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UK tech investment surpasses £10bn, creates eight ‘unicorns’

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In 2019, UK tech investors created eight tech ‘unicorns’ – companies worth more than $1bn USD – as investment into the tech sector hit new record highs.

Investment in UK tech hit $13.2bn (£10.1bn) last year, with its speed of growth faster than both the US and China and outstripping fundraisers in France and Germany.

This was up by £3.1bn since 2018, with UK companies winning a third of the £30bn raised during the year in Europe, according to new figures, which are the result of research by government-backed network for tech entrepreneurs Tech Nation and business database Dealroom.co for the Digital Economy Council.

Eight new unicorns were created in the UK in 2019 as part of those investments, bringing its total to 77. This is double the total number in Germany (34) and almost four times as many as Israel (20).

These include London ‘FinTech-as-a-service’ platform Rapyd, which last year closed a $100m (£77m) funding round and Cambridge-based medical robotics firm CMR Surgical which announced a £195m (£150m) raise.

Furthermore, the UK’s new unicorns also include London-based AI-powered HealthTech firm Babylon Health, which secured $550m (£423m) last year, and Sumup, a mobile payments firm headquartered in London.

Also taking the moniker are FinTech payments firm Checkout.com, which raised a record $230m (£178m) in May 2019, alongside Acuris, Trainline and OVO Energy.

“Our tech companies are not only commanding the confidence of global investors but they are also creating new jobs and wealth across the country,” said digital secretary Nicky Morgan. “It’s absolutely vital we maintain this impressive success and in Government, we are working tirelessly to make sure the conditions are right.”

The analysis also found that venture capital (VC) funders – which invest at some of the earliest stages in a company’s life – increased by 44 per cent as investors hope to uncover the next Deliveroo or Monzo.

Venture capital firms (VCs) were particularly engaged with the sector, with investment increasing more than 40 per cent for the third year in a row. This compares to investments in France, which grew by a little over a third compared to 2018, while Israel’s investments rose by a fifth.

On a global scale, the UK’s performance in 2019 means it now sits behind only the US and China in relation to total venture capital funding received in the year.

Meanwhile, on a city-level, London joins San Francisco’s Bay Area, Beijing and New York at the top of the world’s most-funded locations, with companies headquartered in London raising £7.4bn during 2019.

“Our city is the undisputed tech capital of Europe and the record $9.7bn (£7.5bn) investment in this sector clearly shows London open to talent and investment from all over the world,” said Sadiq Khan, the Mayor of London. “London’s successful digital economy is not only an important source of jobs for Londoners but is also bringing prosperity and growth to the rest of the UK.”

Money is also pouring into other regions, with Cambridge, Bristol, Oxford, Manchester and Edinburgh all ranked as top investment locations. Furthermore, almost half of all UK investments in the tech sector came from US and Asian investors.

David Richards, founder and chief executive at WANdisco, based in San Francisco and Sheffield, said: “With 2019's new unicorn businesses being based in tech hubs like Bristol, Oxford, Cambridge and Leeds, it’s positive to see that tech sector growth is creating highly skilled and well-paid jobs right across the UK.”

This year, investors and analysts are hoping for an equally successful year in UK tech, with investment expected to focus particularly on green technology.

“In 2020, we think particular sectors will continue to outperform in terms of attracting capital, including fintech and AI,” said Suranga Chandratillake, a general partner at venture capital investor Balderton Capital.

He advised: “To make sure the UK tech sector continues to meet high expectations, we need to make sure it is properly representative of all parts of society and work continuously to ensure no one is excluded from the opportunities the sector can provide.”

According to tech start-up founders blog RocketSpace, there are four steps to becoming a tech start-up unicorn.

Firstly, a person must investigate how household names such as Uber and Airbnb have achieved rapid growth by analysing their target audiences, identifying a problem and deploying a rapid solution. Once you have your radical vision in place and a profit-driven business model, figure out what it takes to hit key benchmarks for success.

Secondly, aspiring unicorns must build the right products or services, which must also be highly desired by a huge market segment. According to CB Insights, 42 per cent of start-ups fail because there was “no market need”. Therefore, unicorns should test their assumptions, target large market segments and look for indicators of success.

Thirdly, dreamers must secure the right investments and focus on “power users”, track financial metrics, and provide documentation that proves they have what it takes to replicate previous results on a larger scale.

Finally, as an aspiring unicorn's team grows, it’s important to scale within a space designed to help tech start-ups scale. According to RocketSpace, a large part of becoming a unicorn is related to knowing the right people and also finding a tech-centric co-working space that will help save money, stay plugged in and scale faster.

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