Silicon Valley Shifts To London In U.K. Tech Boom

Silicon Valley Shifts To London In U.K. Tech Boom

Undeterred by Brexit or the Covid-19 pandemic, technology firms in London attracted $10.5 billion in venture capital money last year, a new record for the U.K. and Europe.

Fintech (financial technology) firm Revolut, electric vehicle maker Arrival, and renewable energy provider Octopus Energy led the capital’s tech firms to new highs according to a report released on Thursday (14 January) from the Mayor of London and Dealroom.co.

“London is the global tech capital of Europe,” says Sadiq Khan, the Mayor of London. Last year the city attract more tech investment than Berlin, Paris and Stockholm combined, according to data from Dealroom.co, which tracks European venture capital money.

Behind London’s tech boom is an eastward migration of venture capital from Silicon Valley. In fact, over half of the $10.5 billion of last year’s funding came from non-Europeans, and 36% of it from North America.

“The U.K. has got what it takes to become the Silicon Valley of energy,” says Greg Jackson, CEO and founder of Octopus Energy, which raised $527 million in two funding rounds last year.

Sequoia Capital, one of Silicon Valley’s foremost venture capital firms has been expanding its U.K. presence over the past year. It follows other venture capitalists in moving money away from a squeezed Silicon Valley. The amount of venture capital investment in San Francisco fell by a quarter between 2019 and 2020, while in London it remained steady.

“It’s interesting to see the venture capitalists not just putting capital into funds but setting up teams in London to do their European investment operations,” says Laura Citron, CEO of London & Partners, the Mayor of London’s international trade and investment agency. “That’s what we’ve seen with Sequoia, for example. That looks like a trend that will continue.” 

On a global level, London was placed fifth when ranked by venture capital funding amounts by Dealroom.co. It was a mere $100 million behind Shanghai.

Investors Chase Fintech And Edtech Opportunities Across The Pond

Separate figures released on Thursday (14 January) show the U.K.’s edtech (education technology) sector also attracted a flood of new American money. British edtech firms grew by 72% last year, while in the U.S. they fell by 12%.

Over 40% of all edtech investment into Europe goes to U.K., according to recruiter Robert Walters and data provider Vacancysoft. This was largely driven by Covid-19, which acted as a “hyper accelerator” for the market, says David Roberts, CEO of online educational platform, KidsLoop.

London has its tech-doubters, however. Venture capitalists are always looking for an exit, when they can sell their stakes onto somebody else either privately or through an IPO (initial public offering).

But in London there are fewer of these. “If we want to do even better we must address how we help growing tech companies to make the transition from private ownership to public markets,” says Saul Klein, co-founder of LocalGlobe, a venture capital investor.

In the U.S. financiers are expecting a bumper year for IPOs, with Coinbase, Instacart and Robinhood expected to float on public markets. For this reason, the U.S. still commands the lion’s share of the world’s venture capital money: $140.7 billion compared with the U.K.’s $15 billion.

Others believe that the impacts of Covid-19 or Brexit are yet to take effect. The U.K. still has to agree trading agreements for the financial sector with the E.U. Any big changes could impact future IPOs or venture capital flows.

Meanwhile, Covid-19 has reduced the number of people in London offices. Tech entrepreneurs are now managing a workforce scattered across the U.K.’s hinterlands.

Citron hopes they will return: “The value of face-to-face interaction and networking and the serendipity of being in a cluster I don’t think goes away and it’s what businesses have really realized they’re going to miss.”

After all, there is still plenty of money on the table. Dealcoom.co estimates 1,252 U.K. venture capital firms raised $7.8 billion last year and much of that funding has yet to find a home. “We know we’ve got record levels of capital sitting in our VC (venture capital) funds in London ready to be invested,” says Citron.

I write about the fortunes of Europe’s wealth amidst the continent’s political ups and downs. I cover billionaires and where their money ends up: The charities and

I write about the fortunes of Europe’s wealth amidst the continent’s political ups and downs. I cover billionaires and where their money ends up: The charities and philanthropic endeavours of the rich; the music and arts they support; the clubs and hobbies they accumulate. I have over ten years experience advising governments, companies and charities on the subject, and frequently write for other newspapers and magazines. You can follow me on Twitter @ollieawilliams or email me at ow[at] oliverwilliams.me

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