In their last UK Innovation Update – Q1 2024HSBC Innovation Banking and Dealroom have revealed that fintech is back at the top of the UK’s most funded startup sectors.
In 2023, for the first time, the most funded sector was energy. That didn’t last long, as fintech regained its leadership position with $1.4 billion raised in 73 rounds in Q1 2024. Some large late-stage funding rounds contributed to this, such as Monzo (£340 million), Slab (£108m) and PPRO (£73m).
According to the report, cutting-edge technology sectors such as deep tech, semiconductors and quantum computing saw a surge in support, becoming the top recipients of funding in the UK tech landscape during the first quarter of 2024. These sectors attracted substantial investment, with startups often based in science hubs such as Cambridge and Oxford, collectively raising $314.7 million and $300 million respectively.
Stabilization of venture capital investment levels
In the first quarter of 2024, UK startups raised a total of $3.9 billion. There are indications that UK venture capital investment levels have stabilised after experiencing a strong global reset from the second half of 2022.
Source: UK Innovation Update Q1 2024, HSBC Innovation Banking and Dealroom.co
Early-stage investments in the first quarter reached $1 billion, up from the previous two quarters. Series B and C early-stage investments remained constant, while seed-stage funding rounds, which have a significant impact on total figures, remained relatively small but amounted to $1.4 billion. This can be interpreted as a sign of a potential return of mega-rounds (deals of more than $100 million).
Edinburgh, Brighton and Cambridgeshire: UK’s fastest growing hubs by 2024
Although London retains its position as the UK and Europe’s top city for venture capital raised in 2024, funding is increasingly flowing to innovation hubs across the country.
The report highlights that Edinburgh (406%), Brighton (209%) and Cambridgeshire (59%) have seen substantial growth in venture capital investment this year compared to the previous year. This growth can be attributed to significant fundraising by a range of companies. Examples include video game developers Build a Rocket Boy in Edinburgh, drug discovery company Enterprise Therapeutics in Brighton and quantum computing company Quantinuum in Cambridge.
UK continues to dominate European venture capital landscape
Globally, the UK remains the top destination for startup innovation and investment in Europe. In Q1 2024, UK startups raised almost as much capital as their German and French counterparts combined, $2.3 billion versus $1.7 billion respectively. Moreover, the UK maintains its third position globally, ranking only behind the US and China, and surpassing India in terms of total investment.
As the report shows, over half of the venture capital invested in the UK comes from international sources, underlining its status as a leading destination for technology investment globally. The majority of this investment comes from the US, at 39%, slightly ahead of the 36% provided by UK domestic investors. In addition, Europe contributes 12% of funding, closely followed by Asia, at 10%.
“These figures reflect a busy start to the year for the UK innovation ecosystem – from growing investment in established and emerging areas like fintech and quantum computing to the expansion of regional tech hubs across the length and breadth of the country, there is much to celebrate. We remain optimistic and excited about innovation in the UK in 2024 and are committed to supporting and collaborating with innovators, investors and the wider ecosystem.” Simon Bumfrey, Head of Technology and Life Sciences at HSBC Innovation Banking UK