UK tech investment continues to set a blistering pace in 2019, according to reports from Tech Nation.

The UK-based network for technology entrepreneurs published a landmark study in the summer that showed the UK ranks third behind only the US and China for the number of tech ‘unicorns’ created.

These are new tech start-ups that quickly reach a valuation of $1 billion or more – and used to be as rare as their mythical namesake.

However, they are increasingly common, with London ranking second in the world for the total number of fintech unicorns created, 18, and only the Bay Area scoring more.

As of London Tech Week this summer, the UK had a total of 72 unicorn companies, with 13 new ones added to that list over the preceding 12 months.

Over a third of the fastest growing technology firms in Europe are now based in the UK, and its third-place position worldwide is not adjusted for population or GDP compared with the vast resources of the US and China.

More than a fifth of Europe’s unicorn firms are based in London alone, equivalent to 45 firms with a combined value of almost $150 billion.

A European and global leader

The $35 billion invested in venture capital in the UK in the five years from 2013 to 2018 places it “emphatically” ahead of the rest of Europe, according to the report.

In 2019 this total looks to rise considerably, with a record-breaking six-month total of $5 billion of venture capital investment in the first half of the year alone.

Firms tipped for future unicorn status are those with a current value in excess of $250 million; of these there are 75 in the UK, nearly a third of all Europe’s future unicorns.

Since 2012, the UK has created as many unicorn firms as Germany, Israel, Sweden and the Netherlands added together, and that pace is quickening.

Four out of five of Europe’s ‘unicorn hunters’ – venture capital funds with a focus on unicorns – are based in the UK, a sign of the investment appetite for these fast-growing firms.

Responsibility among unicorns

The UK is favoured for its reliable responsibility regulations and for the support it shows to fledgling tech firms as they are getting off the ground and growing quickly in valuation.

According to the OECD, the UK achieves the highest total score for the quality of the country’s regulatory practices.

The Financial Conduct Authority provides initiatives like the FCA ‘regulatory sandbox’ which allows innovative firms to succeed in their early days.

And the Centre for Data Ethics and Innovation helps to increase the benefits derived from new data-enabled technology.

All of this is not just achieved by rearranging the furniture; a combination of private sector and public sector initiatives supported by the government have put £14 billion of capital into delivering on these ambitions.

The goal is to support rapid growth and innovation, but to balance this with the regulatory responsibility and ethics that are needed to ensure that innovation does no harm.

Unicorns are everywhere

The UK’s unicorns are found nationwide, and although London is a clear leader, there are multiple unicorn firms to be found in Bristol, Oxford, Cambridge, Leeds, Manchester and Edinburgh too.

They also span a wide range of different sectors, including industrial, healthcare, retail and financial technology or fintech.

Well over two million people are now employed in the UK tech sector, which is growing nationwide at a rate of over 10% a year.

Tech Nation’s report in the summer listed Belfast, Birmingham, Leeds, Manchester and Reading as all having seen some of the strongest growth in job opportunities in the sector.

Employment is not all directly tech-related – although there are naturally opportunities for skilled individuals in tech roles – but also includes support roles in non-tech disciplines like accounts, legal, marketing and sales.

A focus on AI

One major topic within tech innovation is that of artificial intelligence or AI, seen as a solution to some of the world’s most complicated challenges.

In a separate Tech Nation report, the UK was again ranked third overall in terms of investment raised for AI innovation.

However in terms of the number of AI firms already operating in the first half of 2019, it ranked second – again a sign of the country’s mature and still-growing innovation sectors.

Some of the main challenges being tackled by UK AI innovators include cancer diagnosis, climate change and identifying so-called ‘fake news’ reports.

A record year

Again, the first half of 2019 saw record investment into these AI innovators, with just more than $1 billion of AI investment recorded during the first six months.

This just pipped the 12-month total for 2018 by around $41.5 million, again putting the UK behind only the US and China in terms of gross total investment into AI.

Between 2014 and 2018, total investment into AI grew roughly six-fold, and firms in the UK raised nearly twice as much as their counterparts in the rest of Europe combined.

The UK is also unusual in that its AI sector employment is dominated by start-ups and small firms, accounting for 89% of the sector working for companies with under 50 employees.

By comparison, China’s AI sector consists in the majority of larger firms, with 53% employing more than 50 people.

This represents one of the future challenges for the UK AI sector and particularly for investors in the sector – ensuring that unicorns are not the only activity, but that once established, they are able to continue to grow to become larger, mature companies with a larger workforce.

‘A race to scale’

The figures were published as Tech Nation announced the 29 companies given a place on the first Applied AI growth programme.

Among them, 35% were located outside of London including cities in Scotland and Wales; 45% had at least one female founder or co-founder; and 24% were led by a female CEO.

One such firm is Dream Agility, based in Manchester, whose CEO Elizabeth Clark explained the importance of supporting growing AI innovators and of collaboration between those operating within the sector – arguably one of the strengths of having a larger number of smaller firms in the UK.

She said: “We’re delighted to have made it on to the Applied AI scheme. It’s the first of its kind and to have a peer group of people with their own proprietary AI in such a fast-moving sector is phenomenal.

“There’s a lot to be gained by learning from each other’s successes and failures, as well as being able to leverage each other’s networks. It’s a race to scale, and having a scheme that will support us in doing that is a gift.”

https://technation.io/wp-content/uploads/2019/06/UK%E2%80%99s-digital-tech-sector-has-created-one-tech-%E2%80%98unicorn%E2%80%99-a-month-for-last-year.pdf

https://technation.io/wp-content/uploads/2019/09/UK-ARTIFICIAL-INTELLIGENCE-INVESTMENT-REACHES-RECORD-LEVELS.pdf

Disclaimer: The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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