Investors ploughed a record £2.5bn into UK tech firms last year

London's fintech firms are fuelling the fundraising, but does a bubble loom on the horizon?

by Rebecca Smith
Last Updated: 12 Jan 2016

The interest in British technology firms shows no sign of abating. According to the capital’s promotional company London & Partners, a record $3.65bn (£2.5bn) was invested in private UK tech companies in 2015. 

This marked an increase of over 70% on the $2.1bn raised in 2014 and a 361% jump from five years ago. Since 2010, UK tech firms have collectively raised nearly $10bn ($9.7bn) and unsurprisingly, London-based firms made up more than half of the total ($5.2bn).

Eileen Burbidge, partner at Passion Capital and Mayor of London tech ambassador, said, ‘Today’s record investment figures offer further proof that the UK’s tech sector continues to mature. Investors are increasingly attracted by the diversity of London’s tech ecosystem but also our strengths in certain sectors such as fintech.’

Fintech (financial technology) firms made up half of the ten largest deals in 2015 – the largest single venture deal involved peer-to-peer lender Funding Circle, which secured $150m and tipped its valuation to $1bn, granting it 'unicorn' status. Zopa, TransferWise, World Remit, Currency Cloud and Azimo were among the other companies to secure successful fundraising efforts.

However, such a steep rise also comes with its worries. Damien Lane, a private equity veteran and partner at Episode 1, an early-stage investor, told The Times that there was a risk of ‘too much money chasing too few assets’. He said that while it wasn’t yet ‘a fully fledged bubble’ the outlook indicated we could be ‘heading that way’.

‘We are cautious about the market and the valuations that we are seeing other investors accept,’ he added, though noted it wasn’t at the point of a ‘feeding frenzy’ like 2007’s private equity bubble.

Then of course, there’s the ongoing scrap over tech talent. Greater investment particularly in London, will likely cause more tension as firms fight for resources. Looking for affordable working space in the capital is a challenge in itself – London attracting more and more investment won't do much in the way of easing that. 

The capital’s businesses collecting over 60% of all funding into the UK’s tech sector also raises questions as to whether regional disparities will keep on widening, rather than being closed at all. Improved innovation resulting in impressive investment is an undeniable positive, but at what expense?

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