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During economically uncertainty times, businesses tend to default to risk aversion. Appetites for corporate transactions and IPOs have dampened considerably this year, for instance, with business leaders holding off on any ambitious growth plans until the economic turbulence hopefully settles.
However, venture capital investment is booming in the UK. In the first five months of 2022, 950 UK startups raised a total of £12.4 bn in venture capital funding, more than in the whole of 2020 alone, data compiled by Dealroom on behalf of the Digital Economy Council revealed.
Private funds have record levels of capital ready to deploy, suggests the latest LexisNexis' Gross Legal Product Index, which measures growth across multiple practice areas of the law. And many of these firms are looking to the UK's rapidly growing tech sector to invest.
UK is No. 2 in the world for startup investment
The aforementioned Dealroom data places the UK in the number two spot on a global scale, coming in only behind the US when it comes to startup investment. It also has an impressive total future unicorn count of 258.
London isn't the only tech hub
London isn't the only region where startups are getting investments. Bristol and Oxford also made it in the list of the top 20 European tech hubs for investment. Cambridge and Abingdon also received significant sums, too.
The US is the biggest overseas tech investor
According to the Department for Digital, Culture, Media & Sport, the most prominent overseas investor by far is the US, with 37% of all funding to UK tech coming from the States, up from 31.5% last year. In comparison, 28% of UK venture funding came from domestic capital. Many US capital investment firms are so invested that they're setting up offices in the UK, with Bessemer Venture Partners, General Catalyst, Lightspeed Venture Partners and Sequoia Capital all setting up shop last year.
Looking at Dealroom data so far this year (January to September 2022), the sectors that have received the most tech investment are:
It will come as no surprise to most that Fintech received the biggest investment, with £9.8 bn in funding. London received the majority of that investment - in fact, London officially became the top Fintech hub globally.
However, investment in this sector has slowed considerably in recent months, with funding dropping, especially at late stage (exits value and count have fallen). Also, unicorn creation is slowing down to pre-pandemic levels.
Notable rounds in 2022 include small to medium sized business lender, Bloom, which raised £300m in Series A funding, and SaaS payments provider, Paddle, which raised £200m in series D funding.
Another rapidly growing sector is health, with a number of notable HealthTech startups luring in overseas investors. This year so far, the health sector has raised £2.5 bn.
Notable investments include immunotherapeutics company, Centauri Therapeutics, which received £24m in Series A funding, and fibrosis and cancer drug discovery company, Engitix, which raised £54m in Series A funding.
The energy sector has received £2.2 bn in funding so far this year, making it the third most invested sector in the UK. Given the current energy crisis and rising appetites for environmental and sustainability initiatives, innovation in this sector is high in demand from both a B2B and B2C perspective.
Notable investments include: rechargable batteries tech provider, Addonics, which brought in $27m in Series A funding, and Better Origin, an AI powered insect farm that received $16m in Series A funding.
The transport sector has brought in £1.1 bn in funding this year alone, with a wave of energy efficient transport solutions driving innovation across the market.
Electronic vehicle recharging solutions provider, Connected Kerb, received £110 in late VC funding, while all inclusive connected car subscription company, ONTO, produced $60m in Series C funding.
MarketingTech was largely behind the £1.1 bn given to UK startups and scaleups, with AI-powered technology leading the way in pioneering a new era of data-driven marketing technology.
Consumer insights platform, GWI, brought in $180m in Series B funding, while conversational AI platform, PolyAI, received $40m in Series B funding.
Demand for variety seems to be driving innovation across the food sector, with food delivery, production and supply chain concepts generating £1 bn in funding across the UK.
Notable investments include ultra-personalised quick food supplier, Vita Mojo, which raised £30m in early VC funding, and food producer, GrowUp Farms, which raised £100m in early VC funding. Edinburgh-based seafood supplier to buyer connector, Rooser, also raised £23m in Series A funding.
The telecoms sector has accumulated £946m in funding throughout 2022 so far, with Pure LiFi receiving £10m in late VC funding, and Raylo receiving £7.5m in early VC funding being among some of the most notable deals.
Rethinking commercial, residential and public property design with new approaches is what's driving real estate investment in the UK this year, with £695m made in funding in 2022 so far.
AI-powered constructive solutions provider, Disperse.io, made £16m in early VC funding, while the tech-powered home design company, Modulous, received £10m in Series A funding.
The gaming sector has brought in £598m in 2022 so far, with traditional, mobile based and lottery gaming companies capturing the attention of investors.
Computation platform, Hadean, brought in £30m in Series A funding, while lottery platform Jackpot.com brought in £35m in Series A funding. Mobile game creator, Trailmix Games also brought in a notable $60m in early VC funding.
The security sector has also brought in £496m in funding this year alone, with cloud-based platforms delivering a wealth of new opportunities across the board.
One powerful example is InsurTech provider, Instanda, which received $45m in funding this year after a very successful Series B. CybSafe, which helps lower human risk to cyber security, brought in $28m in series B.
While the level of investment in the UK's tech sector is huge, the months ahead will give greater insight into how venture capital investment and foreign investment in general will be impacted by the current economic crisis.
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