Undeterred by Brexit or the Covid-19 pandemic, London tech companies attracted $10.5 billion in venture capital last year, a new record for the UK and Europe.
Fintech company Revolut, electric vehicle maker Arrival and renewable energy provider Octopus Energy drove the capital’s tech companies to new heights, according to a report released Thursday (Jan. 14) by the mayor of London and Dealroom.co. “London is the tech capital of the world in Europe,” said Sadiq Khan, mayor of London. Last year, the city attracted more tech investment than Berlin, Paris and Stockholm combined, according to data from Dealroom.co, which tracks European venture capital money. Behind London’s tech boom is an eastward migration of venture capital from Silicon Valley. In fact, more than half of last year’s $10.5 billion in funding came from non-Europeans and 36 percent from North America.
Sequoia Capital, one of Silicon Valley’s leading venture capital firms, has expanded its presence in the U.K. over the past year. It follows other venture capitalists in moving money away from a hurried Silicon Valley. The amount of venture capital investment in San Francisco fell by a quarter between 2019 and 2020, while in London it remained flat. “It’s interesting to see venture capitalists not only investing capital in funds, but also setting up teams in London to run their European investment operations,” said Laura Citron, CEO of London & Partners, mayor of London’s international trade and investment agency. “That’s what we’ve seen with Sequoia, for example. It looks like a trend that will continue.”
Globally, London ranked fifth when ranked by venture capital funding amounts by Dealroom.co. It was just $100 million behind Shanghai. Investors seek fintech and edtech opportunities across the Atlantic
Separate figures released Thursday (Jan. 14) show that the edtech (education technology) sector in the U.K. has also attracted a flood of new U.S. funds. UK edtech companies grew by 72% last year, while in the U.S. they fell by 12%.
More than 40% of all edtech investment in Europe goes to the UK, according to recruiter Robert Walters and data provider Vacancysoft. This was largely driven by Covid-19, which acted as a “hyper gas pedal” for the market, says David Roberts, CEO of online education platform KidsLoop.
London has its tech skeptics, though. Venture capitalists are always looking for an exit, when they can sell their stakes to someone else, either privately or through an IPO (initial public offering). But in London, there are fewer of these. “If we want to do even better, we need to look at how we help growing tech companies transition from private ownership to public markets,” said Saul Klein, co-founder of LocalGlobe, a venture capitalist.
In the U.S., financiers are expecting a banner year for IPOs, with Coinbase, Instacart and Robinhood expected to float on the public markets. For this reason, the U.S. still accounts for the lion’s share of global venture capital: $140.7 billion, compared to $15 billion in the UK. Others believe that the impacts of Covid-19 or Brexit have yet to take effect. The U.K. has yet to reach trade agreements for the financial sector with the EU. Any significant changes could impact future IPOs or venture capital flows.
In the U.S., financiers are expecting a banner year for IPOs, with Coinbase, Instacart and Robinhood expected to float on the public markets. For this reason, the U.S. still accounts for the lion’s share of global venture capital: $140.7 billion, compared to $15 billion in the UK. Others believe that the impacts of Covid-19 or Brexit have yet to take effect. The U.K. has yet to reach trade agreements for the financial sector with the EU. Any significant changes could impact future IPOs or venture capital flows.
Meanwhile, Covid-19 has reduced the number of people in the London offices. Tech entrepreneurs are now managing a workforce scattered across the U.K. hinterland. Citron hopes they’ll come back: “The value of face-to-face interaction and networking and the serendipity of being in a cluster, I don’t think they’re going away and that’s what companies really realized they were going to miss.” Dealcoom.co estimates that 1,252 U.K. venture capital firms raised $7.8 billion last year and much of that funding has yet to find a home. “We know we have record levels of capital in our venture capital funds in London ready to invest,” Citron said.
Source : FORBES
