The UK is the home of VC in Europe

David Mott

For 25 years, we have been backing founders in the UK. We are proud of this record. Over 100 companies grown, thousands of jobs created, £millions of exports generated and £billions of value created for shareholders.  

We are often asked about our geographic investment focus. The answer is that we focus on UK start-ups. For many institutional investors, this can come across as narrow and they prefer to invest in funds with a pan-European focus. This is entirely sensible, especially when you are deploying large sums of capital into bigger and later stage funds. But our focus is on backing early stage companies and helping them grow over time with capital and support. This is a more local and specialist investment strategy. Innovation is everywhere, and the UK has not monopoly of virtues. But it is a pretty good place to start. 

Looking at the latest data from Dealroom, Beauhurst, BVCA and UK government sources, we shine a light on the UK’s role in the European VC sector: 

1. UK funds dominate VC capital raised in Europe  
   
   Over the past 5 years, UK VC funds raised $42 billion, over 40% of the $104bn raised in the whole of Europe. 

2. VC investment in the UK is greater than France and Germany combined 
   
   $21.3m was invested in the UK in 2023, more than any country in Europe and far ahead of Germany at $9.2bn or France at $8.2bn and the whole of Scandinavia which accounted for $8bn. The UK has dominated the stats for decades but other countries are slowly closing the gap, especially France. 

3. There are 547 active funds VC and PE in the UK 
   
   It is estimated that there were 817 VC funds across Europe in 2021. The legal and regulatory systems in the UK continue to attract VC fund managers to set up their funds in the UK, ahead of other jurisdictions such as Luxembourg or Ireland. The sector has a depth of talent and experience that is unrivalled in Europe.  

4. US funds are opening offices in the UK 
   
   The UK has also become a base for international capital investing across Europe. Many of the top Silicon Valley funds have set up a base in London, including: Sequoia, a16z, Bessemer and Lightspeed. 

5. The UK VC market is resilient 
   
   Total VC investment has dropped since 2021 when markets peaked. But 2023 investment in the UK was $21.3bn and this remains ahead of pre-covid levels and more than double the size of the market in 2017. Further, $25bn has been raised by funds in the past 3 years, meaning that while it is still tough for companies to raise capital, there is a mass of dry powder capital to back the most promising start ups. 

6. UK is the #3 tech ecosystem in the world 
   
   The US and China dwarf all other markets but the UK has remained a large market for VC investment in tech. It ranks ahead of India, Canada, South Korea and Japan, as well as all other European countries. UK start-ups now employ 1.8m people and 90% of companies employ less than 100 staff. Many of these are engaged in high value and emerging sectors such as AI and quantum computing. 

7. There are 168 home grown unicorns valued at over $1bn 
   
   There have been more start up successes in the UK that have achieved unicorn status that anywhere in Europe. Many have become household names and some have listed on the public markets. While this is a success, the British Business Bank’s chairman is calling for the UK not to be an “incubator economy” to the US’s benefit. Many successful exits of VC investments continue to be to US acquirers. Oxford Capital has exited a number of companies to US acquirer, the most recent of which was to  Google ) and it is a fact that US acquirers will often pay the highest prices for UK tech companies. 

8. The ecosystem flywheel is in full motion 
   
   Former employees of the UK’s most successful start-ups are recycling their knowledge, experience and networks to build the next generation of companies. 34 start-ups have been founded by alumni of Revolut, the neobank. And alumni of Edinburgh-based flight booking company Skyscanner have created 15 start-ups. Across the UK, talent is remaining in the start-up ecosystem and increasingly attracting the best graduates from top universities such as Oxford and Cambridge. In Oxford, the largest student society is Oxford Entrepreneurs. 

9. UK has world class tech clusters 
   
   While the major of VC funds and start-ups are based in London, other clusters continue to attract capital from international investors and produce exceptional companies. The ‘golden triangle’ cluster of Oxford-Cambridge-London attracts capital from around the world. In 2023, start-ups in Cambridge and Oxford attracted investment of $1bn and $0.8bn respectively. Bristol., Birmingham, Edinburgh and Manchester all have strong ecosystems too. 

10. Here to stay 
    
    The UK start up and venture ecosystem is deep and maturing. This is a far cry from 2003 when Oxford Capital second fund was closed and turned out to be the only VC fund raised in the UK that year! Back then, almost all VC funds had been founded by alumni of 3i. Today we are part of a thriving ecosystem in which most VCs have entrepreneurial backgrounds, serial founders continue to recycle experience, universities are engines of innovation and the government is committed to the enterprise economy. Since we founded Oxford Capital, we have seen the sector be buffeted by the dot.com crash, the banking crisis, three recessions and cyclical volatility. But the power and drive of innovation and the creation of new value remain a powerful force. UK entrepreneurship is alive and thriving.