UK venture capital (VC) deals are set for a record year in terms of total funding secured, according to research published today.
A report by early-stage VC fund White Star Capital has found that UK technology companies have already attracted $4.9bn of funding in the first half of 2019.
This represents 85% of the funding attracted across the whole of 2017, the previous record-holding year for UK VC deals, when $5.8bn was raised.
It is also twice what was raised in the first half of 2018, which was a comparatively modest year that saw only $5.4bn in UK VC deals.
The industries dominating the UK VC deals boom
While the technology industry in general is enjoying growing VC funding, investment is being dominated by a few key industries.
The fintech sector, which London in particular is known for globally, has attracted 22% of all UK VC deals in the first half of 2019.
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Artificial intelligence comes in second, with 15% of all VC investment.
Digital health and e-commerce followed in third and fourth place, both at 4%.
UK technology defies Brexit concerns
The fact that the UK is heading for a record year in terms of VC deals is particularly notable given the looming presence of Brexit, which has caused gloomy economic predictions for the UK economy, and seen numerous companies withdraw or reduce their presence in the country.
However, White Star Capital found that the technology sector was defying this trend due to a combination of talent availability and investment approaches.
The UK’s selection of globally competitive universities appears to have given it an edge when it comes to talent, with 50% of the UK’s 17 unicorns having founders with UK university qualifications.
This has also been supported by industry experience in the country, with 63% of founders of companies completing Series C funding having previously worked with UK-based organisations.
However, the methods to attract funding have also proved significant, namely the use of crowdfunding.
Startup-focused crowdfunding has proved immensely popular in the UK, led by the platforms Seedrs and Crowdcube.
These have been responsible for more than half of the seed deals between January 2016 and January 2019, raising over £1bn in early stage seed investments for UK companies.
Yet while UK VC deals appear to have withstood the Brexit fallout so far, there is a need to be vigilant if the country wants to continue its success once it leaves the EU later this year.
“The UK’s reputation as a global hub for financial services continues to grow and it is maintaining its influence in a number of other large markets, particularly the US. The nation’s future success will rely on regulation that encourages business growth, greater investment in education and research, along with further support for the tech sector,” said Nicholas Stocks, general partner at White Star Capital.
“Our report addresses how the UK is likely to be affected by leaving the EU, as we consider how the nation can continue to attract major international companies and boost later-stage funding for the most innovative, homegrown firms. The key word is ‘talent’ – as nurturing and investing in tomorrow’s entrepreneurs will help to ensure that the UK can consolidate its position on the global stage.”