UK leads the race in Europe’s record year of tech investment

HRH The Duke of York talking to new startup founders at a recent Wayra Academy day

The UK’s tech industry is leading the way in the creation of billion-dollar businesses despite Brexit fears, according to new research.

In the past year, the UK has added six billion-dollar tech companies worth $12.4bn to its club of 26, more than any other European market, and has produced the highest number of billion-dollar companies in Europe since 2000 – contributing $64bn to Europe’s $240bn ecosystem of billion-dollar tech companies.

New entrants from the UK in the past year include digital banking startup Revolut and robotic process automation software firm Blue Prism.

The report from GP Bullhound, Titans of Tech: European Tech Comes of Age, finds that, of the 50 businesses expected to become Europe’s next billion-dollar businesses, half are in the Enterprise SaaS, Fintech and Transportation industries, while close to two thirds are in the UK, France and Israel.

Fintech continues to be a fertile industry for up and coming start-ups in the UK despite the challenges presented by Brexit. Germany, on the other hand, is leading the way in transportation tech.

Manish Madhvani, Managing Partner at GP Bullhound, commented: “The UK’s tech ecosystem continues to present an attractive proposition to global investors, and British tech companies are driving up the ambition level and paving the way for the rest of Europe. The US and Asia may still dominate the market for billion-dollar tech businesses, but our report indicates a hugely optimistic outlook for the UK’s tech industry over the next decade.”

2017 marks the highest year of tech investment on record for European billion-dollar companies, with $20bn raised within Europe.

The report identifies mega rounds – rounds of $200m or more – as a key factor powering the growth of Europe’s biggest and brightest tech businesses. The number of mega rounds is on the rise in Europe, with 9 tech companies raising mega rounds in 2017 – including British companies Deliveroo, Transferwise, and Improbable – vs only 2 in 2013.

A growing proportion of this funding comes from strategic rather than financial investors. 42% of funding through mega rounds in 2017 and 75% to date this year has come from strategics such as BBVA, Naspers and Softbank, indicating a paradigm shift in the investor landscape as strategics take the place of traditional financial investment firms. Asian investors are most likely to invest, delivering 35% of mega round funding in 2017 and over half of all mega round funding to date this year.

The report indicates that several key players within Europe’s tech ecosystem demonstrate the strength and velocity to reach ‘titan’ status – a valuation of over $50 billion – within the next few years.

Since 2014, 5 ‘decacorns’ – companies worth $10bn or more – have emerged into Europe’s tech scene: Yandex, Zalando, Supercell, MobilEye and Spotify. Of these, Spotify has emerged as the frontrunner to reach the $50bn mark, with a valuation growth of 122 per cent in the last twelve months, thanks to its recent IPO.

The European technology ecosystem is also generating an unprecedented number of billon-dollar businesses, with 14 new billion-dollar businesses emerging in the past year – the total number has more than doubled from 30 in 2014 to 69 today.