This article constitutes the final part of our three part series on venture funding in the UK’s golden triangle. This series was inspired a report we co-produced with the technology law firm Pennington Manches, which revealed that levels of investment reaching the UK from the Silicon Valley has increased massively this decade, and that the majority of this has gone to companies based in the Golden Triangle (London, Cambridge, and Oxford). So far we’ve looked at the technology scenes of the Silicon Fen (Cambridge) and the Silicon Spires (Oxford). In this final piece, we look at venture funding in the Silicon Roundabout – London.
Note: since our last post on the Golden Triangle, we have acquired Spinouts UK, greatly increasing our depth of data on British university spinouts. As such, our investment figures have been revised somewhat.
However, as with the rest of the economy, one cannot ignore London’s status as the technology heart of the UK. Out of the city’s 7,500 active high-growth businesses, around 3,500 operate in the technology sector. (For more information on how we classify high-growth, click here). Cambridge boasts 214 high-growth tech companies; Oxford just 117.
Of these technology companies, nearly 3,000 develop some form of software as part of their product offering. Just 125 operate in the life science sector. If software is eating the world, it has already eaten London.
Top Local Authorities by software equity finance deals, 2017 – 2018
As these figures show, Central and East Central London postcodes remain the leading destination for equity finance in the UK’s technology sector. There is a clear leap between London’s leading five boroughs (City of London, Westminster, Hackney, Camden and Islington) and the next best. However, Lambeth, Southwark and Tower Hamlets have also seen a significant amount of tech equity deals in this time period. As such, they form a sort of middle-tier between the more central tech hubs and the less tech-y outer boroughs. It would seem that software startups are starting to permeate south of the Thames.
London’s top funds* by software equity finance deals, 2017 – 2018**
*this graphic displays the top funds, not fund managers. This distinction is important. For example, Parkwalk Advisors manage a range of funds, like their University of Oxford Innovation Fund, or their University of Bristol Innovation Fund. However, our ranking would count these funds separately, rather than tallying them together.
**Excluding crowdfunding platforms.
Since the start of 2017, LocalGlobe has been the most prolific funder in London’s software sectors. Interestingly, a government fund, the London Co-Investment Fund (an LEP), has also been one of the most active funders, showing these organisations are playing prominent funding roles even in London, a global financial centre.
Spinouts of the Silicon Roundabout
There are currently 130 currently active or exited technology spinouts from London universities which still reside in the city. However, spinouts from universities outside London have since moved to London, and vice versa. 184 of the spinouts from London that have left the city are still active, or have managed to complete an exit.
It’s interesting to compare these figures with those of Oxbridge. Cambridge is currently home to 77 spinouts from its university, whilst for Oxford this figure is 98. On a per capita basis, Oxbridge is home to many more spinouts than you would expect when compared with London.
In 2017, London spinouts raised a collective £440m, whilst in 2018 they raised £320m. The most active fund behind these companies over the 2011 – 2018 period was Touchstone Innovations, formerly known as Imperial Innovations, which was set up to help commercialise IP from Imperial College and UCL. Touchstone has since been acquired by the IP Group, in a hostile takeover.
Differences within the Golden Triangle
The distinction between London, Oxford and Cambridge is a large one. Whereas the tech scenes of Oxford and Cambridge focus primarily on “hard technology”, and the life sciences in particular, London is dominated by software companies. Also, whereas spinouts play an important role in the high-growth economies of Oxbridge, this seems not to be the case for London. Indeed, both Oxford and Cambridge have produced spinout unicorns, such as Oxford Nanopore and Darktrace, which is not the case for London’s universities.