UK tech sector on track for another record year of investment

The UK is creating almost $1bn “unicorn” technology business a week after influx of £13.5bn venture capital (VC) funding in the first six months of the year, setting the tech sector up for another record year of investment in 2021.

According to data compiled for the UK’s Digital Economy Council (DEC) and entrepreneurial network Tech Nation by data provider Dealroom.co, the UK is now home to 105 unicorns.

Out of these, 20 reached unicorn status in the first six months of 2021 alone, including Tractable, Zego and Depop. By comparison, Tech Nation claims it took from 1990 to 2014 for the UK to create its first 20 unicorns.

From these 20 companies, 11 are financial technology (fintech) firms, which as a subsector attracted £4.2bn of the total raised. After fintech, healthtech attracted the second highest amount (£2.7bn), followed by enterprise software (£1.3bn), and transportation (£1.1bn).

The number of potential future unicorns has also increased, from 132 companies in May 2021 to 153 in the latest figures.

The £13.5bn investment record can in part be attributed to a handful of “mega fundraising rounds” by UK tech companies, including £578m raised by challenger bank Revolut (the UK’s single biggest tech company),  £289m by cyber security platform Snyk, and £1bn by car sales platform Cinch, among others.

More than half of all funding rounds raised in the previous year have also seen over £100mn worth of investment, with around 1,700 startups and scaleups in total receiving capital backing.

“The UK tech industry is on course for another record high in terms of investment in 2021,” said Tech Nation founder and chief executive Gerard Grech. “The success of established companies like Wise, Darktrace and Depop show there is a clear pathway for UK tech companies to make an impact on a global scale. At Tech Nation, we will continue to support entrepreneurs and startup founders as they grow their businesses from first investment cheque all the way to IPO.”

Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, said the record levels of investment and number of unicorns show that tech companies are driving the UK’s post-Covid economic recovery, as well as helping to consolidate its position as the worlds third largest global tech ecosystem, after the US and China.

“This is no longer a story just about London, or just about fintech – UK tech has proven it is capable of producing world-class tech companies in AI [artificial intelligence], biotech and cyber nationwide,” he said.

“After the challenges so many businesses faced during the pandemic, today’s data recognises the extraordinary resilience and success of British tech companies, and sends a clear message to the international tech community ahead of Europe’s largest tech festival, London Tech Week – the UK is a global tech powerhouse reaching a size and scale that can compete with anyone on the world stage.”

Echoing these sentiments, Nicola Mendelsohn, vice-president of Europe, Middle East and Africa (EMEA) at Facebook and a member of DEC, added that the UK now has “leadership status” alongside Silicon Valley and China.

“This is an exciting time to be part of this industry, and we should be encouraging talented young people to understand that the best careers of the future can be found in those companies that are creating innovative products and services that help businesses and individuals,” she said.

The UK has previously attracted record levels of investment in 2017, 2019 and 2020, and despite a 28% dip in venture capital funding during 2018 – which was largely attributed to the political uncertainty surrounding Brexit at the time – UK tech firms still managed to raise £2.49bn.

However, in 2020, around 20% of the total investment went to just 10 scaleups, eight of which were London-based.

During the pandemic, more than £1bn of convertible loans were issued to a total of nearly 1,200 startups through the government’s Future Fund programme, which was launched in April 2021 by finance minister Rishi Sunak to support startups and loss-making companies with the investment needed to stay afloat during the pandemic.

The British Business Bank revealed on 14 September 2021 that, as a result of the Future Fund loans, the government now has equity stakes in 158 high-growth startups.