UK tech companies see sharp increase in VC funding during 2015

London & Partners (L&P), the official promotional company for London, said data compiled by investment data analysts CB Insights revealed that UK technology companies raised more than £2.46 billion in 2015, up from £1.43bn in 2014.

Expert in corporate financing arrangements in the technology sector Thilo Schneider of Pinsent Masons, the law firm behind Out-Law.com, said the figures reflect a "continuation of a trend" over the past few years which has been the growth of VC funding in the UK technology sector.

"The upwards trend in VC tech funding in the UK, and London in particular, reflects the fact that there are good quality technology companies in the market that are maturing and offer VC funders some exciting to get behind," Schneider said. "The growth also indicates that VC funders have been able to achieve returns on their investment in the UK tech market and have an appetite to replicate that successful business model with other businesses in the sector."

According to the CB Insights and L&P data, technology companies based in London alone raised £1.56bn in VC funding in 2015. This compared to the £0.89bn London-based tech businesses raised the previous year. L&P said that nearly 25% of the total VC funding that London-based technology companies raised in 2015 was raised by financial technology businesses, including the £102m, £72m, £40m and £68m raised by Funding Circle, Zopa, TransferWise and WorldRemit respectively.

Mayor of London Boris Johnson said: "With a flourishing tech scene and one of the world’s leading financial centres, it is no surprise to see that London’s tech companies are attracting record levels of investment. Our world-class talent pool and our culture of innovation and entrepreneurial spirit are helping the sector to grow from strength to strength. We can expect the capital’s tech sector to continue to generate jobs and growth for the city’s economy for many years to come.”  

L&P said that half of all VC funders of London-based technology companies are based in the UK but that the businesses are also attracting VC investment from the US, with 29% of all VC deals London-based technology companies benefited from last year "originating from US venture capital investors".

“Project Innovate has given a number of fintech businesses a good start by helping them to overcome the sometimes insurmountable challenge of determining which approvals and licences are necessary to conduct businesses within the sector," financial services and technology law expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com, said. "However the challenge going forward for many will be dealing with increasing and evolving regulatory requirements without investing at the levels undertaken by larger institutions."

"The FCA’s investigation of the future role of ‘regtech’ is an important development in this regard and gives fintech businesses an opportunity to propose solutions as to how regulatory compliance can be better aligned to the objectives of promoting competition, innovation and consumer benefit," he said.