London start-ups attract record venture capital funding

Tech start-ups in London raised a record $25.5bn in funding last year, more than double the total in 2020, against a backdrop of investors pouring unprecedented amounts into start-ups globally.

It reflects a wider pattern of European growth last year, which received more than $115bn in venture capital investment and $675bn globally. The UK ranked fourth behind the United States, China and India, according to a report by London & Partners and Dealroom.

Twenty London tech companies reached a valuation of more than $1bn last year, bringing the total number of “unicorns” to 75, including car insurance start-up Marshmallow and fintech firm Starling Bank.

Funding rounds of more than $100m accounted for more than half of all fundraising, with rounds from fintech competitors Revolut and Monzo reaching more than $1.4bn combined.

A wave of initial public offerings (IPOs) and deals with special purpose acquisition companies (Spacs) drove the total enterprise value of exits of London start-ups to $88bn, compared to $3.5bn the year before. Last year saw IPOs from Wise, Deliveroo and Darktrace, while Cazoo and Babylon exited through Spacs.

Fintech remains one of the fastest-growing sectors in London, accounting for nearly half of investment last year, but the pandemic also attracted sustained activity in telecoms, health tech and enterprise software, as the pandemic continued to drive remote working and communication.

“London’s strengths in technology and financial services, helped to drive record levels of fintech investment last year,” said Laura Citron, the head of the government-funded promotional agency London & Partners.

She added that there had been a “huge increase in funding for health tech” after the coronavirus pandemic.

Almost 40 per cent of the investment coming into London was from the US, which had a similarly buoyant picture last year, with US start-ups raising $330bn, according to PitchBook data.

Sarah Guemouri, a principal at VC firm Atomico, said that although last year was groundbreaking, it has not been an overnight success story for London.

“It has been made possible by decades of ecosystem building and an acceleration of the digital transformation across all industries,” she added. “The UK is one of the most mature ecosystems in Europe and naturally home to a larger number of scale-ups which have been raising bigger rounds to support their growth.”

But Jeremy Silver, chief executive of early adoption tech agency Digital Catapult, said the wider economy has yet to feel the effects of this increase in funding.

“London is riding a global wave of overall investment in tech, but we need to do more to connect the energy of start-ups into the wider infrastructure and transfer the value of these investments to the economy,” he said.