Tracxn releases UK Tech Semi-Annual Funding Report
Tracxn, a global SaaS-based market intelligence platform, has released its UK Tech Semi-Annual Funding Report - H1 2023. The report, based on Tracxn’s extensive database, provides insights into the UK Tech space.
The UK startup ecosystem has been the second-highest funded startup ecosystem in 2022, after the US and has retained its position in 2023 as well. Despite this, funding into UK Tech startups in H1 2023 has declined by 55% as compared to the same period last year and 9% compared to H2 2022. This downward trend in funding is majorly due to the impact of the ongoing war, recession, higher inflation and rising interest rates. Brexit is also one of the factors that impacted international trade.
The second quarter of 2023 witnessed the major part of funding raised this year with an overall funding of $6.06 billion, contributing to more than 70% of the funds raised in the first half of the year. While Q1 2022 is the highest funded quarter till date, the funding has been declining quarter-on-quarter till Q2 2023, where the quarterly funding saw an increase of more than 150% compared with the previous quarter.
The total funding fell 9% from $9.2 billion in H2 2022 to $8.4 billion in H1 2023. The investments attracted by the UK Tech space in H1 2023 is also a sharp fall of 55% when compared with $18.5 billion funding raised in H1 2022. Late-stage investments rose 9% from H2 2022, but plunged 49% when compared with H1 2022. Early-stage investments in the first six months of 2023 fell 27% and 64% when compared with H2 2022 and H1 2022 respectively. Seed-stage funding fell 20% and 49% from H2 2022 and H1 2022 respectively.
The number of funding rounds in the first half of 2023, too, fell 14% and 38% as compared with H2 2022 and H1 2022 respectively. While early-stage and seed-stage rounds saw a downward trend, late-stage rounds saw a slight uptick.
There were two new entrants to the unicorn club in H1 2023, a sharp contrast from nine new Unicorns in H1 2022 and four in H2 2022. H1 2023 witnessed 241 acquisitions, 23% lower compared to 316 acquisitions in the first six months of 2022 and a 30% decline compared with 280 acquisitions in H2 2022.
During the first half of 2023, six funding rounds were $100 million and higher, as against 17 such rounds in H2 2022. Quell, Builder, and CheBots are some of the companies that have managed to raise funds above $100 million in the second quarter of this year.
Life Sciences, Enterprise Applications and FinTech were the top-performing segments in H1 2023. The Life Sciences sector witnessed a 218% increase in funding in H1 2023, as against the same period last year. Also, the Life Sciences segment contributes to more than 39% of the funds raised in H1 2023. Enterprise Applications is also one of the top segments that attracts investor interest, irrespective of the geography and the economic condition, as it has become the basic infrastructure for any business to run their day-to-day activities efficiently.
Funding into the UK FinTech space fell 79% in H1 2023 when compared with H1 2022. Several regulations from the UK government have been implemented in recent times including reimbursement requirements on payment firms for APP fraud victims and inclusion of certain crypto assets under the Financial Promotion Regime. Fintech is a leading sector in the UK, and the nation benefits from adequate government support and a large pool of talent.
Among UK cities, London takes the lead in terms of total funds raised in this period followed by Oxford and Cambridge. Tech startups in London attracted investments worth $6.5 billion in H1 2022, followed by Oxford ($396 million) and Cambridge ($214 million).
Scottish Enterprise, Seedcamp, and Octopus Ventures are the most active investors in the UK Tech startup ecosystem in H1 2023. SFC Capital, Fuel Ventures, and Jenson Funding Partners were the top seed investors, while BGF, Octopus Ventures, and Oxford Science Enterprises were the top early-stage investors. Iconiq Capital, SoftBank Vision Fund, and Vitruvian Partners were the top late stage investors