UK tech start-ups overtake China to achieve record-breaking first quarter investment

More than 950 UK tech start-ups and scale-ups have raised £12.4bnin 2022, compared to £12bn for the whole of 2020

London has dominated tech investment in Europe this year, raising £8.6bn. Bloomberg

UK tech companies have raised more venture capital funding in the first five months of 2022 than in the whole of 2020.

This puts the UK second to the US globally when it comes to start-up investment and means that UK start-ups are outperforming those in China, France and India when it comes to attracting funding, figures from Dealroom analysed for the UK’s Digital Economy Council showed.

The new figures demonstrate the strength and resilience of the UK start-up sector.

So far, more than 950 UK tech start-ups and scale-ups have raised £12.4 billion in 2022, compared to £12bn for the whole of 2020.

In a record-breaking first quarter, UK tech raised £9bn, up from £6.3bn the same time last year, with the UK ahead of India and China when it comes to start-up funding, as well as raising more than double the funding raised by French tech companies.

This influx of capital means the UK is now home to 122 unicorns, with more than 20 cities and towns home to at least one unicorn, and 248 futurecorns. More than a third of the fastest-growing next-generation tech companies in Europe are now based in the UK.

The new data coincides with the launch of London Tech Week, which brings together leading names from across the UK’s digital industries.

London dominates Europe tech scene

London has dominated tech investment in Europe this year, raising £8.6bn, double that of Paris (£3.9bn) and over four times the amount of Berlin (£1.9bn).

It’s not only London that is thriving in Europe — Bristol and Oxford both made it into the top 20 European tech hubs for investment raised this year, raising £220 million and £248m, respectively. Bristol-based ClearBank, the UK’s new clearing bank, raised £181m in March, while Oxford-based drug discovery company OMass Therapeutics raised £75.5m in a Series B round in April.

Sustained investment over the past few years means that three UK regional cities and towns — Cambridge, Oxford and Abingdon — are among the top 20 European futurecorn hubs. Together, they are home to 18 futurecorns, including Healx, Oxbotica and Immunocore.

Not only are regional start-ups raising large sums, but regional investors are, too. This year, Leeds-based Northern Gritstone has raised £215m to use in university spinouts across Manchester, Leeds and Sheffield, and Manchester-based Praetura Ventures has raised £100m to support start-ups in the north of England.

Cambridge Innovation Capital has also raised its largest fund to date, £225m, to invest in high-growth companies in sectors including HealthTech and enterprise software.

FinTech strongest sector

FinTech has come out as the strongest sector for UK tech investment this year with £6.2 billion raised by FinTech start-ups and scale-ups already this year. Notable rounds included Checkout.com, which raised nearly £800m in Series D funding in January to become the UK’s most valuable private FinTech, and payments provider Paddle which raised £162.2m to become a unicorn earlier this year.

“Despite the wider global challenges that have led to a slow down in public markets, private tech investment in the UK is continuing to grow,” said Yoram Wijngaarde, founder and chief executive of Dealroom.

“The UK has cemented its reputation as one of the best places to invest in FinTech, with more FinTech investment going into the country in the first part of this year compared to even the Bay Area [in Northern California].”

After FinTech, HealthTech was the second-most popular sector for investment so far in 2020, with about £791m invested.

Outside of FinTech, the largest investment round this year was for CityFibre, the UK’s largest independent full-fibre infrastructure platform, which raised £300m in investment by Mubadala Capital Ventures in March to bring full-fibre networks to homes and businesses across the UK.

Impact tech companies, which are using technology to solve challenges including climate change, are continuing to grow and scale across the UK.

Last year, more than £2.7bn was invested in impact start-ups — representing the most ever in a single year.

In 2022 so far, tech businesses focusing on impact have raised more than £791m.

The largest investment raised by an impact start-up this year was for Carbon Clean Solutions, a London-based carbon capture company which raised over £118m in a Series C round in May.

“The UK continues to be a leading light for exciting and dynamic impact and solution-focused start-ups,” said Daniel Korski, DEC member and chief executive of PUBLIC.

“We’ve been working hard to enable an environment where anyone can become an entrepreneur and set up a business that can make a difference, and it's great to see this momentum continuing beyond the pandemic.”

International investment

Increasingly, international investors are backing UK tech.

US investors have put more money into UK companies than they did in the whole of 2020, investing £6.1bn this year compared to £6bn in 2020. Asian investors have taken part in 60 deals this year investing £2.3bn.

This demonstrates that, despite a predicted slowdown in the wider tech ecosystem, UK tech is continuing to be seen as a strong bet by domestic and international investors.