A new report has revealed the extent and importance of ‘stealth’ funding rounds within the UK tech industry – claiming that around 69 per cent of all equity deals are kept quiet.

Financial data platform Beauhurst uses proprietary technology to monitor the forms submitted to Companies House when issuing new shares, with its teams then verifying whether new investments have in fact been made.

If found that 60 per cent of the UK’s most valuable companies began their funding journey with an unannounced round, while 72 per cent of all UK unicorns have raised a silent round.

Despite drastic changes in the number of deals completed and the amount invested over the past decade, the proportion of investments that are unannounced has remained fairly consistent.

This includes a low of 65 per cent in 2014 and a high of 71 per cent in 2017 and 2018. In total there have been 28,122 unannounced fundraisings between 2011 and 2019 – and just 12,677 that were announced.

Henry Whorwood, head of research and consultancy at Beauhurst, commented: “Not only does the proportion of investments that are not announced remain the same over the years, it's the same usual suspects with sophisticated PR departments whose deals make it into the news – often the most exciting companies don't announce their deals.”

While the proportion of deals that go unannounced is high, the proportion invested that are unannounced is relatively low, and much more changeable. Since 2011, 29 per cent of all investments into UK companies were kept under wraps, with no announcement of where they were going or which investors had deployed them.

The highest proportion invested through unannounced deals was in 2013 (38 per cent), while the lowest was in 2019 (24 per cent). This gentle downward trend is a product of the increase in the number of mega rounds completed - investments of £50 million or more - with UK companies securing 152 mega rounds between 2011 and 2019, 90 per cent of which were announced to the media.

Unannounced fundraisings are usually significantly smaller in value than those that are announced to the media. Over time, these round sizes have increased only slightly, from a low of £150,000 in 2012 to a high of £200,000 in 2019. Meanwhile, the median size of announced rounds has more than doubled, from a low of £490,000 in 2014 to a high of £1 million in 2019.

Whorwood explained that smaller deals are typically angel-backed and many angels are publicity shy.

Seed stage companies have a higher proportion of unannounced fundraisings than venture and growth stage companies, as they often do not yet have the means or desire to announce their investment rounds, or may be operating in ‘stealth mode’ while they focus on research and product development.

Meanwhile, venture and growth stage companies are more likely to announce their investment rounds, as they gain more traction, media attention and stakeholders.

Companies that have taken on their first round of funding may also not want to announce the deal before proving their worth and effectively utilising the capital. This helps explain why established companies, which may be fairly new to equity finance, are less like to announce a round than venture or growth stage companies, which will likely have been venture-backed from a young age and already raised several rounds of finance.

Down rounds and flat rounds are far less likely to be announced. Indeed, Beauhurst found that between 2011 and 2019, the largest unannounced round was a flat round, completed in June 2016 by Element, which offers a range of material testing and certification services to the aerospace, oil and gas sectors. The round was completed at a pre-money valuation that was 0.8 per cent lower than the company’s previous post-money valuation in July 2016.

The report also looked at some other funding case studies, picking ClearBank as being one of the least transparent of the new crop of digital challengers.

Set up in 2015 by serial entrepreneur Nick Ogden, the company has raised a total of £163 million of equity finance over four funding rounds. The most recent round took place in May 2019, with £79 million invested at a pre-money valuation of £265 million.

“Unlike challenger banks Monzo and Revolut, which are very transparent about their funding position, ClearBank kept each funding round quiet at the time of completion,” read the report. “It’s unclear why this may be, but it could be for the simple reason that it wouldn’t have interested their customers.”

Across the FinTech sector, 65 per cent of funding rounds into business-to-business companies were unannounced, compared with 58 per cent of business-to-consumer firms.

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