The third quarter of 2024 marks a sharp decline in UK startup funding, the lowest in five years.
- British startups garnered approximately $2.9 billion in venture capital in Q3, reflecting a 50% decrease from the prior quarter.
- Despite the dip, the fintech sector remains the most funded, with $3.3 billion secured so far this year.
- Health tech follows closely with notable investments, riding high in second place within UK tech funding sectors.
- Overseas investments played a significant role, making up around 70% of VC funds, the third highest in a decade.
The third quarter of 2024 has proven challenging for UK startups, witnessing the most substantial drop in venture capital investment over the past five years. The new research from HSBC Innovation Banking and Dealroom highlights that British startups managed to attract only $2.9 billion in venture capital during this period, marking a significant 50% reduction from the second quarter’s figures. While this represents a notable decline, the overall funding landscape remains aligned with trends observed in 2023.
Fintech stands resiliently as the most funded tech sector in the UK for 2024, despite a reduction in overall funding from the previous year. Pulling in $3.3 billion thus far, fintech has continued to hold steady. Remus Brett, general partner at LocalGlobe, remarked that many scaleups, following a tough funding market, have emerged more robust and are now effectively challenging established market players. Among the top funding rounds this year, Monzo led with a substantial £340 million investment that later expanded to $610 million.
Another sector enjoying substantial investor interest is health tech, underscored by significant funding rounds such as Flo Health’s Series C, which raised £156 million, and Myricx Bio’s £90 million Series A. Simon Bumfrey from HSBC Innovation Banking UK commented on the promising outlook for health tech, pointing to both domestic and international sources of funding seeing great potential within the UK’s innovative landscape. The buoyant mood in investment circles bodes well for the continuity of this trend into 2025 and beyond.
In terms of international investment, the UK’s capacity to attract overseas venture capital has remained robust, with around 70% of such investments stemming from abroad. This figure positions 2024 as the third-highest year in the past decade for foreign investments, surpassed only by 2019 and 2021. The UK startup ecosystem continues to lead Europe in terms of funding, with an impressive $12.4 billion raised so far, outpacing major European players like Germany and France, who have garnered $6.7 billion and $6.5 billion, respectively.
The UK’s startup ecosystem faces challenges, but fintech and health tech sectors show resilience, bolstered by significant international investments.
