British start-ups have attracted $15bn of venture capital investment so far this year – the highest in Europe – according to research.
A report from HSBC Innovation Banking (formerly Silicon Valley Bank UK) and Dealroom found British start-ups came ahead of France and Germany, which raised $8bn and $7bn respectively. In Q3 alone, $4.9bn was invested into UK start-ups – a 14 per cent uplift from Q2.
It means that globally, the UK is behind only the US and China for start-up VC funding, which have seen $127bn and $39bn invested this year respectively.
Encouragingly, levels of early-stage funding remain strong – particularly in biotech, deep tech and climate tech – with $4.8bn expected to have been invested across pre-seed, seed and Series A stages by the end of the year.
Perhaps less encouraging, from the government’s view, is that US investors were the biggest source of capital for UK’s start-ups in the latest quarter at 37 per cent – evidence that young British companies are increasingly looking overseas for funding.
The trend was one of the catalysts for the UK introducing funds into venture capital from the pension fund industry – in line with Canada’s model – opening up the possibility of higher returns for pension schemes from riskier investments into high-growth start-ups. In July, nine pension fund providers signed up to the government’s pledge, promising to invest 5 per cent into start-ups.
UK investors were second to the US, accounting for 31 per cent of capital, European investors accounted for 9 per cent, Asia 4 per cent and rest of the world 20 per cent.
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