The venture capital opportunity for UK investors

Ian Connatty, Managing Director, British Patient Capital

Capital. What has brought London to fame in recent years. In 2019, £6.8bn was invested into the city’s tech companies, with London receiving higher VC investment than Berlin, Munich and Paris combined.¹ Driven by foreign and domestic investors seeking higher returns over the long-term, venture capital is at the bedrock of London’s tech ecosystem, allowing small scale ideas by ambitious entrepreneurs to come to life and grow to leading international businesses.

But while London is attracting record investment year-on-year; its greatest challenge remains winning over UK investors.

Foreign investors have long seen the opportunities. Today, Tech Nation revealed that in 2019 the UK led Europe for VC investment into Net Zero companies, at £336mn in VC investment which is up 28% on the previous year.² At British Patient Capital, we’ve been seeing this on the ground over the last few years, and months.

In July, London-based ETF Partners closed its third Environmental Technologies Fund at £167m. Investing in sustainable companies like TravelTime, enabling cities to pursue innovative urban planning initiatives, the fund is bridging the gap between venture capital and sustainability. Providing the capital for companies creating a sustainable future, they are simultaneously creating value for their investors.

Another area attracting considerable foreign investment is deep tech. From London, to Cambridge, to Leeds, companies like Quantexa are using data, machine learning and artificial intelligence to solve another issue made more prevalent during Covid-19: the cyber threat. The opportunity for investors in deep tech is now so well known that it is no longer considered ‘specialist’ but generalist.

The same could be said for life sciences. Technology’s role in finding, locating, and treating disease has been catapulted into the spotlight this year. This year, London-based SV Health Investors launched a new fund entirely dedicated to biotechnology. It raised $265m and attracted 60% new investors. More and more we’re seeing deep tech and life sciences incorporated into general VC portfolios – a big sign there is opportunity here.

As these examples demonstrate, some of the most exciting developments are happening in private markets.

US and Chinese investors – who have benefited from historic returns in their own markets – have shifted their sights onto the UK and Europe.  Meanwhile, European and UK investors currently lag behind their international counterparts, potentially missing out on available returns. Last year, Atomio’s State of European Tech report revealed that the index for European VC performance is either on par or significantly outperforming indices for both US VC and European Private Equity.

So, as we celebrate another London Tech Week, our ambition for this year is for UK investors to wake up to the opportunities currently in the market. The time is now.

• 1

  https://technation.io/report2020/#11-global-investment-trends

• 2

  https://technation.io/net-zero-report/