UK tech sector appears to be thriving despite economic concerns | business news

The economic drumbeat becomes more worrisome every day.

However, based on evidence released this morning, there is at least one sector in the UK economy that appears to be thriving.

Figures from Dealroom, the data provider specializing in emerging and growing companies, revealed that the UK tech sector raised £12.4bn in venture capital funding during the first five months of the year.

That was more than the £12bn raised in the entire pandemic-affected year of 2020 and meant that, globally, the UK was second only to the US in terms of the amount of seed investment. collected.

Some £9bn was raised in the first three months of the year, up from £6.3bn in the same quarter last year, making it the largest sum raised in a quarter since Dealroom began collecting data. data at the beginning of the century.

The figures, published coinciding with the start of london tech weekhighlights the pre-eminence of the United Kingdom as the main destination in Europe for investment in technology.

During the quarter, when more than 950 tech startups and scale-ups raised money, the UK didn’t just put fast-growing economies like China and India in the shadows to this extent.

UK tech start-ups and scale-ups raised more than twice as much as their peers in France, despite Emmanuel Macron’s efforts to attract investment to the French tech sector.

Macron even highlighted, during his presidential election campaign, that France had already reached its goal of having 25 unicorns (start-ups valued at $1 billion or more) by 2025.

The figures also reveal something very interesting about the composition of UK tech startups. It is commonly assumed that most of the venture capital funding flows to London-based tech companies, and in fact these startups in the capital attracted around £8.6bn of the total, but other British cities are also participating.

Both Bristol and Oxford featured in the top 20 European tech hubs list for investment raised this year, while in a separate list of Europe’s top 20 ‘futurecorn’ hubs (a futurecorn is a company that is considered capable of become a unicorn) published today. , three UK destinations (Cambridge, Abingdon and Oxford) made the list.

Dealroom said this influx of capital meant the UK is now home to 122 unicorns, with more than 20 cities and towns hosting at least one unicorn, along with 248 futurecorns. He said that more than a third of the fastest growing next-generation technology companies in Europe were now based in the UK.

Will economic concerns affect investment in technology?

The figures run counter to concerns about a slowdown in technology investment and a collapse in the value of some of the biggest US tech heavyweights by 25% each and Metaplatforms, the new name of Facebook, 48% less.

Yoram Wijngaarde, Founder and CEO of Dealroom, said: “Despite broader global challenges that have led to a slowdown in public markets, private technology investment in the UK continues to grow.

“The UK has cemented its reputation as one of the best places to invest in fintech, with more fintech investments entering the country in the early part of this year than even the Bay Area.

“Almost everything will be affected by the recession we’ve entered, but overall the UK tech sector is in a stronger position than ever before in terms of the breadth and depth of the entire ecosystem.”

The big question, though, is whether these numbers represent a high point for UK tech startups.

There are signs that sharp declines in public market valuations are starting to trickle down to private market valuations. The Wall Street Journal recently reported that Klarna, the buy-now-pay-later provider, has completed a so-called “round down” in which it had raised new money but on terms that valued it at less than its previous funding round.

But Carolyn Dawson, executive director of the Founders Forum, a community of entrepreneurs and investors based on the kind of networks that helped make Silicon Valley the world’s top destination for tech investment, said that didn’t mean the funding would go away. exhausted for key sectors.

Speaking to Sky News at the start of London Tech Week, he said: “There are certainly early signs already, I think that’s inevitable. I don’t think that just because of our rapid growth we’re not completely immune to the macroeconomic climate.” , but I do believe that the tech sector has significant resilience, and generally, as time and time have shown, when there is adversity, the tech sector usually comes out ahead.

“Tech companies will continue to thrive, continue to grow, through that.”

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‘Significant’ growth in health tech and climate tech

Another concern that has been raised for the UK is that fintech, which accounted for £6.2bn of the money raised by tech-related start-ups and scale-ups this year, is becoming too dominant in UK tech.

But Ms Dawson insisted there was no evidence of this or that fintech could be crowding out other parts of the sector when it comes to raising money from investors.

He added: “I think there’s really significant growth in health tech, which is to be expected given the pandemic we’ve all just been through, but equally the climate tech sector is developing very fast and experiencing a Accelerated growth”.

She said one area where she was keen to see further growth was in so-called ‘deep tech’, the term that covers fields like artificial intelligence, quantum computing, semiconductor design: “Those are key areas where we the UK is taking the lead in, it can do more and there will also be areas for really deep investment in the future.

“So I would expect to see more venture capital funding flowing that way in the future, I don’t think it’s just a time for fintech.”

Funding may well turn out to be tighter for UK tech start-up and scale-up sometime this year.

But it is still quite noteworthy that so far this year the UK has attracted more such investment than India or China.

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