VC investment into UK startups saw the biggest annual opening on record despite the start of global economic uncertainty, with $11.3bn raised in Q1 of 2022 compared to $7.9bn in Q1 of 2021, according to data by Dealroom and Tech Nation analysed for the UK’s Digital Economy Council.
For the last decade, Q1 investment tends to be lower than subsequent quarters that year, implying that 2022’s yearly investment could break more records if economic conditions remain fairly stable.
The first three months of 2022 puts the UK second globally for startup investment, after the United States and ahead of both India and China for the first time.
Taavet Hinrikus, co-founder of Wise, said: “I’ve been investing in startups across Europe for nearly 15 years and the past 12 months have been unlike any I’ve experienced. I believe we’re at the start of a new frontier for technology and I hope to find and support the next 100 iconic companies that will be started in the UK and grow into global giants.”
More than 1,000 UK tech startups have raised investment in 2022 so far, with fintech accounting for half of all funding raised – $7.8bn across 172 rounds.
London has raised more fintech investment than any other global hub this year. Across all subsectors, two other UK cities also make it into the top 20 European cities for startup investment in 2022: Bristol and Oxford. Germany is the only other country with three different cities ranking in the top 20 (Berlin, Munich and Hamburg).
Gerard Grech, founding chief executive, Tech Nation said: “UK tech startups and scaleups are increasingly critical to the UK economy, providing high paying jobs and investing in the technologies that help make this country a hotbed of innovation and creativity.
“With more than 17 times growth in value at just under $1 trillion and investment over the last 10 years, the UK tech ecosystem continues to go from strength to strength.”
Despite changing macro conditions, UK-based VCs are still holding record levels of dry powder, with 2022 currently outpacing a record 2021 for new funds raised. In Q1 of 2022, 19 new funds were raised valuing $2.9bn, compared to 12 new funds valuing $877m raised in Q1 of 2021. In total, new funds raised in 2022 between January to May amount to $5.5bn.
Luisa Alemany, associate professor of management practice in strategy and entrepreneurship at London Business School’s Institute of Entrepreneurship and Private Capital, said: “We know that times of greatest uncertainty lay the groundwork for innovation and entrepreneurship and we’re seeing that reflected in the new ventures that are popping up now to tackle the energy crisis and climate change. It’s an exciting moment to be an entrepreneur.”
Read the full investment update here.