Last year London tech startups raised a record $25.5bn (£18.55bn), making it the fourth-highest city for VC investment globally.
The UK capital sits behind San Francisco ($98.5bn), New York ($47.5bn) and Greater Boston ($29bn) for VC investment.
Research by business growth agency London & Partners and startup data firm Dealroom shows that megarounds of $100m or more and high-profile exits helped propel London up the VC investment rankings.
The dry powder in London’s tech ecosystem created a record 20 unicorns – startups valued at over $1bn. New unicorns include insurtech Marshmallow and fintech Starling Bank.
It brings the total number of unicorns in London to 75, putting it once again in fourth place globally behind the San Francisco Bay Area, New York and Boston.
There were a record 64 megarounds in 2021 – a sign that London’s tech sector is maturing as such rounds typically take place in later-stage scaleups.
Among the largest London tech raises in 2021 were the $800m raised by fintech Revolut and $900m for clean energy supplier Octopus Energy.
London fintechs attracted the largest amount of capital – $11.6bn – but there was strong growth for telecoms, health and impact tech startups in 2021.
At a national level the UK sits behind the US, China and India for VC tech investment.
“These record figures mark a significant moment for London, and a milestone in the UK’s growth as a world-leading tech nation,” said Russ Shaw CBE, Founder of Tech London Advocates and Global Tech Advocates. “Our tech sector now sits alongside the US, China and India in defining the growth and impact of the global tech industry.”
London, the “beating heart” of UK tech
Founders and investors operating outside of London might view the London investment figures differently. Excluding London, tech firms across the entire UK raised a combined $14.3bn – just over half of the capital pumped into the capital.
David Foreman, managing director of Manchester-based VC Praetura Ventures, previously told UKTN that a “fixation with London’s tech sector is taking investment away from other UK areas”.
Others see it differently, with Gerard Grech, founding CEO of Tech Nation, describing London as the “beating heart” of the UK’s network of tech hubs, which are home to startups and scaleups across the country.
This view is shared by Saul Klein, general partner and co-founder of London-based venture capital firm LocalGlobe.
“The capital connects tech clusters like Cambridge, Oxford and Manchester to Paris and Amsterdam and beyond,” Klein said.
London-based VCs raised a record $9.9bn last year, accounting for 35% of all new European VC funds in 2021.
Notable funds include the $3.1bn raised by Index Ventures, the $600m raised by Balderton and the $550m raised by 83North.
The upward trajectory looks set to continue in 2022, with US investors in particular expected to continue pouring VC cash into the UK tech startups.
“London and the rest of the UK’s tech sector continues to go from strength-to-strength and means that the UK is now competing on the global stage,” Eileen Burbidge, Partner at London VC firm, Passion Capital. “It’s fantastic to see that London tech companies are attracting large volumes of capital across all stages of the funding journey as a sign that our tech ecosystem is truly flourishing and our entrepreneurs are second to none.”