In 2023, startups in London secured a substantial $12.9 billion in venture capital (VC) investment, reaching levels comparable to those before the pandemic. This resurgence follows a temporary decrease in VC activity after a surge in 2021 and 2022. Notably, the Climate Tech sector has emerged as a frontrunner in this growth.

The data positions London at the forefront of Europe's technology landscape, with the city's startups attracting nearly as much investment in 2023 as the next three leading European cities - Paris, Stockholm, and Berlin - combined. On a global scale, London ranks fourth in VC raised, trailing only the Bay Area, New York, and Boston. Furthermore, the UK holds the third position worldwide in venture capital raised in 2023, following the US and China.

Climate Tech is a standout sector within London's tech landscape, having raised $3.5 billion in 2023, a significant increase from $2.2 billion in 2022. London also holds the second position globally for climate tech investment, just behind Stockholm. Prominent London-based climate tech startups that secured major funding in 2023 include Zenobe Energy (£870 million), Octopus Electric Vehicles (£150 million), and modular housing company TopHat (£70 million).

In 2023, climate tech constituted 23% of Foreign Direct Investment (FDI) into London, doubling its share from 2022. This sector attracted major international players, such as the world's largest electric vehicle maker BYD, which chose London as its UK headquarters, alongside Atlanta's award-winning Cloverly, known for its climate action tech, and Australia's Allume Energy, a specialist in shared solar solutions for flats.

In the realm of AI, London's Generative AI companies have seen a surge in investment. In 2023, GenAI startups in London raised $232 million, a twentyfold increase from 2020. Notable companies include Synthesia, a Gen AI video company that achieved unicorn status with a valuation of $1.0 billion. London also saw a strong year for unicorns, with three additional startups reaching valuations over $1 billion, including Quantexa in Decision Intelligence, Reward Gateway with HR tools, and Zyber 365 in Web3 Cybersecurity.

The venture capital landscape in London remains robust, with London-based VC investors amassing over $24 billion of dry powder in the past three years. London-headquartered VC funds represent over 30% of all VC raised in Europe during this period.

Moreover, London continues to be a magnet for large international VCs and funds, including A16z, Antler, and BDA Partners, as well as several impact funds such as Sustainable Ventures, Octopus Ventures, and 2150.

Laura Citron, CEO of London & Partners said: “London has established itself as one of the global leaders for climate tech. We have fantastic London-based climate innovation, green tech businesses flocking to London from all over the world, and big VC funding for the sector. As VC levels begin to return to pre-pandemic levels, our job is clear: keep building on this momentum to make London an even better ecosystem for startups and small businesses to succeed.”

Janine Hirt, CEO of Innovate Finance said: “It is great to see London continuing to attract large investments for the tech sector, including FinTech. Despite challenging economic headwinds, London and the UK maintain their position as the second-largest global hub for FinTech investment, far surpassing other European counterparts, a true testament to our outstanding ecosystem of founders and entrepreneurs. We are hopeful for positive growth in 2024, and we look forward to working with industry, government, and regulators to maintain the UK's international leadership in financial innovation, including ensuring proactive regulation and attracting investment across all stages, from seed to critical growth funding”.

Russ Shaw, Founder, Tech London Advocates & Global Tech Advocates: “In difficult economic circumstances, the London tech sector has once again shown its resilience and attractiveness as a home for ambitious companies looking to solve the big issues of our time. Record investment in climate tech highlights the vital role innovation must play in achieving net zero ambitions, while the explosion in funding for AI companies cements London’s leading position in the development of the technologies which will dominate global economies for years to come.”

Andrew Wordsworth, Managing Partner at Sustainable Ventures said: “It comes as no surprise that the latest data from London & Partners and Dealroom shows London is a leading global hub for Climate Tech. Sustainable Ventures is thrilled to be part of the exciting growth of climate tech in London. As Europe’s largest tech ecosystem, London is where we are able to successfully combine our unique model of investment, access great workspaces and expert support services."