Wednesday, September 27, 2023

VC Tech Investments on the Rise in the UK 2022

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Shreya Christina
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Even in the midst of a global pandemic and faced with backlash for various political issues, the UK investment sector has not stopped developing. Increased liquidity, equities and interest in areas that have adapted and profited from the pandemic are driving the rising levels of venture capital investment.

2021 marks the year the UK’s tech industry began to spread massively, with new megarounds and unicorns toppling other European countries such as France and Germany.

Last year, startups reached a record high of £29.4 billion – a figure of 2.3x more than in 2020 and the first growth since 2013-2014, when it rose from £1.5bn to £4.6bn. The fintech sector is the one raising the most funding at around £11.6 billion – a 217% increase from 2020.

UK’s place on the world stage

This increase comes as no surprise, said David Kezerashvili, one of the investors behind InfinityVC; “Investing in tech start-ups encourages the production of more real value, the creation of useful technologies and products, the creation of quality employment and the increase in revenues across the board.”

dr. Martin Carkett of the Tony Blair Institute for Global Change adds more detail to the picture when he explains that the UK tech sector has grown tenfold over the past decade. Venture capital (VC) investment in this sector has increased from £1.2 billion in 2010 to £11.3 billion in 2020.

On a global scale, the UK ($37.4 billion) managed to take 4th place in VC investment right behind the US ($323.7 billion), China ($59.5 billion) and India ($44). .6 billion). By cities, London was also ranked 4th ($25.5 billion) after the Bay Area ($100.9 billion), New York ($47.5 billion) and Greater Boston ($29.9 billion).

In a shorter series – Europe – the UK doubled Germany’s intake (14.7 billion pounds) and tripled that of France (9.7 billion pounds). Total cash flow in technology investment for Europe is £89.5 billion, of which the UK takes a third. On the other hand, in the British technology system, the dry powder gave way to the creation of about 29 unicorns. This includes Depop, Motorway, Marshmallow and Starling Bank. With a total of 115 unicorns, the UK has more than France (31) and Germany (56) combined.

The US capital – 37% of all investment – ​​played a major role in the rise in funding in the UK. This even surpassed domestic capital of 28%.

London: the heart of the UK

Interestingly enough, while all the investment revolves around the nation’s capital, London is not the only place where venture capital is collected. New leveling of powertech cities taking the top 3 places are Cambridge, Manchester and Oxford. This has led to differing opinions from experts.

David Foreman, director of Manchester-based venture capital firm Praetura Ventures, believes a fixation on London’s tech sector is holding back investment in other parts of the UK. On the other hand, Saul Klein, co-founder of London-based venture capital firm LocalGlobe, emphasizes London’s importance in connecting technology clusters such as Cambridge, Oxford and Manchester with Paris, Amsterdam and beyond. The truth, as in most cases, is probably somewhere in the middle, but what is certain is that 9 of the 29 unicorns created in 2021 were stationed in cities other than London.

These include Interactive Investor in Glasgow, Vertical Aerospace in Bristol and Touchlight Genetics in Hampton. This accounts for 30% of the total number of unicorns in the UK.

However, London still holds the title of ‘heart of the ecosystem’. The minted unicorns are just a representation of 2021’s increase in megarounds. There were 64 companies worth $100 million in London in 2021, including $900 million for clean energy provider Octopus Energy, $850 million for online event platform Hopin and $800 million for London fintech firm Revolut in Series E.

What’s on the agenda for 2022?

It is safe to assume that unless there are drastic changes in the overall investment system in the UK, VC funding will continue at the soaring rate they are now. Many US venture capital funds are steadily opening offices in London, including companies such as General Catalyst, Sequoia Capital, Bessemer Venture Partners and Lightspeed Venture Partners.

London-based VC firms have a new $9.9 billion in financing in 2021. Some of the investments announced last year include DNCapital ($250 million), White Star Capital ($360 million), 83North ($550 million), Balderton ($600 million), Anthemis ($700 million) and Index Ventures ($3.1 billion). According to David Kezerashvili, this is progress and much needed development for the world. “There is an ongoing need for improved speed, security and adaptability.” Startups are emerging to fill the gaps created by bigger players’ refusal to change.”

Future evolution of R&D

Another factor supporting the growth of VC tech investment is the increased funding from the UK government for research and development (R&D) to £20 billion by 2024-25. The aim is to help British companies become more innovative and productive.

Digital Affairs Minister Chris Philip believes that supporting startups across the country is an important part of their mission, and the ministry is helping companies with pro-innovation policies and helping people gain the skills needed to thrive in this dynamic industry.

LocalGlobe’s Saul Klein summed it up very well when he said the UK has “all the ingredients to become the leading tech ecosystem in the world, with record levels of R&D, funding and established tech hubs across the country from New Palo Alto in Kings Cross.” , to Cambridge, Edinburgh and Manchester.”


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