UK tech firms raise record amounts, yet lack second-round success

The UK registered a record-breaking $15bn in tech funding in 2020, despite the uncertain investment environment created by Covid-19 and Brexit, according to a new report from Tech Nation. Despite this success, 39% of DeepTech businesses in the UK go bust or run out of investment before they raise a second round of capital. International capital, particularly from emerging markets, could be the key to sustaining their success and their innovation according to global investment experts JPIN VCATS.

A quarter of the world’s big telecoms spacecraft are manufactured in Britain, according to BBC figures, making it a leading market in the space sector. As a result, the UK is pulling ahead of other European tech hubs such as Germany and France. Yet despite this overall growth in investment, UK deep tech companies were substantially less likely to raise a second round of funding than their peers in the US: only 49% of UK start-ups received ‘follow-on funding’ compared to 63% of US companies according to Beauhurst.

International investment, particularly from emerging markets, could be key to ensuring the cash keeps coming in. International investors already play a dominant role in fundraising, as over the past five years, they have accounted for more than 70% of the growth in venture capital investment in UK tech. It is evidently an attractive destination, yet it seems more is needed, and emerging markets like India could be the key. Over half of foreign direct investment going out of India heads to British shores, making the subcontinent the UK’s second biggest backer according to government figures.

Nayan Gala, founder of JPIN VCATS, discusses the thriving British tech startup ecosystem, and why Indian investors could be the key to further innovation:

“The UK has always been a leading innovator, and today is no different. It is miles ahead of the rest of Europe when it comes to advanced technology funding and innovation, yet it seems to lack the sustained financing of US firms. More needs to be done to make sure enough capital is invested in time for these firms to keep growing, as continued financing is particularly important to research-heavy firms, such as those in the DeepTech sectors.

India is a key investor into Britain, and another leading startup tech hub. Increasing investment and collaboration between the two countries could be the key to healthier, more sustained funding for UK startups.”