London Calling: Venture Funding for UK Start-Ups Doubles to Over $1 Billion in One Year

It may finally be true that people with brains and ideas and tech chops and competence no longer have to get on the jet to SFO in order to realize their dreams. 

London is not exactly an outpost in the Heart of Darkness, but Silicon Valley-based venture funds are beginning to look for life beyond a couple of local area codes. The recognition is slowly dawning that there is bankable innovation with prospects of achieving scale in places where English may or may not be a second language but where smart people with good ideas abound.

It may be shocking to some that this would be a revelation, but the US, for all its global reach and ambition, remains a sometimes blinkered place. Only a third of Americans possess passports and US school childrens' performance on geography tests remains a source of national embarrassment.

The larger implication may be that after a couple of generations, technological brilliance may no longer be concentrated as heavily in the US as it once was. Executives from China, Taiwan, India, the UK, France, Finland, Estonia, Ireland and many other nations have long contributed at the highest levels in the big US tech shops. Funding for Asian firms - and their competitive strength - is becoming manifest. But dispersion of talent, investment and opportunity is a sign that development itself is achieving scale - and  is arguably good for the entire industry as well as the global economy. JL

Sally Davies reports in the Financial Times:

The amount raised in London is more than 20 times what it was four years ago. The figures point to growing investor confidence that the UK capital's start-ups can compete on the global stage. An increasing number of US investors  set up London bases.
London-based technology start-ups attracted record levels of venture capital in 2014, with investors ploughing $1.4bn into the city’s fledgling companies — double the amount raised last year.

The figures point to growing investor confidence that the UK capital’s start-ups can compete on the global stage, despite years in which European tech companies have lagged behind Silicon Valley rivals.

The amount raised in London is more than 20 times what it was just four years ago, and accounted for 65 per cent of the UK total, according to data compiled by research group CB Insights for London & Partners, the promotional arm of the mayor’s office.

The past year has seen an increasing number of US investors and overseas corporations set up London bases. Google Ventures, the venture capital arm of the technology group, launched a Europe-focused office based in London, while banking group Santander has set up an investment office in the city.

London’s tech scene received a boost when several high-profile exits provided investors with strong returns. These included Google’s acquisition of artificial intelligence company DeepMind for £400m and the initial public offering of Just Eat, the online food marketplace, on the London Stock Exchange.

It has also been a strong year for London-based financial technology companies, with money transfer businesses including TransferWise, WorldRemit and Azimo attracting large investments from prominent US venture capitalists.

Nonetheless, the London figures are small compared with other technology clusters. Silicon Valley saw more than $22bn in equity financing in 2014, while New York raised $1.7bn in the third quarter alone, more than London did for the whole of 2014.
“The London numbers are great but we’ve got a long way to go,” said Hussein Kanji, partner at Hoxton Ventures, a London-based venture capital firm. “You need the good companies, which we have; and you need the exits, which you’re starting to see, and which help people realise you can make money in the ecosystem.”

Several non-UK start-ups have joined the “billion dollar club” by raising more than $1bn in investment. Xiaomi, China’s top-selling smartphone maker, closed a funding round that values it at $45bn, while ride-hailing app Uber raised $1.2bn which valued the company as worth $40bn earlier this month.

Mr Kanji added that London “punches below its weight” in terms of how much money the UK’s institutional investors such as pension funds and university endowments devote to venture capital.
“We started up from an attic in London over 18 years ago, and London remains very much a part of our DNA,” said Hugo Burge, chief executive of Momondo, a flight search company that raised £80m.