Verdict

UK tech investment reaches record $18bn – highest in Europe

Investment in UK tech startups and scaleups reached a record $18bn (£13.5bn) in the first half of 2021 as they attracted more venture capital than Germany, France and Israel combined, according to new research.

The record level of investment was boosted by “mega-rounds” in the likes of fintech Revolut, online videoconferencing firm Hopin and online car sales platform Cinch.

The $18bn raised by UK startups from January to June was nearly three times higher than the same period in 2020, the research published by Tech Nation, Dealroom and LocalGlobe showed.

During that period, more than half of investment came from mega-rounds of $100m or more into later-stage companies, suggesting the UK is becoming more like the US in terms of deal sizes.

While the UK extended its lead above the rest of Europe, it remains third behind the US and China for tech investment.

The first half of the year saw the creation of 20 new tech unicorns – private startups valued at $1bn or more.

Among them are insurtechs Zego and Tractable, along with second-hand fashion app Depop.

That pushed the UK’s unicorn total to more than 100, becoming the third country after the US and China to reach the milestone.

When venture capitalist Aileen Lee coined the term unicorn in 2013, there were just 39 globally that met the criteria. They were so named because finding such a company was considered as difficult as finding a mythical unicorn.

However, in a sign that the term may be becoming outdated, 7 UK companies became decacorns – startups worth more than $10bn – during the first half of 2021, bringing the country’s total to 12.

In July, Revolut raised $800m to become a tridecacorn with a $33bn valuation. Cybersecurity startup Snyk raised $300m in March, giving it a $4.7bn valuation.

Tech Nation noted that the latest rounds of investment will take a while to have tangible impact on the UK tech ecosystem. But when it does it will fuel R&D and expansions, leading to more job creation. According to Tech Nation, backend development roles had the highest number of job openings in the UK during the first half of 2021.

“We are in the midst of the fastest and most astonishingly high growth we’ve ever seen in the UK tech ecosystem, so much so that when it comes to the size of VC investment rounds, we are going to have to re-evaluate what we think of as being significant,” said George Windsor, head of insights at Tech Nation.

London was the hottest target for venture capital from January to June, attracting $10.8bn. Stockholm was a distant second at $5.9bn, with $2.75bn coming from a singular funding round for Swedish battery maker Nothvolt. Berlin came in at third with $4.6bn raised.

While London continues to attract the lion’s share of UK and European tech investment, there were signs that startups were becoming less reliant on the capital.

Bristol, Cambridge and Manchester fell inside the top 21 cities across Europe for startup investment.

George Whitehead, partner at ACF Investors, said: “Success breeds success and the UK has hit a tipping point in which the access to a combination of technology, talent and venture funding ensures entrepreneurs have the self-confidence, practical experience and financial support to build really large businesses.”

The report identified 100 potential future unicorns, or “futurecorns”, suggesting that UK tech growth shows no sign of slowing down.

The first half of 2021 has also been record-breaking for UK tech exits thanks to public listings from Wise, Deliveroo and Darktrace. The total value of UK exits in 2021 to date, including those via special acquisition companies, stands at $80bn.