Climate tech was the leading sub-sector for UK startup funding last year amid signs that VC funding activity is recovering.
Last year UK startups raised $21.3bn (£16.8bn) across all tech sub-sectors, the UK’s third-best year for VC funding and behind only the outlier years of 2021 and 2022 when interest rates were at record lows.
Despite the AI boom – stemming from ChatGPT and other generative AI systems – it was climate tech that came out on top.
New research from HSBC Innovation Banking and Dealroom shows that climate tech firms raised an all-time high of $6.2bn, accounting for 29% of total UK VC investments.
That marks a 40% increase year on year and significantly more than the $4.5bn raised by the UK AI sector last year.
Within climate tech, electric mobility, EV batteries, circular economy and green buildings were identified as the sub-sectors that received the most VC investment last year.
Ev.energy, a London-based app for efficient electric vehicle charging management, was among the startups that contributed to the record figures, securing £26m in July last year.
Other notable climate tech funding rounds last year include smart home energy startup Myenergi, which raised £30m in October and carbon removal platform Isometric, which raised £19m in July.
Separate research published by A/O Proptech in December found that the UK’s built world climate tech industry raised $1.1bn last year.
Growth across all subsectors was spurred by early stage and breakout stage of funding. Later-stage funding remained slow, the report noted.
Regionally, London continued to dominate and attracted $12bn of funding.
The report also found that funding for the UK as a whole picked up towards the end of the year following a slow start. And with $25bn raised by VCs in the last three years, there is still plenty of ‘dry powder’ to deploy.
The UK retained its place as the most funded tech ecosystem in Europe and third globally, behind China and the US, with India and France rounding out the rest of the top five.
“This data demonstrates a significant positive trajectory for the UK’s innovation economy, despite what has been a challenging period globally,” said Erin Platts, CEO of HSBC Innovation Banking UK.
“We should be proud of the resilience the UK innovation ecosystem has shown and should celebrate its commitment to solving some of our most intractable problems.”