London is still a leading technology hub, thanks to its strong roots in innovation. We shouldn’t be anxious about Paris or Berlin overtaking us in tech, writes Laura Citron
These are tough times for tech – but we should be confident in London’s entrepreneurs. Last year saw big fluctuations in tech valuations, high profile layoffs and an overall decline in VC funding. And the turbulence is set to continue this year.
But underlying that volatility is a buoyant and innovative technology sector in London.
According to data we’re publishing today with Dealroom, London is the top European hub for VC investment and fourth globally. And international tech investors continue to make long-term commitments to our city, with more fresh VC capital raised by new funds setup in London last year than any year previously. This provides an undercurrent of certainty for the capital, which will only entice more investors and talent.
Three things will help London to be resilient as a leading global technology hub.
First, our innovation has its roots in sectors in which we have deep strengths and enduring demand. The obvious example is fintech. As the leading global financial centre, London is also the leading global city for digital financial products, with London fintech companies attracting more venture capital funding than any other global city in 2022. This puts the capital ahead of both New York and San Francisco.
Beyond financial services, our strength in creative industries is powering growth in sectors like gaming and immersive reality.
Second, London is positioned as the capital of a growing European technology ecosystem which increasingly competes on the global stage. I often hear anxiety in policy circles about the growing strength of the likes of Paris and Berlin as competitors for tech. But I see no reason to fear.
In fact, the data published today shows that investment into London’s tech sector is still more than double the size of any other European city; and more importantly, we should see the growth of other tech cities in Europe as a positive. Seen from Silicon Valley, New York or Shanghai, Europe is a single technology market with London as its capital.
Finally, innovation will be resilient when it is solving real problems and creating real value for economies and societies – from tackling climate change to supporting mental health.
The investors I talk to are increasingly looking for impact from their investments and seeking out mission-driven businesses. This is starting to move the dial – for the first time this year, over 10 per cent of all investment into London’s tech sector went to impact-led companies. We expect that to grow.
So, we should be confident that London’s tech sector will be resilient, albeit with some bumps in the road.
But to be globally competitive, we need to fix the inclusion gap in tech. Recent data shows that just 1 per cent of all European VC funding in 2022 went into women-led businesses, with similarly poor statistics for black and minority entrepreneurs. This is not good enough.
As one of the world’s most diverse cities, we need to lead the way in creating a technology sector which reflects our city and creates opportunity, jobs and prosperity for all Londoners.