London’s technology sector attracted more venture capital (VC) financing during the first three months of 2015 than in any previous quarter.
Research compiled by London & Partners shows that tech businesses operating in the city secured over $682 million (£436 million) in Q1, which represents a year-on-year increase of 66 per cent.
It also beats the previous record of $411.6 million, which was achieved in the final three months of 2014, and further demonstrates how London is the perfect place for IoT startups to locate.
The city dominates the tech market in the UK, as the amount raised actually accounts for 80 per cent of the finance committed to projects in the quarter. Some of the biggest investments were made by Silicon Valley firm Andreessen Horowitz, which gave $58 million to online payments company TransferWise and made $20 million available for virtual worlds creator Improbable.
Eileen Burbidge, partner at Passion Capital and the Mayor of London’s tech ambassador for the city, labelled the first three months of 2015 as the “most exciting yet in London’s tech development”.
“We have seen companies based in the capital attract substantial new investments from some of the world’s most tech-savvy and influential investors. London is one of the most electrifying tech hubs in the world, with companies and investors all brought here by the city’s ideas and entrepreneurial spirit, as well as its talent and access to markets,” she added.
Taking London global
The figures demonstrate how London is able to compete on a global scale when it comes to technology startups, with initiatives such as Tech City giving companies confidence that there will be a long-term commitment to growing this industry.
Sherry Coutu, a well-known angel investor and entrepreneur, believes London has now proved itself on the world stage by turning out some “exceptional companies” that have quickly become “significant players on the international stage”.
“Global investors are increasingly tapping into this ability, providing the funding and access to export markets that companies need to ‘scale up’. This is powering the UK’s entire economy through creating growth and new jobs both in London and beyond,” she stated.
The rise of FinTech
A large part of the growth of the sector has been through financial technology – or FinTech – with companies including Funding Circle, Azimo, WorldRemit and Currency Cloud all receiving VC investment. Indeed, FinTech companies have been given $472 million during H1 2015, and this is equivalent to 40 per cent of the total amount raised in London.
The largest deal of the year so far has been the $150 million provided to Funding Circle – a peer-to-peer lender – and the company is now valued at more than $1 billion.
CEO and co-founder Samir Desai believes that London is a “fantastic place” to grow a FinTech company, with Funding Circle able to establish itself as the fifth largest net lender to small businesses in only five years. “The money we raised … will allow us to go on to create a sustainable, category-defining business in a multi-billion dollar global market,” he added.
A tech startup’s ideal location
Gordon Innes, CEO of London & Partners, is very clear about the role of London in the tech startup world, as he thinks it is “rapidly becoming the most exciting city in the world” for the sector.
Aside from the near constant stream of highly-skilled entrepreneurs looking to bring their innovative ideas to market, there has also been a significant increase in the number of tech companies “of genuine scale which are drawing serious money into the sector”.
An example of the scale of the progress since the launch of the Tech City initiative is the fact VC investment into London’s tech sector is now more than ten times greater than in 2010 – marking the tech sector out as the fastest growing element of the economy at present.
CEO of Tech City UK Gerard Grech is also very happy with the progress being made by the sector, as he believes 2015 will be a record year in terms of investment as the UK “earns its position as a global tech leader”.
“The increase in VC investment into London in the first quarter of 2015 comes as no surprise. With 44,000 working in the FinTech space alone and record levels of investment in 2014, the capital is the engine of the ‘tech nation’,” he said.