AI is taking up an increasing share of UK venture capital according to new analysis by HSBC Innovation Banking United Kingdom And Trading roomIn the first half of 2024, UK AI startups raised $2.1 billion and are on track to break records this year, with the sector set to raise $4.4 billion by the end of the year.
Since the start of the year, UK AI has surpassed a quarter of a trillion dollars in value and now accounts for 22% of UK tech value, up from 12% in 2019.
The largest AI fundraisings in the UK have been across a range of applications of artificial intelligence, including energy, therapeutics, law and finance. The most notable round was $1.05 billion from autonomous driving startup Wayve.
UK venture capital surges year on year, mega-rounds return
UK startups raised $5.6 billion in Q2 2024, up 37% year-on-year and up 47% from Q1 2024. In H1, UK startups raised $9.4 billion, up from $8.1 billion in H1 2023.
Nearly half of the funds raised this quarter (45%) were raised in mega rounds (valued between $100m and $250m) and mega+ rounds (valued between $250m and above), up from 33% in Q1. This signals the return of mega rounds as a key part of the UK venture capital landscape and underlines the importance of the UK AI ecosystem for innovation and growth investment.
Seed and Series A+ funding rounds remained stable, in line with the previous three quarters.
British universities lead Europe in value added
Outside of London, Cambridge and Oxford startups raised the most venture capital in 2024. The two cities’ universities also ranked 1st and 3rd in Europe in terms of value created by university spin-offs, with Cambridge University ranking 1st and Oxford University ranking 3rd. The UK is the most prolific country in Europe in terms of value creation from university spin-offs, followed by Germany and Switzerland, with 58% of the value created by UK spin-offs in the healthcare sector.
The successes of the startup ecosystem are evident: the UK has now created 176 startups valued at over $1 billion, with five new unicorns added in 2024 to date. It is worth noting that 69 of these unicorns remain unrealized, paving the way for further lucrative exits and listings in the coming years.
UK retains world leading position
The UK has maintained its position as the top destination for startup innovation and investment in Europe. British startups raised more funding than France and Germany combined in the first half of 2024 ($9.4 billion vs. $8.6 billion). Globally, the UK remains in third place, behind the US and China.
Simon Bumfrey, Head of Technology and Life Sciences at HSBC Innovation Banking UK, said: “This data shows that positive investment trends in the UK innovation ecosystem are playing out and early signs of optimism are materialising: investors are becoming increasingly active, unlocking value for innovative UK start-ups, particularly in AI. We look forward to seeing further significant investment in UK AI and beyond from both foreign and domestic investors over the course of the year. We are excited about UK innovation and its central role in the UK economy and remain committed to supporting and working with innovators, investors and the wider ecosystem to drive further growth.”
Peter Kyle MP, Secretary of State for Science, Innovation and Technology, said: “While start-ups like Wayve and Monzo We have managed to maintain growing investment levels despite ongoing uncertainty and stagnant growth, but there is still work to do to create a better environment for our technology sector. Last week, we began that work with changes brought about by the Financial Conduct Authority to make it easier to list in London“This government is committed to using every lever at its disposal to ensure the sector reaches its full potential. That means removing unnecessary regulatory barriers and accelerating innovation to share the benefits of technology more widely and restart the engine of our economy.”