UK start-ups secured $2.9bn (£2.2bn) in new venture capital (VC) funding during the third quarter of 2024, a sharp drop from the $5.7bn (£4.4bn) raised in the previous quarter, according to fresh data from HSBC.
The global VC market also slowed, marking its weakest quarter in over four years, driven largely by a downturn in mega funding rounds. Early-stage and breakout investments remained relatively stable however.
Although fewer deals closed in the third quarter, the UK continues to lead Europe in start-up investment, raking in $12.4bn (£9.5bn) of dry powder so far in 2024. This figure is almost as much as the combined totals of Germany and France, which raised $13.2bn (£10.1bn) together.
Foreign investors, particularly from the US, have played a large role in supporting UK startups, accounting for over 70 per cent of total VC investment in 2024 – one of the highest proportions on record.
“Companies with strong topline growth at high margins, or those developing products for large nascent markets, such as quantum computing, are attracting interest from overseas investors,” explained Amelia Amour, partner at Amadeus Capital Partners.
“AI remains a significant investment focus area with opportunities ranging from energy reduction solutions for data centres through to model output explainability and productivity tools built on top of [large language models] LLMs,” she added.
The health and life sciences sector emerged as a top performer, with UK start-ups in the space raising $2.3bn (£1.8bn) in 2024, including nearly $1bn (£766m) in the third quarter alone.
This sector now ranks as the second most funded in the UK this year, alongside enterprise software, and just behind fintech.
Simon Bumfrey, head of technology and life sciences at HSBC Innovation Banking UK, said: “Health and life sciences is attracting significant investment and a trend we expect to continue with interest from both domestic and international investors.
“We have already seen a strong start to Q4 with over $500m raised in rounds in Series B+ in the early days of October, showing signs of positive tailwinds to further drive investment and financing within the UK innovation economy as we head into 2025,” he added.