Many thanks to our partner, Dealroom
2022 has been a year of challenge and change for tech firms - both in the UK, and on a global stage. Investment has decreased year on year for the first time in years, there has been a scaling back of megarounds (those deals over $100mn in size), and unicorn creation has slowed.
To truly understand these changes, we need to take a step back.
2020 and 2021 heralded some of the highest levels of investment ever seen into UK tech firms, and also a profound sense of disruption. Emerging R&D intensive areas of tech (called deep tech) rocketed, increasing by 33x since 2011, topping $8.5bn in 2021 where megarounds of over $250mn contributed heavily to the total. And, climate tech, those companies addressing some of the world’s most pressing environmental challenges received $3.5bn in venture capital investment in 2021, nearly 43x that of 2011.
By the end of 2022 UK startups raised $30B. A considerable drop from the heady heights of 2021 funding which peaked globally, but still 72% higher than the total from 2020, a record high year for VC investment for many nations.
The UK was not alone in seeing a pulling back in investment in 2022. In fact, relatively speaking, the UK startup and scaleup ecosystem has shown resilience during a challenging global pullback in venture capital. Between 2021 and 2022 UK venture capital investment declined from $41bn to $30bn, a reduction of 28%, while globally, the decline was 32% - from $312bn to $219bn.
Trends would suggest that there could be more challenging times ahead. The report shows that we are only just beginning to see the full impact of a slowing market in the second half of 2022.
That said, we know that investment can be noisy, and volatile. The value of UK tech firms remained strong over 2022, and despite a reduction in rate of value growth, combined value of UK tech companies reached over $1tn by the end of 2022. The UK is just the third country in the world to pass this milestone after the US and China.
Exit events have been fewer in 2022 than at any other point this decade.
UK startups are going public at their lowest rate in over a decade, with just ten companies realising an exit through SPAC or IPO in 2022, compared to 77 in 2021. Perhaps associated with this trend, the UK is entering a unicorn winter. With exit routes narrowing and a late-stage capital crunch, new unicorns are once again becoming rare beasts. Whilst 34 new unicorns were created in 2021, only 15 new $1bn+ valued companies emerged in 2022.