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US and Asian Investment in UK Tech Skyrockets

The UK tech sector has attracted more foreign investment in the first seven months of 2019 than it did during the whole of last year, according to latest industry figures, and has overtaken the US for foreign investment, per capita. 

Research prepared for the Digital Economy Council by Tech Nation and Dealroom.co shows that between January and July this year, UK-based tech firms received a staggering $6.7 billion in funding – with $3.7 billion, or 55%, coming from American and Asian investors thanks to billion dollar tech companies such as energy supplier OVO Energy and food delivery startup Deliveroo. 

The sector is attracting an average of $1bn a month from both foreign and domestic investors – one and a half times the amount raised during the same period last year – making the UK one of the most attractive and dynamic markets in Europe. 

$6.7 billion has been invested in UK tech companies in the first seven months of 2019

What’s more, during the second quarter of 2019, investments in UK tech smashed previous records by more than a billion dollars putting the sector on track for its best year to date. If this trajectory continues, the UK sector is on course to exceed $11bn worth of investment before the end of the year. By comparison, UK tech firms raised a total of $8.7bn from January to December 2018. 

Overseas Investment

These record-breaking figures have undoubtedly been boosted by an extremely keen interest in UK tech by investors in the US and Asia. 

Twice the value of US and Asian investments have been made into the UK tech scene since 2013 compared to those made in Germany, and six times as many as those in France. The total amount of investment in the UK from these sources has surpassed $3.7bn in the first seven months of 2019. 

UK tech has now overtaken the US for foreign investment, per capita 

With the exception of Germany, this surge in foreign investments from US and Asian investors is higher than the amount received by the whole of the rest of Europe. Since 2013, this takes the total amount of money put into the sector by US and Asian investors to $14.6 billion compared to a respective $6.5bn and $2.5bn into Germany and France. 

In fact, the UK is attracting more non-domestic capital, per capita, than the US, and is on China’s heels in terms of total non-domestic capital. 

Investments from US corporates have risen by 3 percentage points in the past six years, while Asian Venture Capital investment, alongside Asian corporate funding which didn’t exist as a funding source in the UK in 2013 has jumped to 6% and more than 20% respectively. The latter having surged significantly in the past two years. The majority of funding across all rounds still comes via venture capital. 

The biggest drivers of this investment include fintech Checkout.com, which received $230m from Insight Partners; supply chain finance firm Greensill, having received $800m from Japan’s Softbank; London-born Deliveroo which recently achieved $575m Series G funding from the likes of Amazon and Fidelity; and Bristol-based OVO Energy, the recipient of $220m via Tokyo’s Mitsubishi Corporation. 

The sector is averaging $1bn a month from both foreign and domestic investors 

Closer to home

Although the majority of recent money has come from foreign investors, since 2018 37% of investments in UK tech have come from domestic sources. Only France and Netherlands exceed the amount of homegrown funding. 

That said, the UK attracts a much broader mix of investors than its neighbours. Over the past six years, at least a third (32%) of capital has come from either the US, Japan or the rest of the world, with the rest attributable to local or European sources. In comparison, France receives the least amount of foreign investment across the continent, followed by Germany. 

Having a steady mix of funding sources proves the market is not only attractive to a wide range of investors and investment types, it offers stability. This, coupled with the recent surge in global investment, paints a positive future for the sector as a whole. 

High-Value Deals

The surge is in part due to the rising number of high-value deals. During the second quarter of 2019 more than $1.9 billion came via deals involving investments of $100 million or more.

Across the country, the number of global investors increases the higher the round size, with the data showing that the percentage of deals involving at least one foreign investor peaks when the value of an investment totals $50 million or more. 

An incredible 92% of deals of this round size in London involved a foreign investor. But this is not exclusive to the capital, in fact, quite the opposite. High-value deals made outside of London, like that of Bristol’s OVO Energy, also had high levels of foreign investment.

Paying it forward

Beyond the amount of cash flow such investments can put into the wider economy, the rising interest in UK tech is having a significant impact on the creation of jobs, particularly high-paying jobs, in the sector. 

The top 30 foreign-funded companies have created more than 5,000 UK jobs 

As an analysis of the data reveals, the top 30 companies that have received the most foreign investment in the past three years – including StarlingBank, Skyscanner, Darktrace, Checkout.com – have collectively created more than 5,000 new positions.

In 2016, a total of 10,100 people were employed by these leading UK tech firms. By 2018, this had risen to 13,600 and in 2019 to date, this figure sits at 14,900 and rising. 

When looking at the sector as a whole, recent research from Tech Nation found that in at least five UK cities, one in ten of the workforce is now involved in digital tech and a total of 2.1 million people work in the industry across the UK.

Digital tech roles offer salaries on average 10% higher than in other industries, and it’s not just tech jobs that are opening. A total of 230,000 non-tech jobs, including roles in HR, marketing, communications and more, were advertised in the tech sector in 2018.

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