The Global Startup Ecosystem Report 2022

London’s Tech Scene: A World-Class Ecosystem Competing on a Global Scale

Tech hubs are springing up around the world, as the sector and demand for talent continue to grow and the way we work evolves into a more seamless hybrid experience. But few cities can claim to feature all the necessary ingredients to become world-class tech hubs.

London is one of the rare few that can. The city’s tech sector continues to go from strength to strength, and London is now one of the top tech hubs in the world. In 2021, the enterprise value of London’s startups, via IPOs or acquisitions, soared to a record-breaking $88 billion.

Although 2021 was an unparalleled year for investment in startups around the world, London stands out. Companies based in London secured £25.5 billion ($33.3 billion) and 20 new unicorns were created here in 2021. Additionally, in March 2022, the UK’s tech scene was valued at $1 trillion, a milestone shared with the U.S. and China.

This growth further consolidates London’s position as a globally mature tech hub with a unique combination of factors that encourage innovation.

Let’s dive into some of the top reasons why London is such an ideal location for companies to scale. These include access to investment, the existing tech ecosystem, a well-established history of innovation, a highly skilled workforce, and a consumer market open to new experiences and technology.

London’s Tech Gold Rush

Access to investment is one of the main drivers behind London’s tech boom. In particular, late-stage investment is on the rise. Megarounds ($100 million+ rounds) are now becoming the norm, with London seeing a threefold growth in 2021. Fintech firm Revolut, clean energy supplier Octopus, and online events platform Hopin have all raised significant funding rounds in the last year.

More and more venture capital firms have opened offices in London to be closer to their UK and EU customer base. U.S.-based Sequoia and Expa are examples of VC firms lured by the city’s potential. Startups benefit from the proximity of a large number of VC funds looking to invest in the next potential unicorn or “futurecorn.”

The London ecosystem also benefits from UK government incentives for tech and the presence of accelerators. One example of a government-led initiative is innovation funding, available for UK-based companies, which provides funding for research, testing, and collaboration with other organizations. Innovate UK awarded grants worth £3.1 billion ($3.9 billion) during 2020-21 and had a 21% award rate during the same year.

In the latest edition of the US News Best Countries index, the UK came in at #8, with particularly strong scores in areas that are relevant to technology and business, including agility, connectivity to the rest of the world, educated population, entrepreneurship, quality of digital infrastructure, and legal framework.

Eileen Burbidge, partner at London VC firm Passion Capital, says “It’s fantastic to see that London tech companies are attracting large volumes of capital across all stages of the funding journey as a sign that our tech ecosystem is truly flourishing and our entrepreneurs are second to none.”

Strength in Fast-Growing Sectors

The city’s strengths as a tech hub make it an ideal place for startups in fast-growing sectors including Fintech, Cleantech, Edtech, and Proptech.

As the impact economy grows, so does the number of impact-focused startups — those with a goal of achieving positive, measurable change on societal and environmental issues. Investment into UK impact startups grew ninefold in the period between 2014 and 2019, with Cleantech and Climatetech firms attracting the most funding.

A Magnet for Skills

Together with the nearby university cities of Oxford and Cambridge, both less than two hours away from the capital, London is part of the so-called Golden Triangle for skilled talent. London is home to four of the world’s top 40 universities and provides unparalleled access to world-class talent and research.

London is also the most attractive city for digital talent. A global survey by Boston Consulting Group shows that London continues to be the first choice for tech workers willing to relocate to a city in a different country. The city’s multiculturalism and diverse knowledge of markets, languages, and cultures are ideal for companies looking to scale globally.

Tech-Savvy, Conscious Consumers & Excellent Market Access

Many of London’s strengths for tech would be of little relevance if not for its tech-savvy and conscious consumer market. London is a testing lab for many innovative ideas and industries, from music and entertainment to fashion and retail. Londoners are open to new experiences and welcome the integration of technology to everyday products and services.

A growing strength on the consumer side is that people in the UK are increasingly conscious about how they spend their money, preferring companies, services and products that are sustainable and ethical. A study by Accenture found that a third of UK adults expect brands to report on the environmental impact of their business.

Additionally, London provides excellent access to global markets. As well as having easy access to UK and European consumers, startups in London can benefit from dedicated support and connections in the city’s cosmopolitan ecosystem when looking to scale to international markets. For example,Tech Nation, a UK growth platform for tech companies and leaders, and Startup Genome undertook an Asia Market Expansion Study.

The data-based analysis of Asian ecosystems was intended to assist UK-based scaleups assessing the best ecosystem for geographic market expansion. It found that Singapore was the most favorable location, thanks to its connectedness and outstanding soft-landing support, and that UK scaleups are also well-positioned to access Seoul, Tokyo, Melbourne, and Sydney.

For Tech Startups and Investors, London Has Much to Offer

London is a global epicenter for tech. Its fast and solid growth in the sector, particularly during the challenging landscape of the COVID-19 pandemic, is a testament to the city’s ability to adapt, innovate, and reinvent. When combined with the amount of excellent talent and strength in fast-growing sectors, London’s tech ecosystem is only set to get better.

The opinions expressed in this sponsored article do not necessarily reflect the views or position of Startup Genome.