the deal and we really enjoyed working with them."

Mishcon de Reya advised Qatalog, an enterprise intelligence platform that helps teams work smarter and faster with AI, on its latest funding round in August of 2023. The round featured contributions from both existing and new investors including Zoom, founders of Squarespace, Slack and leadership from Google, SAP and Workday.

Qatalog offers an innovative platform that streamlines and automates contemporary work.

Mishcon de Reya's team was led by Erika McIntyre.

Mishcon de Reya Associate, Danny Whittaker, commented:

“We are delighted to have advised Qatalog on this significant funding round, which takes its investment raises north of $26 million in aggregate - a testament to the work of Tariq and the rest of the Qatalog team and their innovative approach to workplace intelligence and automation. We look forward to assisting the company further with its continued growth.”

We advised on 172 funding rounds during 2023.

On average, we closed over 14 funding rounds per month. March was our biggest month by deal volume as we closed 25 funding rounds.

An examination of our deal volume in 2022 revealed a similar increase in March. However, in 2023, we observed heightened activity in both February and April, surpassing the levels recorded during the corresponding months of the previous year. These figures suggest a robust first quarter in 2023 compared to the same quarter in 2022, with deal volume rising by 8% relative to the previous year.

The level of activity in Q1 and Q2 of 2023 didn’t continue in the second half of the year, with activity levels decreasing by almost 28% on the previous six months. This further amplifies the view that investors have been approaching opportunities with more diligence and selectivity in order to mitigate the risks posed by rising interest rates and unpredictable public markets.

Investments that we were involved in during 2023 totaled £524,848,720.

This figure marks a 51% fall in funds deployed when compared to last year, but reflects broader trends experienced across the UK, where investment activities have been tempered in response to the global economic downturn and rising interest rates.

Three months in 2023 showed an increase in amounts deployed compared with the same period last year: December experienced a substantial surge, with £26.7 million funds raised, an increase of 470%; February’s deployment stood at £57.4 million, an impressive rise of over 96% on last year, whilst August’s £75.3 million saw a noteworthy 19% increase on last year.

In contrast, the number of transactions involving the deployment of more than £20 million dropped to just four this year, a fall of 66% from last year’s transactions. This reflects the more cautious approach taken by investors during a year which has focused on fewer, more secure investments.

Investor caution over 2023 has resulted in challenging conditions for venture backed companies, who have found that the bar has been raised considerably when seeking investment. This has been coupled with a recalibration of valuations to pre-pandemic levels. Despite these headwinds, venture capital investors, by design, take a long-term view and we remain confident that companies will continue to successfully navigate this period of volatility.

In a broad market context, around 50% of investment activity has occurred outside London and the strongest sectors have been AI, digital health and medtech. 

For the Mishcon de Reya teams, the last year has also seen an uptick in advisory services to investors. Our collaboration extends beyond investment transactions, as we work closely with investors to identify innovative strategies for supporting and steering their portfolio companies.

Finally, the market generally has seen an increase in exits at an earlier stage than would have been expected previously, albeit at lower average valuations. We anticipate that this increased activity will continue into 2024.

Erika McIntyre, Partner in the Corporate and Venture Capital teams.

Amongst our clients, those in or investing in the technology and AI sector secured the most deals during 2023, with a total of 41 transactions.

The digital sector followed closely, with 38 transactions, while the healthtech sector completed 30 transactions, placing it in third.

A heightened level of deal activity in these sectors mirrors national trends which have, in particular, seen the AI sector attract significant levels of investment.

The high number of deals in the technology and AI sectors among our clients suggests that these areas are attracting a lot of interest and investment. The strong performance of the digital and healthtech sectors also suggests they are key areas for innovation and are likely to continue to be important in the economy.

In the digital sector, we facilitated investments totalling more than £116.5 million, representing a little over 22% of all amounts raised in our transactions in 2023.

The life sciences sector boasted the largest average deal size, with transactions averaging just over £10 million.

The only sector that generated an increase in sums deployed this year when compared to last year was the impact sector, which grew 224%, as investors increasingly seek to generate positive societal or environmental impacts alongside financial returns.

Compared to the previous year, in 2023 we observed:

• A 40% increase in the number of investment mandates for our Oxford-based clients;
• A 76% increase in the number of investment mandates from UK-based clients outside of the ‘Golden Triangle’ of Cambridge, London and Oxford; and
• A 400% increase in the number of investment mandates from clients based in the EU.

Once again, our clients in the digital sector were predominantly based in London. In a notable shift, Cambridge surpassed London and Oxford in terms of being the primary location for most of our healthtech clients. This change may be attributed to Cambridge University’s track record for fostering spin-out companies in this sector.

The Private Equity (PE) market in 2023 has been challenging and was particularly impacted by higher interest rates. In spite of the year's difficult economic and geo-political landscape, the Mishcon PE team acted on a number of high-profile deals in 2023.

Notable examples include advising the management team of Rockpool investee company TrustedHousesitters on their management buyout (MBO) backed by Mayfair Equity Partners LLP, advising the founder of Direct Ferries on the secondary buyout backed by ICG and advising management and the company on the sale of Autovista Group to Thoma Bravo backed by J.D Power.

We saw an upturn in transactions at the end of 2023. With PE investors holding capital that requires deployment to generate investor returns, and an acknowledgement that higher interest rates - albeit down from their recent peak - are here to stay, we expect to see an increase in transactional activity through 2024.

Nadim Meer, Partner, Head of Private Equity

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Mishcon de Reya is an independent law firm, which now employs over 1450 people with more than 650 lawyers offering a wide range of legal services to companies and individuals. The firm has grown rapidly in recent years, showing more than 40% revenue growth in the past five years alone.

With presence in London, Oxford, Cambridge, Singapore and Hong Kong (through its association with Karas So LLP), the firm services an international community of clients and provides advice in situations where the constraints of geography often do not apply.

The work the firm undertakes is cross-border, multi-jurisdictional and complex, spanning six core practice areas: Corporate; Dispute Resolution; Employment; Innovation; Private; and Real Estate.