London tech raises £16 billion in 2022 as UK tech remains resilient

London is the leading tech ecosystem outside of the US, pulling in £16 billion in venture capital funding in 2022. This means the UK tech sector will end the year as Europe’s most developed ecosystem, amidst a global backdrop of difficult economic conditions, according to new figures from Dealroom for the Digital Economy Council.

In London alone:
There are more high-growth companies than European peers with 88 unicorns and over 36,000 startups and scale-ups
High growth rounds include NewCleo – safe uranium recycling (£262 million); SumUp – fintech payments (£256m); Cera – digital-enabled care startup (£130m)
VC funds from across the globe including General Catalyst, Sequoia and Lightspeed

During 2022, fast-growing UK tech companies have continued to raise at near-record levels (£24 billion), more than France (£11.8 billion) and Germany (£9.1 billion) combined. This takes the total raised over the past five years to nearly $100 billion (£97 billion).

The latest figures underline the success of the UK tech economy and its progress as a source of global innovation – a European Silicon Valley. These elements are guiding the expansion of its tech ecosystem, which now employs 3 million people, right across the country.

Sustained investment and growth have forged a global tech powerhouse

Consistent growth across UK tech saw the industry reach the $1 trillion in value milestone earlier this year, making it only the third country ever to hit this valuation after the US and China. This means the UK tech industry is ahead of its European peers and is worth more than double Germany’s ($467.2 billion) and three times more than France’s ($307.5 billion) as well as retaining the lead when it comes to overall funding, unicorns and startups numbers.

This has enabled the UK to produce almost 400 high-growth startups since 2000 (worth more than $250 million in value). This includes 144 unicorns – companies with valuations of $1 billion or more – and 237 futurecorns, fast-growing companies which are predicted to be the most valuable businesses in the next few years. The new figures showcase how the ecosystem is expanding, up from 116 unicorns and 204 futurecorns at the same time last year.

Laying the groundwork for value-driven growth

Part of the UK’s strength in creating such a wide-ranging and expansive tech ecosystem is down to its focus on combining innovation with standards and values. Earlier this year the UK unveiled a new approach to regulating AI – based on core principles like safety, transparency and fairness – to take a less centralised approach than the EU to reflect how AI is used in their sectors. The Chancellor also announced that the government will bring forward legal powers for the Digital Markets Unit to drive up competition and level the playing field for challenger tech firms. All this goes towards creating the right environment to drive forward research, technology and growth.

Introducing new generations to tech

Upskilling and reskilling have become a key part of the UK’s dominance in tech with nearly 3,000 edtech startups having raised a collective £1.7 billion in funding over the past five years. Companies such as Academy, Code First Girls, Immersive Labs and Multiverse are focused on enabling people of all ages to gain the skills they need to succeed in tech roles, from tech apprenticeships to coding, development and cyber security.

According to smarter job search engine Adzuna, UK companies are increasingly hiring for entry-level tech roles, up from 6,596 in November last year to over 15,000 this year, as they seek to bring in a new generation of tech talent and develop them into future leaders.

Taking the lead in impact

Whilst the UK remains the dominant country outside the US for fintech investment (nearly £10 billion raised this year), it is also becoming a leading hub for impact tech – companies creating technological solutions to reach the UN Sustainable Development Goals. There are nearly 1,200 impact tech companies in the UK which have raised £3.12 billion in funding this year, ahead of last year’s record £3 billion.

Green energy receives the bulk of investment, such as Newcleo, a startup that is developing technology to enable safe uranium recycling (£258 million). Scaleups tackling healthcare inequality, such as Cera which bring technological innovation into social care raised £263m, while GrowUp Farms, a vertical farming company which uses technology to grow food more sustainably raised £100 million. The steady influx of investment into impact tech means the sector now employs more than 53,500 people, up from 37,500 last year.

Regional strengths make the difference

Innovation is spread out across the country with eight cities now home to two unicorn companies or more including Bristol, Cambridge, Edinburgh, Leeds, London, Manchester, Nottingham and Oxford. These high-growth businesses are using decades worth of science and tech research and development to revolutionise areas such as finance (Interactive Investor – democratising investing), sustainable travel (Vertical Aerospace – electric-powered aircraft), health research (Oxford Nanopore – portable DNA sequencing) and electronic device development (CSR – semiconductors).

Collectively, these cities are home to 112 unicorn businesses, more than France (36) and Germany (63) combined – demonstrating the strong pipeline of global tech leaders being created up and down the UK. In fact, Cambridge was recently named the number one university in the world for producing successful tech founders ahead of the likes of Harvard and MIT – with over 500 alumni founders raising more than $10 million in funding. Oxford came third with 410. Bristol (173), Nottingham (100) and London (98) all made it into the top 20, thanks to their deep tech and science focuses.

Finding the next sources of global innovation

This is also what is attracting international investors to expand their footprint in London and the UK to access the growing network of entrepreneurs in the new Silicon Valley.US investors including General Catalyst, Sequoia and Lightspeed have increased their teams in the UK in 2022 after opening new offices here last year, and global firm New Enterprise Associates hired its first UK-based partner in October. Whilst European investor Earlybird VC has opened a new office in London earlier this year. This follows another strong year of fundraising for UK-based funds, who have collectively raised £9.2 billion this year, up from £9 billion at the same time in 2021.

Digital minister Paul Scully said: “UK tech has remained resilient in the face of global challenges and we have ended the year as one of the world’s leading destinations for digital businesses. This is good news and reflects our pro-innovation approach to tech regulation, continuing support for start-ups and ambition to boost people’s digital skills.”

Chris Bischoff, managing director at General Catalyst, said: “We established a presence in London as we believed the UK is a stand-out ecosystem globally. Our experience over the last 18 months has enhanced our appreciation for this remarkable ecosystem, enabling us to find and support early stage companies that are working toward accelerating change in their industries. As importantly, our values of responsible innovation and radical collaboration are perfectly in tune with the UK’s approach to innovation.”
James Wise, partner at Balderton Capital, said: “This has undoubtedly been a much harder year for the entrepreneurs and businesses in the UK. Despite this, funding for innovative new companies here remains the highest in Europe, thanks to our strong talent base and global leadership in fields such as life sciences and A.I. We hope the Government will continue to support start-ups innovating in these fields, and keep regulation up to date with the latest technologies from autonomous vehicles to mRNA applications in the year to come.”

Stan Laurent, partner at Highland Europe: “The UK has created some of the world’s most visionary founders, who have scaled impactful businesses across the world. The wider global tech ecosystem may be facing external challenges but we’re excited about the talent that we see coming into the UK startup sector and can’t wait to support the next generation of entrepreneurs as they attempt to become global leaders in their field.”
Nicole Crentsil, co-founder and CEO of Black Girl Fest and angel investor, said: “As UK tech adjusts to the global challenges, there needs to be a concerted effort by the entire industry to ensure that minority founders and communities are not left behind. Last year, Black women received only 0.34% of VC funding. That’s why initiatives such as Black Girl Fest and Launchpad are needed to empower and enable Black founders to build the products and services that are missing from the world.”

Anna Brailsford, CEO of Code First Girls, said: “From using AI to tackle healthcare inequality to designing and building space missions, every day there are incredible tech businesses being launched and scaled in the UK. Yet, too few women have the opportunity to work for these impactful startups because they have not previously been given the encouragement to look at a career in tech or learn key skills. We’re aiming to train 26,000 women in the UK over the next five years and place them in tech roles so they can use their knowledge and expertise to change this industry for the better.”
Ian Livingstone, partner at Hiro Capital, said: “Founding a company now is very different to when I was starting out 47 years ago, founding my first games company. It’s been amazing to see how UK tech has grown and developed in this time to become the global powerhouse it is today. This is down to the drive and passion of the incredible entrepreneurs, innovators, designers and software engineering teams that make up the industry, and I am personally delighted to be helping support the next generation of games makers.”

Yoram Wijngaarde, founder of Dealroom, said: “The UK’s startup ecosystem is unignorable. UK startups are worth over a trillion dollars collectively, with over 130 unicorns, and many of the world’s most important investors use London as a logical launchpad into the rest of Europe. While the lofty rounds and valuations of 2021 are long gone, healthy startup ecosystems with strong fundamentals don’t disappear overnight. We’re now seeing a “return to normal” in startup markets, which for the UK’s startup ecosystem means returning to its roots of ambitious, outward-focussed, open entrepreneurship.”

Paul Lewis, chief customer officer at Adzuna, said: “Hiring for tech positions has settled down in recent months and numbers continue to be higher than they were in 2019. It’s interesting to see how companies are adapting by hiring for more entry-level positions to help train up a new generation of tech leaders and visionaries. With more open positions than skilled staff to go around, working in technology offers a long and varied career path.”

Eileen Burbidge MBE, partner at Passion Capital and director at Fertifa, said: “The UK tech sector is in a very different place to where it was 10 years ago, with so many more start-ups and scale-ups, more entrepreneurs, more capital and greater enterprise value than ever before. The current challenges facing tech globally are only going to intensify next year, but thanks to the extensive networks and deep UK ecosystem built over the past decade, British companies and entrepreneurs that can rise to the challenge will emerge even stronger than ever.”

Baroness Martha Lane Fox said: “UK tech has built some incredible products that are solving everyday challenges people face across the country and the world. But if we want to make this industry truly world-class, we need to ensure that the sector not only employs people from all backgrounds but also funds founders from all backgrounds. This will improve UK tech for the better and drive real change.”