West coast-based investors have increased their investments in UK tech startups by 252% since 2011, reveals research from Penningtons Manches
Brexit has created a lot of uncertainties for UK businesses. As the government keeps negotiating the divorce from the EU, entrepreneurs are left wondering where the breakup will leave them in terms of funding, access to talent and to the European market. Fortunately, these concerns have seemingly not deterred Silicon Valley investors from believing in the British startup ecosystem.
In a great vote of confidence in UK entrepreneurialism, research from Penningtons Manches, the law firm, reveals that US west coast-investors injected a grand total of £1.08bn across 74 deals into UK startups in 2017. Not only is it the first time these investors have invested over £1bn in one year but it also represents a 252% jump from the rounds raised in 2011.
And looking at where VCs chose to place their money, a clear pattern emerges. For starters, 79% of the money has landed in the so-called Golden Triangle: London, Oxford and Cambridge. Moreover, the lion’s share of the dough has helped to raise the potential of software companies, with £2.2bn of funds having gone into the tech sector since 2011. Startups in the life-science sector came second in terms of investment having raised £472m from west coast investors in the same period. These industries were followed by hardware companies and medtech businesses that raised a total of £207m and £58m respectively.
Even more encouragingly, the report also highlights that this is part of a wider trend where more foreign investors are betting on the success of UK startups. Last year alone saw a 62% jump in foreign investment into UK firms, a third of which were by North American investors and a quarter by those were based in the US. Investors from outside of the UK were involved in £5.9bn worth of deals in 2018, a 187% rise on 2017 and eight times the amount invested in 2011.
Speaking with Elite Business, James Klein, partner at Penningtons Manches, says: "Despite the doom and gloom surrounding Brexit and the UK's economic outlook, the research Penningtons Manches has commissioned shows that investment from Silicon Valley has actually increased since the referendum result. The British tech landscape is showing strength and resilience in the face of adversity, indicating that it is ready for new challenges and open to establishing fresh partnerships that will underpin the growth of the country's digital economy moving forward.
“While some remain sceptical of the future investment prospects for the UK, the increase of funding into the Golden Triangle speaks for itself. Silicon Valley, the world’s most mature tech ecosystem, is paying attention to British tech entrepreneurs and their businesses – now more than ever. By possessing world-class talent that is diverse in both background and technological expertise, UK tech companies have emerged as one of the most valuable investment targets in the world, standing shoulder to shoulder with their US counterparts. British tech is thriving and it's increasingly clear that Brexit will not be standing in the way of future US investment or growth.”
This news is particularly welcome considering VC investment in UK startups slumped in the first three months of 2018, with Brexit concerns being cited as a main reason. Hopefully, the news that Silicon Valley is still confident int Blighty’s future success should make more investors bullish about Britain’s startups.