The future looks bright for London’s tech sector, according to a new report from London & Partners and Dealroom.co, showing that 2021 was another record year for venture capital investment into London’s tech firms.
2021 was the year London tech came of age, with a large increase in megarounds ($100m-plus rounds), an unprecedented number of exits and more new unicorns than any previous year. The UK capital’s tech firms raised an all-time high of $25.5bn in VC funding, 2.3 times the investment levels in 2020, against a backdrop of record global ($675bn) and European ($115bn) VC investment.
Despite the challenges posed by Brexit and coronavirus, the strong performance and rapid growth of London’s tech sector in 2021 suggests the city is competing strongly on the world stage with other leading global tech hubs like the Bay Area, New York and Shanghai.
London ranked fourth globally for VC investment in 2021, behind the Bay Area ($100.9bn), New York ($47.5bn) and Greater Boston ($29.9bn). Berlin was the only other European city to make it into the top ten list with $11bn in tech VC investment.
London is producing some of the fastest growing tech companies in the world, adding 20 new unicorns to its ranks in 2021, more than any other previous 12-month period. This takes London’s total unicorn count to 75, with new unicorns joining the pack in 2021 including insuretech disruptor Marshmallow, SaaS company TrueLayer and fintech firm Starling Bank. Unicorn is the term used in the venture capital industry to describe a start-up company with a value of over $1bn.
As the world works to address the climate crisis, there has been a rapid acceleration of investment into climate tech solutions, with $1.7bn pumped into London-based climate tech companies in 2021, up from $1.3bn in 2020. London is also the second city globally for number of climate tech rounds raised by start-ups, indicating an active ecosystem with significant growth ahead.
Significant increase in later stage funding and exits
2021 saw a huge surge in megarounds in London, accounting for over 60% of all funding and demonstrating real signs of maturity for the UK capital’s tech sector. There were 64 megarounds in London last year, up from 19 in 2020 and 18 in 2019. Some of the largest deals involving London companies included: a $800m Series E for fintech firm Revolut and over $600m (across two deals of $100m and $500m in December) for digital challenger bank Monzo, two funding rounds totalling $900m for clean energy supplier Octopus Energy ($600m in September and $300m in December) and two deals for online events platform Hopin of a combined $850m ($400m in March and $450m in August).
Additional findings also show that the enterprise value of London’s tech companies (founded since 2000) passed half a trillion dollars in 2021, growing 70% in value on the previous year. Indications of the maturity of London’s tech sector are further boosted by a record year for the number of London-based tech firms exiting via IPO, SPAC or sale via acquisition.
Laura Citron, CEO at London & Partners, said:
“London is now a truly mature global technology capital – we have big pools of later stage funding, nearly two new unicorn companies every month, and massive funding rounds and exits. This data shows that London is not only a brilliant place for entrepreneurs to start businesses, but also to grow them to a global scale. London has it all – capital, talent, customers, a supportive ecosystem and a fantastic place to live.”
Additional research shows that London-based VC firms raised $9.9bn in new funds in 2021, providing record levels of dry powder to pump into London-based tech companies. This accounts for 35% of all new European VC funds over the last year. Major new London-based VC funds announced in 2021 included Index Ventures ($3.1bn), Balderton ($600m) and 83North ($550m). 2021 also saw US VC firms Lightspeed and General Catalyst expand their footprint into Europe, choosing London as their European base and joining Silicon Valley based VC Sequoia Capital amongst other US VC firms in the UK capital.
Jan Hammer, Partner at San Francisco and London based VC firm, Index Ventures said:
“Start-ups are reshaping our economy. Thanks to record levels of investment and the fast pace of growth, they’re creating thousands of jobs every month and account for an ever-greater share of the job market. London and the UK can – and should – seize the opportunity to become the best place to work in startups. Attracting and retaining world-leading talent will be the biggest challenge facing startups, and indeed the economy as a whole, in 2022.”
London & Partners is the business growth and destination agency for London, supporting the Mayor of London in promoting London internationally as a leading world city. Find out more at www.londonandpartners.com