Tech Nation Report 2021: The future UK tech built
We’re very pleased to once again partner with Tech Nation on their annual Tech Nation Report, the state of the nation of UK tech.
In its 7th year, the report lifts the lid on UK tech in 2020, revealing the top performers, and the challenges and opportunities the UK faces as it navigates out of the pandemic and leaving the EU, powered by Dealroom data.
- Report reveals who the UK’s 10 superstar scaleups were, driving a fifth ($3.5bn) of UK tech VC investment between them
- UK benchmarked against European tech hubs, Germany and France in terms of investment
- Despite the positive picture, still major challenges ahead as we navigate out of Covid-19: UK is trailing on R&D, with some overseas private companies investing more in R&D than the whole of the UK
Prime Minister, Boris Johnson said: “The UK is maintaining its lead as one of the world’s premier centres for tech of all kinds. While the real credit lies, as ever, with the engineers and designers toiling away at laptops across the country, I’m immensely proud to lead a government that is so comprehensively committed to supporting the sector. We’re continuing to invest in your success, and I hope that the winning combination of UK tech and this government will lead us to yet another record-breaking year in 2021.”
Scaleup stars of 2020
In 2020, the UK tech scaleup ecosystem continued its strong growth. Valued at $585bn, startups and scaleups have more than doubled (120%) their collective value since 2017.
Driving UK tech into new heights in 2020 were 10 superstar scaleups, which between them secured 20% of total UK tech VC investment, at $3.5bn.
See biggest UK rounds of 2020
Fintech challenger, Revolut, and insurance platform, Ki, helped to cement the UK’s position globally for fintech and insurtech. Revolut raised $580 million over the course of 2020, while Ki raised $500 million in its bid to redefine the commercial insurance market.
Arrival, the London-based electric vehicle startup, and green energy provider Octopus Energy, secured the biggest rounds for UK impact startups in 2020 – at $400 million and $577 million (across two rounds) respectively – helping to drive the UK’s contribution to the global Net Zero goals.
Record-breaking tech investment in 2020
There was also a record level of VC investment in 2020 into UK tech companies, despite the backdrop of the global pandemic. Investment reached $15bn, $200M higher than 2019’s record breaking year. Investment gained momentum throughout 2020, reaching a peak in December 2020 at $1.9B. The UK hubs driving investment were London, Oxford, Bristol, Cambridge and Edinburgh.
This places the UK third highest globally, behind the US ($144.3bn) and China ($44.6bn).
Q1 2021 is already an all-time quarterly investment record for the UK. Investment driven by companies including Hopin ($400M), Checkout.com ($450M), Starling Bank ($300M) and Rapyd ($300M) – who have raised megarounds of over $250M.
The next decade
Despite a blockbuster decade of growth in the UK tech, some significant challenges still lie ahead in an increasingly competitive global landscape.
The UK is trailing on R&D, with some private overseas companies investing more in R&D than the UK does as a nation. Data from the ONS finds that UK R&D expenditure (public and private spending) was just under £30bn in 2018, whilst in the same year, the combined R&D expenditure of Amazon and Alphabet (on their own R&D activities) was £33bn. Comparing this on the global stage, total US R&D expenditure in 2018 reached $551bn, while China’s R&D expenditure reached $463bn.
As the potential of technologies like AI, machine learning and quantum computing become fully realised and applied at scale, the UK will have to find ways to ramp up the R&D intensive capabilities it possesses and capitalise on a record year for deep tech VC investment, which increased by 17% to just under $4bn in 2020.
Dealroom founder Yoram Wijngaarde said: “As the most mature tech ecosystem in Europe, the UK is an incredibly important hub of talent, innovation and capital for the whole continent. For the next generation of tech, set to be defined by deep technologies such as AI, quantum, fusion and blockchain, the UK is well positioned to capitalise.
European and UK research universities are genuinely world-leading, and the UK has already produced game-changing university spinouts in Dundee (Exscientia, doing drug discovery with AI), Oxford (Vaccitech, who worked on the Oxford-Astrazeneca Covid vaccine), Cambridge (semiconductor giant ARM) and beyond. Ensuring the right conditions for both deep tech innovation and crucially commercialisation, will be vital for future-proofing jobs and economies. University IP-transfer terms, employee options treatment, R&D investment, startup-corporate partnerships, institutional investment and cross-continental collaboration will all play their part in defining the winners and losers of the next 20 years.”
Digital Secretary Oliver Dowden said: “With record levels of investment secured and UK listings gaining momentum, this report shows Britain’s tech sector continues to go from strength to strength, solidifying our position as one of the world’s top tech hubs.
“We want to bring about a golden age of UK tech through a raft of supportive measures and funding to help businesses thrive. This will help fuel a booming tech sector – creating jobs and improving services so that we can build back better from the pandemic.”
Gerard Grech, founding chief executive, Tech Nation, comments: “This year has highlighted the UK tech sector’s enormous resilience and world-beating innovative spirit. In the face of a major global crisis, it has not only survived; in many areas, it has boomed. From EdTech to HealthTech, tech scaleups are at the centre of rebuilding the British economy and setting new standards worldwide.
“Now the focus turns to the future, as the UK pivots to a wider global role. Developing Britain’s AI-powered deep-tech is especially critical. Much of our future economy will be built on this new technology that leverages machine learning for faster innovation. Bold investment is needed in R&D to boost Britain’s new deep-tech companies and ensure our global competitiveness.”
“These are truly exciting times for UK tech. The successes of the past decade have shown what the UK is capable of when policy foresight, investment and a diverse and ambitious pool of talent come together. By continuing to set our sights high, the next decade promises to be the most innovative yet.”
Johnny Boufarhat, CEO, Hopin, comments: “Hopin was born in 2019 because due to a prolonged illness I experienced the isolation that so many of us sadly became familiar with in 2020. Nobody saw COVID coming, but luckily at Hopin we were already building the best way to create connection and share experiences from afar. Being based in London also helped with that – we’re a fully remote company which enables us to hire the best talent from across Europe and beyond, and also teaches us to build with empathy for all our global customers. It’s harder to have that mindset if you’re based in Silicon Valley.”
Nik Storonsky, CEO and co-founder of Revolut said: “Tech Nation’s annual report highlights the richness of the UK tech landscape and the record investment in the sector. At Revolut, we’re honoured to be successful among such original and entrepreneurial businesses. But all of our successes owe much to the dynamism of the UK tech ecosystem that attracts exceptional talent and patient investment from the UK and around the world.
In this extraordinary year, every business has faced exceptional challenges as we and our customers dealt with the global pandemic. As our customers embraced digital spending and account management, we switched to truly virtual operations, learning as we went and ending the year as a faster and more productive business than we started. We launched Revolut in the US, in Australia and in Japan. We added new products that our 15 million customers use every day. And we accelerated along our path to build a financial superapp that makes our customers’ lives ten times easier as they use Revolut for all things money, from savings to spending, rewards and more.”
Greg Jackson, CEO and founder of Octopus Energy, comments: “We’ve already used technology to drive down costs of energy for customers, and transform service – but tech also holds the key to the biggest challenge.
Through technology we can make green energy cheap energy, globally. Renewables are lower cost than fossil fuels, but we need to digitise electricity systems in every nation to enable citizens to benefit. It’s exciting that London, and the UK, are at the forefront of the entech revolution.
Just like with fintech, British companies are innovating through AI, big data and customer-focused design and creativity and we have the opportunity to make the UK the ‘Silicon Valley of Energy’. We now need to make sure that our home market not only allows early stage innovation, but also provides a path to scale, if the UK is to capitalise on this early success.”
Mark Allan, CEO of Ki and CFO of Brit: “The events of last year demonstrated the importance of technology, not only in overcoming adversity but also in enabling businesses to thrive during change and capitalise on new opportunities. We are living in a digital-led era and it is no surprise to see the pace of development accelerating, creating exciting opportunities for investors. Commercial insurance is an industry that is ripe for innovation and tech-enabled transformation to drive changes in decades-old processes. With Ki, we have embraced a digital and data-led business model to catalyse the adoption of technology in the commercial insurance market.
The response we’ve had to Ki, both from investors and trading partners, is a clear example of this. Our success in partnering with Google and UCL, and attracting investment from Blackstone & Fairfax, has given us the opportunity to launch and scale a truly innovative business. Throughout the process we have focused on the broker and client experience, seeking to transform how business is transacted in Lloyd’s using our digital platform to deliver our mantra of ‘Risk, Simplified’.
We are huge believers in the potential of technology in the UK and our market, Lloyd’s of London, and we are excited that Ki is one of the businesses delivering a digital future in financial services. The UK has all of the right ingredients for innovation to happen, combining talent, access to capital and world-class regulatory frameworks.”
Denis Sverdlov, Founder & CEO, Arrival comments: “In 2015, Arrival saw an opportunity to reimagine the automotive industry by developing a radical new method for the design and production of electric vehicles using Microfactories, enabled by our innovative proprietary technologies in materials, robotics and software. As we start a new chapter as a public company, the UK tech ecosystem will continue to play an important role for our London HQ, Banbury R&D facility and Bicester Microfactory.”
Nigel Toon, Graphcore CEO comments: “The UK is continuing to punch well above its weight in terms of building and growing world-class technology companies, even in the midst of these unusual and uncertain times. We are, of course, delighted that Graphcore is identified as one of the standard bearers for this national success story. Deep tech represents the coming together of so many great British attributes – our reputation for innovation in science and engineering, the excellence of our academic institutions and, most recently, our status as a leading player in the development of artificial intelligence.”
Louise O’Shea, CEO Confused.com & Chair of Fintech Wales & Chair of the Insurtech 2.0 board, comments: “The Tech Nation Report highlights the strength of UK tech, and the tech sector’s resilience over the course of 2020. With Wales’ position as a fintech hub within the UK, we’re able to drive innovation, while creating jobs in the industry. This will only accelerate the opportunity for positive change and help position us as being world leaders in fintech.”
Loral Quinn, CEO and Co-founder, Sustainably, comments: “With investment in impact startups doubling, the challenge now is how the UK can best leverage investment and R&D to be a world leader in disruptive tech, creating positive impact that is effortless, embedded and sustainable. The good news is we have a thriving tech ecosystem, record levels of investment from VCs in 2020 and tech and consumer internet companies increasing their share of capital raised through IPOs. So despite all the challenges, I’m excited about the huge opportunity this represents for global growth of tech for good.
Murray Roos, Group Head of Capital Markets, LSEG: “We welcome Tech Nation’s annual State of the Nation report, which underlines the strength and economic importance of the UK’s tech businesses. The report also highlights the need to ensure that the funding ecosystem in the UK is able to support firms at all stages of development to allow them to continue to innovate, scale, create jobs and drive economic growth.
“As part of this ecosystem, London Stock Exchange is committed to supporting these dynamic companies, enabling access to deep pools of global capital through London’s public markets. It’s particularly pleasing to see tech and consumer internet businesses account for 40% of all London IPO proceeds in 2020.”