The UK outstripped both the US and China for venture capital growth in the tech sector last year, according to the latest government figures.
The amount of money invested in digital companies hit £10.1bn in 2019, up up £3.1bn from 2018 – already a record year – and securing 33% of all European tech investment.
Venture capital investment leapt by 44% year-on-year – growth that outstripped the US, China, Germany and France.
Research prepared for the Digital Economy Council by Tech Nation and Dealroom.co showed between January and December, UK companies secured a third of the £30.4bn raised during the year in Europe.
In particular, UK-based tech firms received more VC investment than Germany (£5.4bn) and France (£3.4bn) combined.
Growth in VC investment exceeded 40% for the third year in a row whereas investments in France grew by a little over a third compared to 2018, while Israel’s investments rose by a fifth.
On a global scale, the UK’s performance in 2019 means it now sits behind only the US and China in terms of total venture capital funding received in 2019 and on a city-level, London joins the Bay Area, Beijing and New York at the top of the world’s most-funded locations. Companies headquartered in London raised £7.4bn during 2019.
Almost half of the UK investments (£4.6bn) in 2019 came via US and Asian investors and the UK tech sector recently overtook the US for foreign investment per capita. What’s more, when compared to Germany and France, the UK had the widest overall mix of foreign versus domestic investors.
While eight more billion-dollar companies or unicorns were created in the UK in 2019 – taking the total number based in the UK to 77 – the amount being invested in early-stage companies increased, reaching £3.9bn in 2019 up from £3bn the year before.
2019 saw the number of early-stage investment rounds grow by 20% year-on-year. While among more mature companies, a total of £4.1bn was invested in rounds exceeding $100m in 2019 – more than twice the amount invested in such rounds during the same period last year.
Of the highest-value UK rounds, five companies raised more than $250m each, and three of those exceeded $500m in a single round.
2019 saw one of the UK’s largest ever Series A investments, made in payments processor Checkout.com ($230m) in May, and the largest UK round of all time, which saw $800m being invested in supply-chain fintech Greensill in October just five months after the company had raised $655m.
Since 2014, the UK has produced more than twice the total number of $1bn tech companies than any other country in Europe, and sits behind only the US and China when it comes to building fast-growing global firms.
In 2019, eight UK companies reached this unicorn status – Rapyd, CMR Surgical, Babylon Health, Sumup, Trainline, Acuris, Checkout.com and OVO Energy – meaning the UK has now created 77 billion-dollar businesses, double the total number in Germany (34) and almost four times as many as Israel (20).
While London remains the leading city for unicorns in the UK, having produced a total of 46 unicorns since 1990, Manchester, Oxford, Cambridge, Edinburgh and Bristol have produced a combined total of 20. Of the latest unicorns to join the list, OVO Energy adds to Bristol’s tally while Cambridge-based CMR Surgical pushes Oxbridge’s combined total to 11. Two unicorns are based in Leeds: Sky Betting & Gaming and TransUnion UK.
Six UK cities rank amongst the top 26 cities in the world for raising venture capital in 2019, these are London (4th), Cambridge (12th), Bristol (15th), Oxford (21st), Manchester (25th) and Edinburgh (26th).
The UK’s success in attracting venture capital investment in 2019 also fuelled, in part, a surge in the UK’s best performing sectors – fintech, AI and deep tech, and clean energy.
Again, when compared with Germany and France, UK fintech firms raised £4.1bn last year – an impressive 7.5 times the amount raised by French fintechs, and three times as much as fintech firms in Germany.
This figure represents a 100% increase from 2018’s total of £2bn, as a result of both the Greensill and Checkout.com investments plus significant fundraises from the likes of World Remit ($197m), Monzo ($147m) and Starling Bank ($98m).
In AI and deep tech, investments in Benevolent AI ($90m), Melody ($60m) and Wayve ($20m) helped push the investment total across these sectors to £2.5bn – up from £2bn from 2018, and twice that invested in Germany and France’s respective sectors.
While clean energy is a smaller market, OVO Energy’s $260m deal, alongside $81m investments in photovoltaic and solar panel firm Oxford PV and BBOXX, similarly helped push 2019’s total investment in this sector to just short of $1bn for the first time, which is a 45% increase on 2018’s figures.
Digital Secretary Nicky Morgan said: “These brilliant new numbers demonstrate the strength of the UK tech industry and how it is a sweet spot of our economy.
“Our tech companies are not only commanding the confidence of global investors but they are also creating new jobs and wealth across the country.
“It’s absolutely vital we maintain this impressive success and in Government we are working tirelessly to make sure the conditions are right.”
