London is top of mind for US investors

US venture capital firms are showing a strong appetite for investing in London and UK companies, with latest data from PitchBook produced for London & Partners, showing that 2019 is already a record year for US VC investment into British businesses¹. The findings have been released to coincide with this week’s Silicon Valley Comes to the UK event series, bringing together investors, entrepreneurs and CEOs from the UK and the Bay Area.

According to the research, American investors have been involved in $4.4bn worth of deals into UK companies so far this year, with London businesses accounting for 77% ($3.4bn) of all VC investment from the US in 2019¹.

Major funding rounds for UK companies involving US investors in 2019 include: a $144m series F funding round for London fintech unicorn, Monzo, led by Silicon Valley investment firm, Y Combinator; a $70m Series B round into London Cybersecurity firm, Snyk, by Palo Alto based investor Accel Partners and a large $200m Series A funding round, for UK data privacy firm, OneTrust, led by New York based investor, Insight Partners.

As London continues to produce high volumes of unicorn companies, US investors are increasingly looking to the UK capital as the scale-up capital of Europe, with the findings showing that over the past five years, London companies have received significantly more funding from US VCs than any other European business hub².

Investment ties between the UK and Silicon Valley are particularly strong, with Bay Area VCs investing almost double the amount into UK companies ($10.7bn) in the last five years than the levels seen in Germany ($5.95bn) and France ($2.87bn).³

Sherry Coutu CBE, Angel Investor and Co-founder of SVC2UK said: “The UK remains a top place for global investors because it is now producing high volumes of scale-up companies. While Brexit has created some uncertainty, investors from the US and further afield continue to look to London as Europe’s leading tech hub because it is home to world class talent and an abundance of innovative companies – especially in areas such as Fintech, Cybersecurity and Artificial Intelligence. We’re excited to bring together some of the best minds from the UK and Silicon Valley this week as we see lots of opportunities for companies and investors to do business across both regions.”

David Hornik, General Partner at Silicon Valley based investment firm, August Capital added: “The UK and Silicon Valley share strengths in technology and innovation. As an investor, I always like to keep an eye on what’s happening in London as it is a truly global centre for business with a large pool of companies building breakthrough technologies. I’ve been involved in the SVC2UK programme for a number of years now and it’s a great way to build networks and connect two of the world’s leading start-up hubs.”

London’s booming Fintech sector is particularly attractive for US investors, with a number of large deals this year including: a $175m Series D investment into London online money transfer platform, WorldRemit, involving Accel Partners; a $75 million Series E round for online payment service, GoCardless and a $40m Series E round for online international money exchange platform, CurrencyCloud – ­­­­both led by GV, the venture capital investment arm of Alphabet Inc.

Separate research by Innovate Finance and London & Partners recently revealed that London has received more Fintech VC funding than New York and any other European tech hub, second only to Silicon Valley.

US investors appear to be flocking to the UK looking for good returns, with a recent report from British Business Bank showing that UK venture capital funds generated better financial returns than their US counterparts. The Analysis of UK Venture Capital Financial Returns report found UK venture capital funds generated a higher distribution-to-paid-in-capital ratio (DPI) in the period of 2002 to 2006 than those based in the US.

Trade and investment links between the US and UK remain strong, with some of America’s largest companies recently announcing significant long-term investments into London. This includes:

• Apple is set to open a new London campus in 2021 at Battersea Power Station for 1,400 staff 
• Google will open a new HQ in Kings Cross to house up to 4500 staff 
• LinkedIn moved into its new UK HQ in Farringdon in January 2019 
• In 2018 Facebook announced it will be leasing 3 new offices in the London Kings cross area to double its headcount in the UK capital with space for up to 6,000 staff, including its largest developer hub outside for Silicon Valley. The company also announced it has chosen London as its base to develop WhatsApp payments, hiring an additional 100 people in the UK capital 
• In 2018, Microsoft announced a $20m investment to open up its ‘Reactor’ accelerator space in Shoreditch for global start-ups. It will also open its first European flagship retail store in Oxford Circus in July this year  
• In July 2017 Amazon UK announced they would double the capacity of the London Development Centre from 450 to 900 high tech staff and by the end of the year there would be 5,000 corporate roles and R&D roles in London across their London offices including their new UK HQ.

The United States also remains a key market for UK firms looking to expand internationally, with a number of British Fintech unicorns announcing plans to launch their services in the US market this year including: Revolut, Monzo and TransferWise.

Artificial Intelligence is another key area for collaboration, with UK AI firm Babylon Health announcing plans to expand to the US market following a recent $550m funding round and London based financial AI identify software firm, Onfido, announcing it has launched an international partner programme to expand the reach of its platform in the US market.    

From 18-20^th November the three-day SVC2UK event programme will see events take place in Oxford, Cambridge and London. This year’s speakers from the Bay Area include: David Le, Vice President at Lyft; Dr Anita Sengupta, Co-founder Airspace Experience Technologies; Karen Appleton Page, General Partner, B Capital Group. UK representatives include: Dr. Gordon Sanghera CEO, Oxford Nanopore; Jacqueline de Rojas, CBE President, techUK; Martha Lane Fox Founder & Executive Chair, doteveryone.org.uk and Saul Klein Investor, LocalGlobe.