Boutique corporate finance advisers Ascendant have produced a review of UK technology sector investment trends for the first quarter of 2010 in the UK and Ireland. While some of the numbers are better than in the corresponding quarter in 2009, this cannot hide some worrying trends.

“The simple headline is 65 companies (up 48% over Q1 09) received £153m (up 34%) from 82 investors (up 34%). Superficially these figures look encouraging but they hide a number of important developments.

“Firstly, the average deal size dropped significantly to just £2.4m – this was slightly worse than the figure for Q1 09 which was the worst quarter for more than 9 years. Investors did not finance larger deals in the way we have come to expect and some sectors really suffered – e.g. there was no VC investment in semi/opto companies.

“Secondly, syndication dropped below 60% of deals for the first time in 10 years. This can be interpreted in a number of ways but none of them are positive signals. It looks as though many smaller deals (i.e. <£2m) were done by single investors – either to support an existing portfolio company or to take advantage of low valuations in a difficult market.

“Thirdly, the amount of money committed in Q1 10 was static compared to Q4 09. Usually there is a significant bounce in the first quarter of each year which sets the pace for the year as a whole – typically about 30% of the whole year’s capital is committed in Q1. This did not happen in 2009 because of the recession, but if the market reverts to its normal behavior we have a very slow 2010 for tech businesses raising finance.

“On the positive side £340m was raised by VCTs and there have been a few new tech funds coming into the market – particularly in France. How much of this will reach early stage tech companies in the UK and Ireland is open to question but we are already seeing some activity. Let’s hope that the election in the UK results in a positive investment environment and investors write a few more, and a few bigger, cheques during remainder of 2010.”

In our (BLN) view, this is not particularly good news for early stage entrepreneurs as VCT funds have not shown themselves particularly interested in investing in highly ambitious early-stage opportunities. Far more relevant developments include the Kleins and Index Ventures joining forces to create the Index Seed Fund, and the increasingly well organised, experienced and early stage investors who are starting to work together to co-invest together.

Other data and trends include:

• In the first quarter of 2009, 82 investors invested in £153m in 65 companies.
• The busiest investors were YFM (as a Group), Octopus Ventures, Amadeus and Finance Wales.
• Levels of syndication dropped significantly to 54% (66%) of deals.
• Private investors participation in VC deals declined to 22% of completed deals
• The 10 biggest deals included: Oxford Nanopore (£17m), Mimecast (£13m), Sterecycle (£10m), Openet Telecom (£7m), Greenroad (£6m), Autoquake (£6m), Control Circle (£6m), Image Metrics (£5m), Rainstor (£5m) and Intela Global (£4m).
• The three primary areas of investment were Internet/Wireless Services (£50m), Cleantech (£32m) and Software (£29m).
• 24 Internet/Wireless Services companies received investment including Mimecast (£13m), Autoquake (£6m), Intela Global (£4.25m), MyCityDeal (£3.5m) and Mi-pay (£3m).
• The key Cleantech deals included: Sterecycle (£10m), Greenroad (£6.4m), AMEE (£3.5m) and Enecsys (£2.5m). 12 Cleantech businesses took money from VCs in Q1 up from just 8 in Q1 2009.
• 15 Software companies received VC backing – the largest deals were: Openet Telecom (£7m), Image Metrics (£5.3m), Basekit (£2m) and Elona (£2m).
• NO semi/opto companies received venture capital in this quarter
• London based companies received around 45% of the funds invested in the UK and Ireland.
• Whilst London, the Thames Valley and the North experienced an increase in value of investment all other regions suffered a decline. In terms of the volume of deals, the North was unusually busy with 11 completed deals and Ireland was very quiet with just 4 publicly announced deals.

You can contact Ascendant here.

• Want to grow a big business?
• Want to learn from some extraordinary entrepreneurs who have created over $10 billion of value from zero?
• Want to meet some of the people that funded those business to make it happen?

http://growthforum2010.thebln.com

The first BLN One Day Growth Forum will be held on July 15th, 2010. This one day forum has been designed for CEOs, owner managers, chairs, founders & senior executives in growth businesses as well as the VC, PE and institutional investors that fund growth enterprises. This is a one day forum to think, talk and learn about growing your business.

We think:

• You attend events to meet others that can help your business grow and to get insights from others you respect.
• Entrepreneurs and CEOs want to be challenged, to share practical ideas that help their organisations thrive in the future.
• You don’t want a long-winded, waffle-filled event where you don’t get a chance to meet the people you want to because the room is over-filled with the wrong people.

We were so excited about this event we built a separate website! http://growthforum2010.thebln.com

• RT @covert: RT @skrift: there is a silver lining to all this. Status Quo are stranded in Moscow. #
• Saw The Beauty of Maps. Feeling a (bit) less weird about being a map freak/obsessive Planning trip to British Library. #
• Great investors speaking at #gknr Europe needs more people like this! http://bit.ly/EuroVCdata #

Not a bad day for Graham Kirkham who has sold his Doncaster based 74 store furniture retailer to Advent International for a reported £500 million.

A helpful primer from a board member of the EFF about copyright issues and DMCA takeown notices. Of course all Hitler learns parodies have been removed from YouTube because they are a very bad thing and will destroy the film industry.

If you want to see an entire synopsis of the plot go here to Wikipedia. This will probably not inspire you to buy the DVD.

If you want to see a short clip that runs for about the length of a trailer and is probably a lot more entertaining than a trailer would be, you can see one here – while you still can. Strangely, I know two people that have bought the DVD based on the evidence of the trailer alone but neither ended up watching the whole film.

Congratulations to all of the winners of the Queen’s Awards for 2010.

We were going to pick out a few of our favourites but they all deserve a big hand for plugging their way to success in a difficult economic climate. We salute you!

The Queen’s Awards for Enterprise: International Trade 2010

• AMI Exchangers Limited, Hartlepool, Charge air coolers and heat exchangers
• Abbot Group Limited, Aberdeen, Scotland, Onshore and offshore drilling engineering and rig design
• Aerospace Design & Engineering Consultants Limited, Stevenage, Hertfordshire, Design and engineering services to commercial airlines and aircraft leasing companies
• Alcatel-Lucent Submarine Networks Limited, London SE10, Telecommunications systems
• Allam Marine Ltd, Melton, Hull, Industrial and marine generating sets
• Alperton International Limited, Spennymoor, County Durham, Engineering goods and services
• Applied Acoustic Engineering Ltd, Great Yarmouth, Norfolk, Underwater acoustic positioning, tracking and survey equipment
• Applied Language Solutions Ltd, Oldham, Lancashire, International language services including translation & interpreting
• Ashley Chase Estate, Dorchester, Dorset, Speciality hand-made English cheeses
• Autonomy, Cambridge, Platform technology with a pure software model offering a full spectrum of mission-critical enterprise applications
• Baillie Gifford Overseas Limited, Edinburgh, Scotland, Investment management services

• Investor networking & discussion dinner, Edinburgh, May 11th http://bit.ly/cVBnni #
• Well done! @tedxcam sold out. Great work Cong Cong and @Dawson #
• Thx @Real_Business – We are a better place to meet entrepreneurs than LinkedIn or Twitter! http://bit.ly/beXJTn #