Research from London & Partners indicates that over £6.7bn of venture capital and private equity funding was injected into UK firms during 2016, with more than one third of the total going to startups based in London.
£14.bn of a total of £1.9bn in venture capital funding into the UK went to London technology firms, and UK tech companies attracted more M&A activity than any other European country.
Brexit has done little to slow the influx of capital, according to the data, with UK tech attracting more venture capital investment than any other European country post-referendum.
London based companies attracted £668m during the second half of the year and more importantly, post-Brexit. To capitalise, London & Partners say they will launch the “London VC Club”, “a bespoke programme to connect some of London’s leading investment firms with the capital’s fastest growing companies”, and say that a number of leading VC firms and angels will participate in the scheme alongside the likes of Salesforce Ventures, Octopus Ventures and Seedcamp.
LocalGlobe, an investment company backed by Saul Klein will also join and Klein said “There is more talent, capital and diversity in London’s tech sector than any other European destination. The success of London has been built on a strong culture of collaboration between investors, entrepreneurs and policy makers”, hence the importance of the club to the startup eco-system.
London’s most favoured sectors are adtech, e-commerce and big-data firms, all of which are attracting more and more investment, alongside AI, which received a record £100m in funding last year.
On-demand food company Deliveroo secured the largest single round of investment in 2016 with a £210m series E; founder and CEO of the company, Will Shu said;
“In 2016 we grew by over 400% and we have big plans for the year ahead. London is a world class city where we can attract some of the very best tech talent, access leading investment opportunities and operate in a fantastic work environment.”
An astonishing £71 billion of M&A deals were completed across the UK in 2016 led by Softbank’s £24.3bn acquisition of ARM, the chip-maker based near Cambridge, and EE’s £12.5bn purchase by BT.
In the tech sector, Swiftkey was acquired by Microsoft for £175m whilst Twitter acquired Entrepreneur First Alumni Magic Pony for £105m.
Private Equity firms were by far the largest investors, making £4.7bn of investments into tech firms.
Eileen Burbidge, Tech City Chair and partner at VC firm Passion Capital, situated in White Bear Yard, Farringdon, commented:
“The UK is undeniably a leading destination for investors, entrepreneurs and businesses alike. With a diverse talent pool, global financial centre and a strong culture of innovation, it is no surprise to see that the London has attracted more investment than any other major European city in 2016.”
London is also celebrating the decision by a number of the world’s biggest tech firms deciding to show long term commitment to the city, with Google planning to invest £1 billion in a new Kings Cross HQ, Facebook intending to hire 500 more people and Apple understood to be unveiling new offices in Battersea.
The biggest of news of all, announced last week, is that Snap.inc, the company behind Los Angeles based Snapchat, recently valued at $25 billion pre an expected IPO, has announced its intention to establish its international headquarters in London.
The mayor of London, Sadiq Khan, said;
“Despite the Brexit vote, the capital continues to attract record levels of investment and remains the best place in the world to grow a business. I have no doubt that this important sector of our economy will continue to generate jobs, investment and world-leading technology for decades to come.”
It already looks like 2017 has the potential to totally change the landscape of London’s tech start-up scene – and the futures of many businesses still hang in the balance, not least within the Fintech sector, where any restriction on the number of EU nationals being permitted to work in the country could decimate the workforce, 20% of which are migrant workers.
On both the macro and micro levels, London could be set for another bumper year, and what are the trends that will emerge over the course of the seasons?
Right now, it’s anybody’s guess.