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Big artificial intelligence exits in London buck downward trend in VC investments

High-profile exits in artificial intelligence (AI) firms in the first half of the year propped up some disappointing venture capital investment figures, according to a new report by CB Insights and KPMG.

The pair have released their ‘Venture Pulse’ report for the second quarter of this year and the figures do not make pretty reading for Europe’s startups and entrepreneurs.

According to the report, which surveyed the region’s VC investment, investment in European startups fell by 40% compared to Q1 as investment firms held off making investments until after the UK’s EU referendum.

In total the region saw 385 deals in Q2, a five per cent increase, however these totalled just $2.8bn, meaning investment across Europe fell below $3bn in a single quarter for the first time since the tail-end of 2014.

As usual, the UK dominated in terms of total investments with 104 deals in the quarter but this still represented an 8% decline on the first three months of the year and 15% on last year, as investors adopted a ‘wait and see’ approach according to the report.

Total deal value saw a particularly stark decline, down 43% from Q1 to $729m and down a similarly stark 46% on the same time last year as the Brexit vote inspired caution in the region’s VC firms.

However, the AI sector continued to show strong growth; building upon Microsoft’s acquisition of SwiftKey in February with the £102m acquisition of machine-learning startup Magic Pony by Twitter.

Financial services also put in a strong showing with £40m going to FinTech posterchild LendInvest and a further $26m going to money transfer firm TransferWise, amongst a smattering of other deals.

Commenting on the uncertainty surrounding the EU referendum, the report struck a more positive tone in its predictions that much of the economic ‘havoc’ unleashed following June’s vote has now settled down.

It said: “Uncertainty around Brexit dominated talk in the UK, no doubt contributing to the over 40% drop in VC investment in the country over the quarter.

“Many VC investors held back from making investments, taking a ‘wait and see’ approach prior to the vote.

“The outcome of the referendum caused brief havoc in the public markets, although we are starting to see some stabilization with the recognition that any separation process will take years to complete.”

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