Artificial intelligence is taking an ever-greater share of UK venture capital, according to new analysis from HSBC Innovation Banking UK and Dealroom.
In H1 2024, UK AI startups raised $2.1 billion and are on track for a record-breaking year, with the sector projected to raise $4.4bn by the end of the year.
Year-to-date, UK AI has passed a quarter of a trillion dollars in value and now accounts for 22% of UK tech value, up from 12% in 2019.
The UK’s top AI rounds are spread across diverse applications of AI including energy, therapeutics, legal and finance. The most notable round was autonomous driving startup Wayve’s $1.05bn megaround.
Return of the megaround
UK startups raised $5.6bn in Q2 2024, up 37% year on year, and up 47% compared to Q1 2024. In H1, startups across the UK have raised $9.4bn, up from $8.1bn in H1 2023.
Almost half of all funds raised this quarter (45%) were across megarounds (worth $100-250 million) and mega+ rounds (worth $250m+), up from 33% in Q1. This signals the return of megarounds as a key part of the UK VC landscape and highlights the importance of the UK AI ecosystem for innovation and growth investments.
Funding rounds across seed and series A+ remained steady, in line with the previous three quarters.
UK leads Europe in spinout value
Cambridge and Oxford startups have raised the most venture capital outside of London in 2024. The universities in both cities also rank 1st and 3rd in Europe by value produced by university spinouts with Cambridge University in 1st place, and the University of Oxford in 3rd place.
The UK is the most prolific country in Europe for university spinout value creation followed by Germany and Switzerland, with 58% of the UK spinout value created by health startups.
The successes of the startup ecosystem are clear to see, with the UK having now created 176 $1bn+ startups, with five new unicorns added in 2024 to date. Notably, 69 of these unicorns are still unrealised, setting the stage for further lucrative exits and listings over the coming years.
UK retains global leadership position
The UK retained its position as the number one destination for startup innovation and investment in Europe. UK startups raised more than France and Germany combined in H1 2024 ($9.4 billion vs. $8.6 billion). Globally, the UK remains in third place, only behind the US and China.
“This data shows that positive trends for investment into the UK innovation ecosystem are manifesting and signs of early optimism are coming to fruition – investors are becoming increasingly active, unlocking value for innovative UK startups particularly in the area of AI,” said Simon Bumfrey, head of technology and life sciences at HSBC Innovation Banking UK.
“We are hoping to see further large investments into UK AI and other areas, both from foreign and domestic investors as the year progresses. We’re excited about UK innovation and its pivotal role within the UK economy and remain committed to supporting and partnering with innovators, investors and the broader ecosystem to drive further growth.”
Peter Kyle MP, Secretary of State for Science, Innovation and Technology said: “While startups like Wayve and Monzo have secured growing levels of investment despite persistent uncertainty and stalling growth, there is work to do to create a better environment for our tech sector.
“Last week, we began that work with changes by the Financial Conduct Authority to make it easier to list in London. This Government is committed to use every available lever to make sure the sector reaches its full potential.
“That means removing unnecessary regulatory barriers and accelerating innovation to share the benefits of technology more widely and restart the engine of our economy.”