United Kingdom

London #2

London has an established position at the cutting edge of tech. Previously in Fintech, but now also AI and Healthtech. It’s critical we leverage this advantage — attract the best talent and build a supportive ecosystem.

Suranga Chandratillake
Partner at Balderton Capital
#2 Global Ecosystem: Funding
Top 5 Global Ecosystem: Talent & Experience
Top 10 Global Ecosystem: Performance

Highlights

London remains a tech powerhouse, with local startups in the British capital valued at an astronomical $47 billion, but the ecosystem faced considerable headwinds this year. In addition to the global disruption caused by the pandemic, the finalization of Britain’s protracted and messy breakup from the EU left many commentators wondering whether London would retain its spot near the top of startup ecosystem rankings. So far, signs are good. VC investment into Britain is the third highest in the world, after the United States and China, and hit a record high of $15 billion in 2020. Despite the uncertainty surrounding Brexit, 63% of that funding came from overseas last year, up from 50% in 2016. Previous to Brexit, London excelled at attracting overseas talent, which led to concerns about the impact of the end of freedom of movement for Europeans. However, Britain boasts plenty of homegrown tech talent, and ecosystem insiders note that the end of the drawn-out Brexit process at least brings clarity, allowing startups to plan. Britain’s new freedom to craft it’s own regulatory regime could potentially offer benefits to the ecosystem as well. Finally, the City of London continues in its status as a global financial hub, suggesting the greater ecosystem will retain its dominance in the Fintech sector. Edtech is a growing sub-sector in London as well. The bottom line is that the gloomiest predictions regarding the impact of Brexit on Britain’s biggest startup ecosystem don’t seem set to have come to pass, though London startups have faced a year of adjustment and recalibration.

Ecosystem by the numbers

TOTAL EARLY STAGE FUNDING
$8.5 bn
GLOBAL AVG.
$548 m
ECOSYSTEM VALUE
$142 bn
GLOBAL AVG.
$13.68 bn
MEDIAN SEED ROUND
$653 k
GLOBAL AVG.
$480 k
MEDIAN SERIES A ROUND
$4 m
GLOBAL AVG.
$3 m
SOFT. ENGINEER SALARY
$76 k
GLOBAL AVG.
$44 k

Sub-sector Strengths

Fintech

Thanks to its status as a pre-eminent global financial hub, London hosts 2,183 fintech companies, more than New York or San Francisco. Those fintech companies raised more than £2.7 billion in investment last year, with an average early-stage investment of $486,000 per startup, compared to a global average of $286,000. Local success story Transferwise (now known as Wise) was founded in 2011. As of July 2020 it was valued at $5 billion, on par with Europe’s biggest fintech companies, including Revolut and Klarna.

Edtech

London’s Edtech ecosystem is one of the largest in Europe with an estimated value of US$3.4 billion, and London is the one European city to feature in Dealroom’s global Edtech top 10 by investment. Edtech VC firm Brighteye Ventures closed its second $54 million fund last year, bringing assets under management to more than US$112m, while Edtech startup Kano secured US$15.46 million in funding in March 2021.

Reasons to move your startup to London

Talent availability

Thanks to its proximity to world-class universities and educated, cosmopolitan workforce, London is a leading global talent hub. Of the world’s top ten universities, four are located close to the city, and 54 percent of residents have a tertiary degree. According to Accenture’s UK Tech Talent Tracker Report, there are 422,000 data analytics, artificial intelligence, blockchain, extended reality, and quantum computing professionals in the UK. About 37 percent of them are located in London.

Tax incentives

While there is no difference between taxes paid by early-stage and established businesses in the UK, there are various dedications startups can use to reduce their tax bills. England also offers 24 Enterprise Zones, including the Royal Docks in southeast London, in which businesses are 100% tax exempt for their first five years (for a maximum discount of £275,000). Other schemes reduce tax on income from the development of patents and intellectual property and on UK taxpayers who invest in startups.

Startup Community

Startup Genome
Partners

Tech Nation (formerly Tech City UK)
Accelerator Network
Balderton Capital
City of London
GEN
GSMA
KPMG
Level39
MassChallenge
Microsoft Ventures
Microsoft for Startups
Northzone
Tech London Advocates
TechUK
Techstars London
Wayra London

Get connected

Are you interested in diving deeper into this ecosystem? Drop us a message. Our Ambassadors and Partners can plug you in.