Top 10 startup stories of 2021

1. London received quarter of all European tech funding in 2020

At the very start of the year, it was revealed that London-based technology startups received $10.5bn of venture capital (VC) investment in 2020, accounting for a quarter of all European tech funding.

The research, conducted by market intelligence firm Dealroom and investment agency London & Partners, showed that a significant chunk of the investment, $4.3bn, went to London’s financial technology (fintech) firms, while $1.9bn went to firms developing enterprise software technologies – an 82% increase on the previous year.

The figures marked a significant increase from the capital raised by London firms in 2017 and 2018 – $7bn and $5.9bn, respectively – and came close to eclipsing the record $10.7bn raised in 2019.

2. UK ‘impact startups’ raise £2bn in 2021

UK technology startups addressing one or more of the United Nations’ Sustainable Development Goals (SDGs) raised £2bn in 2021, up from £1.7bn in 2020

Investment in these firms, also known as “impact startups”, has increased by 127% since 2018, and the UK now has nearly 900 startups and scaleups working across a wide range of technologies.

These companies have a combined worth of £50bn and employ more than 35,000 people, with most of the capital raised going to companies working on clean energy and other climate change-related technologies.

Collectively, climate tech companies make up 65% of the deals signed by impact startups throughout 2021. Among these are firms such as green energy provider Octopus energy, which raised the biggest funding round of any impact startup at £438m; electric car subscription platform ONTO, which raised £130m; and waste management and recycling firm Plastic Energy, which raised £123m.

Outside of climate tech, a number of UK impact startups are looking at how technology can help solve global health problems. BenevolentAI, for example, uses big data and deep learning to discover more effective medicines, while Huma enables remote patient monitoring to reduce hospital readmission rates in countries including the UK and Germany.

3. Glitch signs collective bargaining agreement with unionised workers

Employees at software startup Glitch signed a collective bargaining agreement with the company via their union, which claimed it was the first time such a deal has been signed by white-collar tech workers in the US.

The agreement, which took effect on 28 February 2021 and will last 11 months, came a year after Glitch’s workforce voted to unionise under the Communications Workers of America’s (CWA) Local 1101 branch in March 2020.

The effort to bring Glitch workers into the CWA was part of the union’s Campaign to Organize Digital Employees (CODE-CWA), which launched in January 2020 to help workers in the tech industry build up their power.

Although the agreement – which is a legal contract between the union and Glitch – does not include anything about higher wages, which are “already generous” according to a union spokesperson, it does include important protections for workers.

4. UK technology business created every 30 minutes in 2020

A new technology business was created every half an hour during 2020, with nearly 19,500 registering in total across the UK, industry figures revealed in March 2021.

Data analysed by industry body Tech Nation for the Department of Digital, Culture, Media and Sport (DCMS) – based on figures provided by the Office for National Statistics (ONS) and Companies House – showed that 19,465 new businesses were registered in the information and communication sector between January and December 2020.

The increase in the number of technology businesses coincided with a record year for venture capital (VC) investment, which saw UK-based technology firms raise a total of $15bn – a significant proportion of the $43.1bn raised by European companies throughout 2020. However, most of the capital raised by UK firms ($10.5bn) went to those in London.

5. One-fifth of all UK tech investment went to just 10 scaleup firms in 2020

According to Tech Nation’s seventh annual report, just 10 technology scaleups received one-fifth of all UK venture capital (VC) investment during 2020.

Investment in the UK tech sector hit $15bn in 2020 – $200m higher than the previous record set in 2019 – but about 20% ($3.5bn) went to just 10 scaleups, eight of which are London-based.

Only e-commerce business Gymshark and semiconductor manufacturer Graphcore are located outside the capital, in Solihull and Bristol, respectively.

Seven of these firms – Octopus Energy, Arrival, Cazoo, Gymshark, infobip, Gousto and Hopin – reached unicorn status in 2020, which means they are now each valued at more than $1bn.

6. UK tech sector grows tenfold in 10 years

The UK’s technology sector has seen a tenfold increase in both venture capital investment and the number of billion-dollar “unicorn” companies (those valued at more than $1bn) over the past decade, according to figures released in May by the government’s Digital Economy Council and Dealroom.co.

Between 2010 and 2020, investment in the UK’s tech industry grew from £1.2bn to £11.3bn, with most of this increase taking place since 2015 when investment was £4.1bn.

There has also been a tenfold increase in the number of unicorns, which increased from eight in 2010 to 81 by the end of 2020. A further 10 unicorns were created between the start of 2021 and May.

Out of these unicorns, 32 were fintech firms, 14 focused on enterprise software and 13 were in health tech – sectors that have consistently attracted the most capital over the past decade.

7. UK government takes equity shares in more than 150 startups

Data from the British Business Bank released in September revealed that the UK government has taken stakes in 158 high-growth startups after its Covid support loans converted into equity.

Launched in April 2020 by finance minister Rishi Sunak to support startups and loss-making companies with the investment needed to stay afloat during the pandemic, the Future Fund scheme’s investment came in the form of convertible loan notes, giving the UK government equity shares in the enterprise when the funding is converted.

Tech-related companies on the list include Vaccitech plc, which co-invented the Covid-19 vaccine with the University of Oxford; Century Tech, an education platform that uses artificial intelligence (AI) to personalise learning for children; gig ticketing app Dice FM; and Ripple Energy, which allows customers to buy shares in wind farms.

According to British Business Bank CEO Catherine Lewis La Torre, the Future Fund was integral to ensuring investment continued flowing to high-growth startups, with more than £1bn of convertible loans being issued to nearly 1,200 firms in total.

8. 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.

The UK is now home to 105 unicorns, 20 of which 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 also increased, from 132 companies in May 2021 to 153 in the latest figures.

9. UK government announces safety tech challenge fund winners

The UK government announced the five winners of its Safety Tech Challenge Fund, who will each receive £85,000 to help them advance their technical proposals for new digital tools and applications to stop the spread of child sexual abuse material (CSAM) in encrypted communications.

Launched in September 2021, the challenge fund is designed to boost innovation in AI and other technologies that can scan, detect and flag illegal child abuse imagery without breaking end-to-end encryption (E2EE).

The fund is being administered by the Department for Digital, Culture, Media and Sport and the Home Office, which will make additional funding of £130,000 available to the strongest projects after five months.

Digital minister Chris Philp told Computer Weekly that CSAM-scanning was the only inherent use of the technologies, and that the government would not mandate its use beyond this purpose.

10. Tech startups turn to digital PR platform for media exposure

Early-stage technology startups in the UK are using digital public relations (PR) platform Newspage to help increase media visibility and secure further funding.

Conceived during the UK’s first national lockdown, Newspage enables startups to create and disseminate their own publicity without the involvement of expensive PR agencies whose costs are prohibitive to many early-stage startups.

While Newspage is designed for use by any small businesses operating in the UK, the latest vertical its founders are targeting is technology startups.

“I’ve worked with tons of tech startups that are bootstrapping and have hardly any cash – they come to see PR agencies, it’s £1,000 a day or even £500 a day, but its beyond their budget. Until they get an angel investment or VC [venture capital] backing, they’re off the radar,” said co-founder Dominic Hiatt.

He added that the underlying concept of Newspage is to be a “port” for connecting media and news organisations with stories that would otherwise be difficult to find, and that for startups themselves the platform can help them raise money through increased visibility.