Global investors flock to London in ‘golden age’ for tech
London has cemented its role as Europe’s leading tech hub after a near-record year of investment as overseas investors circle in on the capital’s best firms.
Global tech investors are piling into the capital with a total $10.5bn (£7.7bn) investment recorded in 2020, a quarter of Europe’s whole VC investment for the year.
The amount raised is significantly more than the raised in 2017 and 2019 – $7bn and $5.9bn respectively – and three times the amount of investment than any other European tech city.
It is also catching up with its global peers, featuring as the second fastest growing global tech hub since 2016 and ranking 5th on the worldwide list for VC tech investment over the past five year.
The research from Dealroom and London & Partners shows that it is in large part because non-European investors are flocking to London.
Non-European investors accounted for 57 per cent of all tech VC investment into London with international investors having a preference for the capital.
Investors from North America unsurprisingly represented the largest share of venture capital funding into London between 2019 and 2020.
“The London tech ecosystem continues to mature and build recognition on the world stage,” chief executive of London VC firm Augmentum. “This latest data comes as no surprise to us, as it has been impossible to ignore the increased engagement from overseas investors – particularly from the US and Asia – seeking exposure to high potential tech businesses.”
It is a sign of optimism for the city after what has been a long and torrid year as the pandemic mixed with Brexit uncertainty has derailed confidence.
“It’s brilliant to see how resilient London’s tech sector has been, despite all the challenges of 2020. International investors have shown real confidence in London, with new venture capital funds setting up here to invest in high-growth companies in sectors like fintech, cybersecurity and healthtech,” said Laura Citron, chief executive of London & Partners.
Investment prospects for London firms will likely be further boosted by an increase in the number of VC funds in the city.
London firms raised $7.8bn in new funds last year, on top of the $4bn raised in 2019, which accounts for a third of all new European funds over the past two years.
Fintech leads London’s innovation
London’s growing fintech industry will no doubt have a strong part to play in London’s burgeoning role as a tech hub having raised $4.3bn in 2020 alone.
“The past twelve months have seen a dramatic acceleration in digital adoption in the wake of the pandemic and fintech challengers will continue to play a crucial role in supporting economic recovery in the capital and beyond,” says Levene.
Some of the biggest funding rounds this year have been the big fintech players such as Revolut’s $500m Series D round. Some other big deals involved KI Insurance – $500m – Checkout.com – $150m – and Gocardless – $95m.
But Russ Shaw CBE, founder of Tech London Advocates has warned “now is not the time for complacency. We must be cautious of the challenges that lay ahead as the pandemic situation evolves and the true impact of Brexit is revealed.”
“While these figures demonstrate the enormous potential of our tech scene – addressing issues on digital skills shortages, diversity and inclusion, and our pivot to a net zero economy remain critical.”
Levene also expressed words of caution. “We expect a golden decade for European venture capital, although London must do more to build on its market leadership if it is to remain the leading European hub for tech by the end of this decade.”