Funding into so-called ’impact tech’ start-ups in the UK has jumped over 30 per cent this year despite soaring inflation and market turbulence beginning to put the squeeze on venture capital investors, fresh data has revealed.
Investment into impact tech firms – those addressing United Nations’ sustainable development goals – has jumped from £728m in the first five months of 2021 to £960m in the same period this year, according to a new report from startup network Tech Nation and Google for Startups.
The jump in investment comes after a decade of increased cash pouring into impact tech firms, Tech Nation found, with investment rising from £59m in 2011 to £2.8bn last year.
But Tech Nation warned of a coming slowdown in 2022 as cash becomes harder to come by.
“The impact sector’s future growth and success is being threatened by dwindling funding for early stage start-ups,” the report said.
“This issue particularly affects UK tech businesses when compared to their US and European counterparts because of ecosystem maturity, valuation boosts from large scale US investment, and greater levels of retail investor certainty in later stage, venture capital backed firms.”
Funding for impact tech start-ups represented nine per cent of all venture capital into tech start-ups in 2021, in a year of frenzied VC investment that saw £25.5bn pumped into London tech firms alone, according to data from London and Partners.
But analysts are predicting a slowdown in overall VC investment this year as a rising interest rate environment dents investors’ ability to raise cash and public market volatility restricts exits via IPOs.
“Interest rates have risen in major economies, which could signal the end of the cheap capital that has underpinned the private market boom during the past decade,” analysts at Pitchbook warned this week.