London's tech scene pulls in record £2.5bn in 2017 venture capital bonanza

 
Jasper Jolly
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London is the dominant location for tech venture capital in Europe (Source: Getty)

London’s tech venture capital investment reached another all-time high in 2017 as firms raked in four times more cash than Paris, the nearest European rival.

Venture capital investment into the UK’s tech sector reached an all-time high of £2.99bn, almost double the total invested in 2016, according to figures compiled by data firm Pitchbook for lobby group London & Partners.

The UK’s tech firms, dominated by London, gained more venture capital investment in total than Germany, France, Spain and Ireland combined.

Venture capital funding into tech firms in major European cities in 2017

European city

Total funding raised (£)

London 2.45bn
Paris 564.97m
Berlin 456m
Stockholm 360.27m
Madrid 65.38m
Amsterdam 212.18m
Dublin 117.45m
Helsinki 56.98m
Copenhagen 40.23m
Lisbon 2.43m

Read more: Mayor-backed London venture capital fund has helped create 700 jobs

Softbank’s $502m (£392m) investment in game development platform Improbable was the biggest single investment during the year, but it was London’s burgeoning fintech firms which led the way with a record haul of investments.

Investors poured £1.3bn into fintech firms, with currency exchange unicorn Transferwise gaining £212m from Old Mutual Global Investors and Silicon Valley VC firm IVP. Meanwhile, peer-to-peer lending platform Funding Circle raised £82m and digital-only payments firms Monzo and Revolut raised investments of £71m and £64m respectively.

Venture capital investors cite the UK’s time zone, language, and the network effects offered by close proximity to the City’s finance and service providers as the key reasons for its strong position amid European nations.

Read more: With the rise of fintech, banks have more on their plate than Brexit

Rob Kniaz, a founding partner of VC firm Hoxton Ventures, and an early investor in tech firms Deliveroo and Darktrace, said: “London is the place where US and global investors come as their first port of call.”

“Being in London puts you in a perspective that is a lot more worldly,” he said. “That’s a real advantage.”

Retaining the UK’s openness to global capital and talent will be vital in maintaining the UK’s tech investment, according investors and business leaders.

Colin Stanbridge, chief executive of London Chamber of Commerce and Industry, said: “It is vital the London remains open to both talent and investment now and after Brexit.

The UK's biggest tech VC deals of 2017

Tech firm £m
Improbable 391.7
Deliveroo 364.9
Truphone 255
Transferwise 211.97
Funding Circle 81.92
Monzo 71
Revolut 64.41
Darktrace 57.69
Graphcore 37.85

Read more: Not impossible: Virtual reality firm Improbable bags $500m in funding

“Irrespective of future trade deals or the colour of passports, as London heads to megacity status we need to ensure that we continue to attract the people in quality and quantity as well as the financial investment which will allow London to flourish and remain a globally competitive city.”

Government ministers are receptive in private to tech firms’ concerns, according to Russ Shaw, founder of Tech London Advocates, but the “soft power” message being heard around the world is harming the UK’s prospects, amid widespread concern within the tech and business communities over potential immigration restrictions.

The government must work to give the “message that skilled talent from within the EU and beyond the EU is welcome here,” Shaw said.

The figures show a trend of increasing confidence from UK firms in their ability to access private funding, according to Frederic Lardieg, a partner at Octopus Ventures.

Read more: Revealed: These are the UK's 100 fastest-growing startups

“We’re having bigger and bigger rounds: that’s proof that we can build really big and successful companies,” he said.

However, he echoed the fears of damage immigration restrictions could do, noting the leaderships of Deliveroo, Transferwise, and Improbable all contain people who have migrated to the UK.

He asked: “How can we make sure the founders of the new companies are too?”

Paul McNabb, a managing partner at VC firm Episode 1, said some of the firms in his portfolio have already had difficulties recruiting skilled EU nationals.

While “doomsday scenarios” are unlikely to come to pass, a “chronic shortfall of talent” is a major concern within the tech community, he said. Recruitment in artificial intelligence, machine vision, and cloud architecture is particularly difficult, he added.

Read more: Key issues start-ups should consider during the innovation process

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