A look at UK tech investment trends during Q3 2017


Ed Lascelles, partner at Albion Capital, looks at UKTN’s proprietary data to decipher UK tech investment trends during Q3 2017. 

Data from UKTN’s investment tracker shows that London has continued its dominant position as a hub for UK tech, providing a base for 78% of the startup and scaleup businesses that raised finance in Q3 2017.

Notably, there is strong performance where you see cross-functional expertise – industries where London is strong, such as financial services, pharma and media, utilising breakthrough technologies such as AI or VR.

Recent and ongoing developments in open source software and cloud infrastructure continue to underpin the creation of a remarkable number of startups. We can see how businesses are benefitting from an ever reducing cost to prototype a business model.

As predicted by disruption theory, incumbents are finding it hard to compete with agile, digitally native businesses and so companies with early product market fit are now scaling rapidly. This can be seen in the most notable statistic from the investment tracker: in 2016, the total raised by the 10 largest fundraisings was £562m. By 30 September 2017, the 10 largest fundraisings accounted for £1.4bn. This is a huge step up in the performance and ambition of UK tech companies.

Sector specific

Encouragingly, innovation is thriving across multiple sectors, with Fintech – the sector with the highest number of raises in Q3 – accounting for just 19 of the 98 businesses that secured funding in the last quarter.

Machine learning businesses have a particularly high profile within the investment community, and rightly so given the impact deep learning, in particular, can have on performance. However, compelling ‘Full Stack AI’ businesses which combine enterprise-grade big data plumbing with the latest machine learning techniques are still rare.

This will change as we move to a data-driven economy, and enterprises understand that the strategic interpretation of their data is not just a competitive advantage but a necessity.

The most exciting companies in this emerging sector are those solving hard problems in industries where London has global leaders. Machine learning is already being used in earnest to improve personalised medicine in pharma, detect fraudulent networks in banks, and prevent data breaches in advance of GDPR.

The use of data

That said it is the MarTech/ AdTech world that seems most advanced in its use of data. The opportunities offered by data-driven marketing are leading to the continued rise of the CMO and digital media spend. Martech is shifting from a means for the CIO to reduce cost to an opportunity for the CMO to grow revenue.

Automation is increasing in both the advertising and marketing sectors, and within display advertising, programmatic trading now accounts for c.75% of spend.

Data-driven marketing is enabling brands to get closer to the holy grails of attribution, reduced wastage and contextually relevant, personalised, in the moment engagement. And we can now see in Facebook and Google the power of data network effects.

Machine learning will follow the path of mobile apps, which were once innovative enough to underpin stand-alone app companies but are now a standard part of any developer’s toolkit.

As Sundar Pichai said, we have moved from a mobile-first to an AI-first world. But for now we have many high growth machine learning companies, and that’s a great thing for the industries adopting this technology the quickest.