As one of the top startup hubs in the world, UK has cultivated numerous unicorns and provided fertile ground for the growth of startups. For entrepreneurs aspiring to startup in UK, it is crucial to understand the investment landscape and key highlights of fundraising. This article will provide 5 key highlights of startup investment opportunities in UK, including active angel investors, abundant VC capital, government incentives, strategic startup hubs and private equity interest. Through analyzing trends and data of the UK startup ecosystem, it offers actionable insights for startups to raise funds more effectively in UK.
Abundant angel investors actively funding startups in UK
UK has a vibrant angel investment scene. Total angel investment surged to £1.41 billion in 2020 from £1.04 billion in 2019, with the number of deals rising by 14% to 4,033. Many active angel networks exist, such as Angel Academe, Anglia Capital Group and Archangels. Well-known angels like Sherry Coutu and Saul Klein are also actively supporting startups. The growth of equity crowdfunding platforms like Crowdcube and Seedrs have further democratized angel investing. For startups, identifying right angel investors with domain expertise and leveraging online platforms can be an effective fundraising strategy.
Strong supply of VC capital targeting high-growth startups
UK is the largest VC market in Europe, receiving £4.1 billion VC investment in 2020. Major international VCs like Accel, Balderton Capital and Atomico have funds focused on UK startups. Top domestic VC firms include Octopus Ventures, Eight Roads Ventures, Episode 1. While overall investment is growing, mega-rounds above £50 million to unicorns form a significant share. Startups should identify funds specializing in their domain and growth stage and develop compelling metrics to prove business potential to VCs.
Government tax incentives supporting investors and startups
The UK government offers important tax incentives to boost startup ecosystem, especially the Seed Enterprise Investment Scheme (SEIS), providing 50% income tax relief to investors in startups below 2 years old. The Enterprise Investment Scheme (EIS) offers 30% income tax relief for investing in startups below 7 years old. For startups, the R&D Tax Credit scheme offers up to 33% credit on R&D costs. Understanding these incentives allows startups to better communicate benefits to investors.
Strategic startup hubs across UK
Certain regions have emerged as strategic startup hubs, like London, Cambridge and Manchester. 40% of UK startups are based in London, which has the greatest density of investors, corporates and support ecosystem. Fintech startups thrive in London while bioscience startups cluster in Cambridge. With abundant local support and investor access, locating in the right startup hub enables capital raising.
UK private equity looking to invest in mature startups
Later stage and mature startups can tap growth capital from UK private equity firms. Total UK private equity investment grew 46% to £73 billion in 2020. Top PE firms like CVC Capital, Permira, Bridgepoint are looking to deploy large amounts of dry powder into high-growth tech companies. PE firms can fund international expansion, provide operational support and enable exit via IPO. Startups should track relevant PE firms and discuss potential value creation plans.
UK provides abundant startup investment opportunities, with active angels, growing VC capital, government incentives, strategic hubs and private equity interest. Startups should identify investors by stage, sector and location fit and showcase metrics proving business potential. If executed well, UK offers robust funding prospects to scale startups.