Investment and funding in technology in London


London has developed a reputation in recent years as the ideal place for a tech startup to base itself.

There are a whole host of initiatives that have helped East London Tech City to grow into a premier hub for the sector, with the knock-on effect being that many now view London as the perfect place for Iot startups.

And venture capitalists are sitting up and taking notice of the city’s potential, as some $682 million (£459 million) was attracted in venture capital funding during the first three months of 2015. This represents a 66 percent year-on-year increase and equates to more than was invested during the whole of 2012.

This is evidence of the investment opportunities that currently exist in the city, and its status as one of the top tech corridors is only going to grow in the coming years. London has also been ranked second worldwide for supporting innovation and entrepreneurship, which underlines just how committed the city is to becoming the world’s leading tech hub.

Here are three investment channels helping to shape the future of digital in London.

Tech City UK

Founded five years ago with government support, Tech City has been a huge success story. According to research by Oxford Economics, digital technology companies are expected to create more than £12 billion of economic activity over the next ten years. The pace of growth has also been hugely impressive, as there was a 92 per cent increase in new digital companies incorporated in Inner London between 2010-13. All of this points to a very healthy future for the sector.

London has also been able to establish itself as the FinTech capital of the world, with 44,000 people employed in the sector, which just puts it ahead of New York. This is an area that will grow even more in the future. For example, Azimo, Funding Circle, WorldRemit and Currency Cloud managed to raise $472million between them this year.

London Co-Investment Fund

Launched at the end of 2014, this £85 million fund has been set up by the London Enterprise Panel and seeks to address current SME finance gaps. It is being supported by £25 million from the Mayor of London’s office and up to £60 million from six private sector partners. The scheme plans to invest in 150 small businesses over the next three years, spurring the creation of up to 2,600 new jobs in the process.

When announcing the development last year, Boris Johnson said that the city is flourishing and is now “a hotbed of talented young and ambitious people buzzing with exciting ideas”. There will be a series of seed rounds between £250,000 and £1 million, and these will be led in turn by one of the chosen co-investment partners. “This … fund will ensure the tech-giants of the future can get the support they need to bring their ideas to reality and deliver jobs and growth for the capital,” Mr Johnson added.

“As demonstrated by the level of interest from private sector investors, we believe we have a fund that can incentivise the private sector to invest and support the establishment of new players in the early stage investment ecosystem,” said Maggie Rodriguez-Piza, co-founder and manager of the London Co-investment Fund. “Our model means [the fund] will be investing in some of the best London-based startups.”

Venture capital

London is attracting 80 per cent of the total venture capital funding and 70 per cent of all deals in the UK, according to figures from London & Partners. Tech companies have been particularly successful in attracting finance in recent months, as angel investors recognise the potential of this sector to explode.

Frans van Eersel, CEO of DoPay – a company that has raised $2.4 million in two separate deals – recognises just how important it is to have financial support. “Access to this kind of early-stage funding is crucial for companies like us. The money will allow us to push ahead with our growth across Egypt and expand into new markets across West Africa,” he added.

The recent London Technology Week 2015 also highlighted the strength of the sector, with more than 43,000 people attending over 220 events. Delegations came from a number of key markets, including Brazil, Korea, China, USA and Malaysia.