Tech Startups in London Shattered Records in 2021

by - January 18, 2022

Tech Startups doubled their VC funding, exit valuations blew the roof off & Silicon Roundabout was flattened by a Unicorn stampede.

A London Unicorn

By any measure, 2021 was a bonkers year for the United Kingdom. London in particular saw countless records smashed: Covid-19 cases hit 1.75m, average house prices exceeded £500k, & Downing Street hosted an unprecedented number of lockdown parties work events.

Most impressively though, London’s tech start-up community chalked up some serious figures last year.

London Tech Startups: a 2021 funding roundup

An article (paywall) published by the Financial Times last week revealed that in 2021, London based tech startups raised a record $25.5bn in Venture Capital funding. With all the zeros, that’s $25,500,000,000.00, or enough money to purchase:

  • 1.4% of London’s housing stock without speaking to a mortgage advisor
  • 243 million suitcases of wine for your next Westminster bash

What makes this feat so staggering is that last year’s wave of investment into the city represents 230% of 2020’s figure, a comparatively paltry $11.1bn.

Notable industries

Unpacking the FT’s figures from a Jan ’22 Report by Dealroom / London & Partners, helps to provide clarity around the industry sectors that benefited most in 2021:

Unsurprisingly, in one of the world’s leading financial centres, London’s fintech startups reaped the largest rewards, raising $11.7bn. This figure was nearly half of all VC funding in the capital & greater than its 2020 total.

London Healthtech startups raised $1.6bn, boosted by the unrelenting pandemic that has demonstrated a need for technical advancement in the healthcare space.

Telecoms & Enterprise Software startups also saw increased investor interest as a result of Covid-19. With many businesses left exposed by lengthy lockdowns that have kept staff at home, investors are looking to tech startups to improve how organisations work & communicate. In 2021, London’s telecoms sector saw the biggest growth in funding, with VC investment rising tenfold from 2020 to $2.6bn.

Though the Dealroom / London & Partners report doesn’t categorise the issue, climate change also made the agenda for many investors. Our own research at Sales for Startups finds that tech startups addressing environmental concerns accounted for up to 7% of London’s successful VC raises in 2021.

The rest of the UK

While success was felt across the rest of the United Kingdom,  London based startups commanded the greatest share of investment.  The city accounted for 64% of the UK’s total Venture Capital funding, which clocked in at a cool $39.9bn.

How investment in London’s tech startups compared with other cities globally

Once you’ve wrapped your head around those numbers, consider the following. Globally in 2021, an unprecedented $675bn was poured into the coffers of tech startups. So while founders are deservedly high fiving each other in boardrooms across London, the capital that they raised last year, accounts for only 3.7% of total VC funding around the world.

Almost half of this VC investment, $328.8bn in total, went to US based companies. This could hardly be considered surprising given the high concentration of tech startups in hubs like San Francisco, New York & Boston. In 2021, these three cities took the podium for Venture Capital investment.

Tech Startup Funding by City in 2021

Source: Dealroom / London & Partners

However, for VC firms looking to invest outside of the States, London appeared to be the first port of call. The capital convincingly took the top spot for the rest of the world, ahead of its Asian & European peers.

How London’s tech startups stacked up in Europe

Europe’s tech startup community thrived in 2021, benefiting from more than $115bn in venture capital investment.

Despite the United Kingdom’s Brexit woes continuing for the foreseeable,  London’s success in 2021 saw the country retain poll position in Europe. In fact, investment into UK tech startups exceeded the combined totals (by a hefty $7bn) of its closest competitors Germany & France. who reported $19.9bn & $12.9bn respectively.

Tech Startup Funding by Country in 2021

Source: Dealroom / London & Partners

Founders in the UK will be buoyed by this seal of approval from VCs both home & abroad (40% of funding was raised from US firms). While a weak pound has made investing in Britain more attractive, it’s clear that investors believe that the country’s startups have plenty to offer long term.

Unicorns & Exit Doors: tech startups that made it big in 2021

2021 set new records for growth in the City, which saw the combined value of tech startups jump 70% to $509bn.

Unicorns

Depop: 1 of 20 London based tech startups that reached Unicorn status

If the seven Unicorns (startups with >$bn valuation) produced by London in 2020 were enough to open a stud farm for mythical beasts, then 2021’s crop presents a serious danger of overpopulation. It surely can’t be long until someone loses an eye on the Old Street Station escalators.

Ridiculous metaphors aside, twenty London based tech startups reached Unicorn status in 2021. Among them were:

  • Gen Z’s favourite fashion marketplace: Depop
  • Digital challenger bank: Starling Bank
  • Used car marketplace: Motorway

Exit Doors

At this point I’m struggling for an analogy to convey the value realised by London based tech startups that exited in 2021, so I’ll spell it out in plain English:

Eighty eight billion dollars.

To provide some perspective, the $88bn of exits made via IPO, SPAC or acquisition in 2021 is twenty two times greater than the $4bn realised in 2020. Last year’s figure also completely trounces combined total exit values over the previous five years which stack up to a comparatively modest $28bn.

Among the most recognisable names exiting in 2021 were:

  • Deliveroo (I’d like to credit at least part of its $7.6bn IPO valuation with my Saturday night eating habits)
  • Mimecast (5.8bn buyout)

The wider financial context

2021’s unparalleled interest in tech startups occurred against a backdrop of surging prices across a variety of asset classes. Naturally, most of the financial media has focused on the bullish performance of publicly traded companies in 2021.

  • In the USA the S&P 500 made solid gains, up 27% & largely driven by a rally of tech stocks
      • Most notably, the value of Google’s parent company, Alphabet rose 65% last year
  • London’s FTSE 100 reported its best performance in five years, up 14%

However, on the back of three years of outstanding results, many experts are speculating that bubbles may burst in 2022.

By betting big on tech startups, VCs demonstrated that the smart money is on the newcomers driving the digital transformation behind market success.  As the world becomes increasingly unpredictable, it seems that many investors are realising that big business can’t save us all.

Sharing in the success

  • If you’re a tech startup founder & would like advice on how to get more out of your next funding round, why not Book A Call with us?
  • You can also find articles, webinars & other useful resources about how to grow your tech startup on the Sales for Startups Insights Page
  • On 28th Jan, we’re hosting a Founder Fireside Chat with guest Kim Atherton, Co-founder & CEO of just3things
      • Sign up to hear what Kim has to say about planning for growth alongside our CEO, James Ker-Reid
  • Looking for a place to collaborate, network, share ideas & access exclusive resources? Apply to join our new community: The Founders Collective on LinkedIn


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