Last week the British Business Bank published its latest Nations and Regions Tracker, offering a detailed snapshot of Wales’ financial landscape.
Some of the most interesting data relates to Wales’ equity picture, where the numbers tell a tale of two halves – the number of equity deals is rising (+7.2%), bucking the general º£½ÇÊÓƵ wide trend (-15.1%).
However, the total investment value is falling (-12.1%), and at a steeper decline than the º£½ÇÊÓƵ average (-2.5%).
It’s an interesting contradiction. On one hand, we’re seeing signs of a healthy and active investment market in Wales, with investors showing confidence by backing more businesses.
On the other hand, the fall in deal values points to increased caution – investors are deploying capital more conservatively, perhaps in smaller amounts, or in earlier-stage ventures.
While investor activity has slowed in some parts of the º£½ÇÊÓƵ, Wales has seen a marked increase in deal flow.
This momentum is credited to a combination of coordinated initiatives and supportive policy frameworks.
These include the growth of innovation hubs and sector-focused clusters, alongside the introduction of targeted funding streams such as the Investment Fund for Wales and the Cardiff Capital Region Investment Fund, along with the continued efforts of the Development Bank of Wales.
Collectively, these factors have significantly enhanced Wales’s ability in recent years to channel investment into the hands of the start-ups and scale-ups that need it most.
However, offsetting all of these positive forces, is the fact that deal values are under pressure – something that is not unique to Wales, but reflects a broader º£½ÇÊÓƵ wide trend in which investors, faced with ongoing inflationary pressures, global uncertainty and valuation corrections, are being more selective.
These economic headwinds are creating a more complex backdrop for both investors and founders. While the appetite to invest remains, the way capital is being deployed is shifting in response to wider market uncertainty.
For Welsh businesses, this means the path to funding may look different than it did even a year ago – not necessarily more difficult, but more nuanced.
Understanding these shifts is essential for founders looking to navigate the current climate and position themselves effectively in a market that is still very much open for business.
For Welsh business owners seeking funding, the outlook is far from discouraging. In fact, the growing number of deals signals that there are more opportunities to pursue and more investors willing to engage.
However, institutional investors are raising the bar – conducting more rigorous due diligence and asking tougher, more targeted questions.
They’re focusing on businesses with strong fundamentals, clear paths to profitability, and well-articulated growth strategies.
For founders, this means preparation is vital – clarity and credibility combined with a compelling case have never been more important.
Ultimately, whilst all businesses are unique and have their own USPs, the key pieces of the investment jigsaw are usually the same – do they have a good, solid management team who really know their stuff and can communicate that effectively?
And if they do, do they have a product or service they can sell? If so, the door is always open to talk.
So, what else should founders keep in mind as they navigate this evolving landscape?
Be valuation-smart.
Over-inflated valuations can be a red flag to investors so be open and realistic to investor feedback. Clearly the process is a negotiation, but you need to be in the room to have the negotiation.
Another key tactic is to cast your net wide. Engaging with multiple investors is key. Just because you’re not the right fit for one doesn’t mean you won’t be exactly what another is looking for.
It’s rare to land the perfect match on the first try, and speaking to a broad range of investors can also open the door to something investors value highly – co-investment opportunities.
In a more cautious market, this is especially appealing.
By exploring syndicates, angel networks, and other collaborative routes, founders can reduce perceived risk for investors and access a broader pool of capital and expertise.
Despite wider economic pressures, Wales’ equity market is showing signs of real strength, especially when contrasted to many areas of the º£½ÇÊÓƵ that are seeing both falling deal numbers and investment values.
There’s no doubt that a more cautious mood is shaping today’s investment environment. But that isn’t necessarily a bad thing.
It can prompt smarter investment decisions and more sustainable growth.
Over time, this paves the way for the best possible outcome – more deals being done, and more capital being invested – strong signals of economic confidence and the hallmarks of a resilient and healthy economy.
- Bethan Bannister is senior investment manager at the British Business Bank. Phil Sampson is fund investment principal at Foresight, the fund managers for the British Business Bank’s Investment Fund for Wales.
