Investment in UK artificial intelligence startups soars

A boom in AI investment has put the UK ahead of European rivals and ready to take on global leaders.
21 February 2019

Graphcore’s co-founders Nigel Toon (CEO) & Simon Knowles (CTO). Source: Graphcore

Venture capital (VC) investment in the UK’s growing artificial intelligence (AI) sector leapt almost six-fold from 2014 to 2018, with funding comprising almost as much as the rest of Europe combined.

According to research prepared for Tech Nation and the Digital Economy Council by Dealroom, investment in UK AI startups reached US$1.3 billion in 2018.

Notable deals in 2018 included Bristol-based Graphcore which raised US$200 million.

Throughout 2018, Dealroom recorded 82 venture capital fundraisings across UK companies, compared to 70 in the previous year— that’s a continuation of a trend that’s seen investment in AI companies grow sharply over the last five years.

“These statistics are further confirmation that the UK is Europe’s undisputed number one tech hub,” said the UK digital secretary, Jeremy Wright.  

“Our success in artificial intelligence is thanks to a unique combination of talent, location, our business-friendly environment, unrivalled access to capital and world-leading universities.”

AI startups in the UK raised almost as much as France (US$400 million), Germany (US $300 million) and the rest of Europe combined last year. Israel was second place behind the UK, raising US$800 million in VC funding for AI startups.

Wright added that the government was determined to play its part in making the UK the best place to start and grow a digital business.

Tech Nation’s Chief Executive, Gerard Grech commented that “as one of the most important players in this field”, the UK has an opportunity to lead with the technology, in particular regard to ethics and regulations the companies involved follow.

The company’s Head of Insights, Dr. George Windsor, added that many of the companies in receipt of funding are still just beginning to scale and, as such, the real economic benefits of this “technological revolution” are yet to be seen.

Interest in AI companies has leaped since 2014 when UK startups raised just US$200 million. Between 2016 and 2017, there was a spike in investment, with VC firms doubling their funding from US$0.7 billion to US$1.2 billion.

Bristol’s Graphcore— a semiconductor company that develops accelerators for AI and machine learning— claimed one of the largest investments, raising US$ 200 million from a consortium of investors.

Other UK AI companies which raised funds in 2018 include Renalytix AI a developer of AI for kidney disease; which raised US$ 29 million through an AIM flotation; healthtech company Medopad (US$ 26 million); HR software Beamery (US$ 28 million); and accident and disaster recovery startup Tractable (US$ 25 million).

While investments have spanned all sectors, fintech and healthtech have seen particularly strong growth, according to the research.

The UK also counts at least five AI unicorns amongst the total number of private tech companies with a valuation of US$1 billion, including Darktrace (US$1.7 billion valuation), Benevolent AI (US$2.1 billion); Improbable (US$2 billion); Graphcore (US$1.7 billion) and Blue Prism (US$ 1.3 billion).

For the UK, the findings are incredibly positive given the shadow and uncertainty cast by Brexit, which could see companies moving operations or suppliers into Europe and the end of EU-backed SME innovation funds— which can supply the building blocks for startups to scale and access to universities for the equipment and data required for AI development.

The global AI market

Looking more broadly at the global market, Tech Nation’s own research found that investment in AI is growing at a faster rate than investment in wider technology. That trend began as far back as 2015, while 70 percent of all AI deals completed globally in the last decade were done so in the last three years.

While the UK is certainly making its mark on the world stage, the United States boasts 3,000 high-growth AI tech businesses— claiming some US$83.3 billion invested— making it the biggest ecosystem for the technology in the world.

China follows (US$14.8 billion invested), then Israel (US$14.1 billion invested). By end of 2017, the UK had seen US$2.9 billion invested in AI startups. However, the UK is a much less mature market, with a fast-growing number of startups emerging that are ready to scale.

If further evidence were needed for the dizzying growth of AI technology, Tech Nation also notes that Google searches for the phrase ‘Artificial Intelligence’ have boomed in the last two years, along with related phrases ‘Machine Learning’ and ‘Data Science’.

Meanwhile, 43 percent of online tech media mentions AI. But this may be out of proportion with activity; just 0.03 percent of questions posted on Stack Overflow ask for assistance relating to AI development. So, maybe that’s our cue to wrap up this article.