The UK has once again beat its European counterparts in terms of attracting venture capital funding.
An impressive 244 deals across businesses in all sectors, not just tech, took place in the UK, leading to £1.55bn of venture capital investment flowing through the country – compared to £1.1bn raised during Q1. UKTN’s own investment tracker reveals that £1.54bn has already been invested in UK tech companies so far this year.
Late-stage financings were responsible for the majority of the capital invested. Six of the top 10 European deals done in the past three months were in the UK, including Revolut’s £188m round, Freeline Therapeutics’s £90m investment, CMR Surgical’s £75m, Liberis’s £61m, Culture Trip’s £60m, and Crescendo Biologics’ £53m; among others.
Unsurprisingly, the report found that London was a hotspot for VC funds. The third-highest quarterly sum of VC invested ever within London was made during Q2.
Despite this, other regions in the UK have seen some key deals, including Cambridge-based Crescendo Biologics bagging £53m, Edinburgh-based TVSquared getting £6m, Liverpool-based vTime raising £5.7m, and Coventry-based Impression Technologies landing £3m.
AR startup Blippar raising $37m amid losses
Besides funding, the report also found that regions outside of London were quickly developing important tech hubs. The Northern Powerhouse Investment Fund, for example, has been involved in around 10 fundraises during Q2, investing more than £7m.
The data also suggests that overseas investors are willing to invest in startups coming out of the North. There have been a number of significant cross-border tech deals, such as the £1bn acquisition of Leeds-based Callcredit by a US business.
There is also a chance for star talent to find work outside of the capital. The report stated that there are now around 200,000 jobs in digital tech businesses across Manchester, Leeds, Newcastle, Sheffield, Liverpool and Hull.
Commenting on the findings, Patrick Imbach of KPMG, said: “Hot on the heels of a blockbuster 2017, the UK is still seeing very healthy sums of VC invested as investors continue to feel under pressure to deploy funds, which in turn is driving a higher investment volume and higher valuations.
EY’s Olivier Wolf on why tech M&A activity is rising in 2018
“The continued uncertainty in the macro-political and macroeconomic environment does not appear to be substantially hampering appetite for investment in UK startups. Despite a trend in the number of deals continuing to drop, not only in the UK but also in Europe as a whole, we can see that investors are still focused on later stage investments in businesses with a proven track record and market traction,” he added.
Investors still have their eye on AI
“We are seeing new groups of companies emerging, in particular AI first and blockchain businesses. These have kicked off new VC life cycles with increasing venture rounds to come over the next few quarters and years,” Imbach added.
“Already now, AI businesses are raising solid early- and mid-stage funding rounds. Subject to successful R&D and commercialisation, they will surely attract even more funding going forward.”
FinTech, AutoTech, cybersecurity and Biotech were also seen as key priorities for investors.
FinTech startup Cleo closes $10m round led by Balderton
The UK government and private investors have committed to invest in AI in a bid to position the country as a leader in the technology.
In April 2018, the government allocated £300m in new funding to invest in AI research. As part of this, Japanese VC firm Global Brain and Canada-based VC firm Chrysalix will locate their European headquarters in the UK and will invest a total of £145m in UK-based AI and robotics startups.
Imbach reflected on this: “AI is absolutely critical to the future success of the UK economy, particularly around the Government’s Industrial Strategy. The UK has a track record in creating some of the most innovative AI businesses in the world; however, we are seeing too many of these businesses exit too early.
“For the UK to be a world leader in AI, it is imperative to get more funding and infrastructure in place to help these businesses stay independent longer in order to grow further. It is also important to ensure that the UK remains an attractive destination for AI talent from across the world,” he added.
Finally, it seems the global IPO market gained momentum in Q2’18. Following Spotify’s successful IPO in April, other successful listings were completed by Adyen (Netherlands) and DocuSign (US). The total capital raised by all VC-backed IPOs globally has soared to £7.3bn, already moving past 2016’s low point of £4.8bn.
In conclusion, the UK tech scene is still thriving, and VCs are actively investing in companies in the space. AI remains a key area of interest as we set out to explore new ways of leveraging automation and robotics to reap benefits in the workplace and beyond. And, although London is still seeing the lion’s share of investment, the rest of the UK should not be forgotten.