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Britain’s tech sector appears to be thriving despite economic worries

The economic drumbeat becomes more worrying every day.

However, based on the evidence released this morning, there is at least one sector of the UK economy that appears to be thriving.

Figures from Dealroom, the data provider specializing in emerging and growing businesses, revealed that the UK tech sector raised £12.4bn in venture capital during the first five months of the year.

It was more than the £12billion raised in the whole of the pandemic-hit year of 2020 and meant that, globally, the UK was second only to the US in the amount of money raised. seed investment collected.

Some £9bn was raised in the first three months of the year, compared to £6.3bn in the same quarter last year, making it the largest amount raised in a quarter since that Dealroom started collecting data at the turn of the century.

The figures, published coinciding with the start of london tech weekhighlights the UK’s pre-eminence as Europe’s leading destination for technology investment.

During the quarter, when more than 950 tech startups and scale-ups raised funds, the UK did not just overshadow fast-growing economies like China and India in this measure.

UK tech start-ups and scale-ups have raised more than twice as much as their French counterparts, despite Emmanuel Macron’s efforts to attract investment into the French tech sector.

Macron even pointed out, during his presidential campaign, that France had already achieved its goal of having 25 unicorns (start-ups valued at $1 billion or more) by 2025.

The numbers also reveal something very interesting about the makeup of UK tech startups. It’s widely assumed that most venture capital funding goes to London-based tech companies, and in fact these startups in the capital have attracted around £8.6bn of the total, but other UK cities are taking part. also.

Both Bristol and Oxford were in the list of Europe’s top 20 technology hubs for investments raised this year, while in a separate list of Europe’s top 20 futurecorn hubs (a futurecorn is a company considered capable of becoming a unicorn) published today. , three UK destinations (Cambridge, Abingdon and Oxford) are on the list.

Dealroom said this influx of capital meant the UK was now home to 122 unicorns, with more than 20 towns and villages hosting at least one unicorn, as well as 248 future horns. He said more than a third of Europe’s fastest growing next-gen tech companies are now based in the UK.

Will economic concerns affect investment in technology?

The numbers run counter to concerns about a slowdown in tech investment and a collapse in the value of some of America’s biggest tech heavyweights by 25% each and Metaplatforms, the new name of Facebook, 48% less.

Yoram Wijngaarde, Founder and CEO of Dealroom, said: “Despite wider global challenges that have led to a slowdown in public markets, private technology investment in the UK continues to grow.

“The UK has cemented its reputation as one of the best places to invest in fintech, with more fintech investment entering the country earlier this year than even the Bay Area.

“Almost everything will be affected by the recession we have entered, but overall the UK tech sector is in a stronger position than ever in terms of the breadth and depth of the whole ecosystem. »

The big question, however, is whether these numbers represent a high point for UK tech startups.

There are signs that large declines in public market valuations are starting to trickle down to private market valuations. The Wall Street Journal recently reported that buy-it-now-pay-later provider Klarna completed a so-called ’round down’ in which it raised new money, but on terms that valued it less. than its previous funding cycle.

But Carolyn Dawson, executive director of the Founders Forum, a community of entrepreneurs and investors based on the kind of networks that helped make Silicon Valley the world’s top destination for tech investment, said that doesn’t mean that funding would run out for key areas.

Speaking to Sky News at the start of London Tech Week, he said: “There are certainly early warning signs already, I think it’s inevitable. I don’t think that because of our rapid growth, we’re not completely immune to the macroeconomic climate. . , but I believe the tech sector has significant resilience, and generally, as time and time have shown, when there is adversity, the tech sector usually comes out on top.

“Tech companies will continue to thrive, to grow, because of this. »

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“Significant” growth in health technologies and climate technologies

Another concern that has been raised for the UK is that fintech, which accounted for £6.2bn of funds raised by tech-related start-ups and scale-ups this year, is becoming too dominant in British technology.

But Ms Dawson insisted there was no evidence of this or that fintech could crowd out other parts of the industry when it comes to raising money from investors.

He added: “I think there’s really significant growth in health tech, which is to be expected given the pandemic we’ve all just been through, but also the climate tech sector is growing very rapidly and experiencing accelerated growth.

She said one area she wants to see further growth in is so-called “deep technology,” the term that covers areas like artificial intelligence, quantum computing, semiconductor design: “These are key areas where we as the UK are taking the lead in, it can do more and there will also be areas for really significant investment in the future.

“So I would expect to see more venture capital funding flowing this way in the future, I don’t think this is just a time for fintech. »

Funding may well prove tighter for the UK tech start-up and scaling up this year.

But it’s still worth noting that so far this year the UK has attracted more such investment than either India or China.

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