Back in August last year, we published a report with Barclays on global opportunities for UK entrepreneurship, analysing how much money UK startups have raised from foreign investors, and the role that US and EU funds play in the UK economy. Now, we’re digging deeper to find out more about foreign direct investment (FDI) in the UK’s high-growth ecosystem.
We explore how the COVID-19 pandemic and Brexit have affected foreign investment into the UK, what the UK Government’s FDI policy is, and which country invests the most into UK companies. We also look at the kinds of businesses that secure these deals, before profiling 10 of the UK’s most active international investors. And if that’s not enough, for even more data insights, you can download the full list of the UK’s 31 top foreign funds below.
Download the full list of the UK’s top foreign investors.
What is foreign direct investment and how does it differ from inward investment?
Inward investment refers to the flow of external capital into a local economy. FDI is a type of inward investment through which international investors from one country have “a lasting interest in and a significant degree of influence over” a business in another country (i.e. at least a 10% ownership stake). These cross-border investments usually take the form of equity or debt transactions.
FDI and the UK Government
Inward foreign direct investment is an important stimulus for economic growth. According to the Department for International Trade (DIT)’s latest statistics, for the financial year 2020 to 2021, inbound foreign investment led to the creation of over 55k new jobs in the UK. And while government intervention around FDI has traditionally been limited in the UK, this has become a growing focus in recent years.
In November 2020, the Prime Minister launched the Office for Investment, part of DIT, to “support the landing of high value investment opportunities into the UK which align with key government priorities”. The Office for Investment aims to make the UK economy more attractive to international investors by easing regulatory barriers to top tier investments, and maximising the benefits of international trade deals.
Meanwhile, at the start of this year, the UK Government introduced new laws surrounding both domestic and foreign investment under the National Security and Investment Act 2021. The rules are intended to increase government powers to intervene in investments, mergers and acquisitions from investors, including non-UK funds, that pose a threat to national security. The Act is being administered by the Investment Security Unit (ISU), within the Department for Business, Energy and Industrial Strategy (BEIS).
In 2021, the House of Commons’ International Trade Select Committee published its inward FDI report, exploring the UK Government’s foreign investment strategy and proposed investment screening regime. Its findings raised concerns that FDI is actually exacerbating the UK’s North-South divide, in conflict with the Government’s current ‘levelling up’ agenda. In fact, Office for National Statistics (ONS) data shows that, in 2019, London accounted for over 42% of the UK’s inward FDI stock, and a combined 55% with the South East.
Impact of Brexit and COVID-19 on inward investment in the UK
Unsurprisingly, both Brexit and COVID-19 have affected inward investment to the UK economy. An EY report last year found that there were 975 inward FDI projects in the UK in 2020, marking a 12% decline on 2019’s figures (but a smaller drop than seen in the rest of Europe). But the report also found that London had regained its title as the most attractive European city for foreign direct investment projects—with the United Kingdom in second place overall, behind France, having proven resilient amidst the pandemic.
And it seems Brexit uncertainty has also failed to deter many international investors from deploying capital in the UK. It has, however, prompted a shift in the sectors securing this foreign investment, towards those impacted by Brexit-related supply chain and regulation changes, and continuing away from industries like manufacturing. Meanwhile, the pandemic seems to have triggered an uptick in FDI into life sciences projects, as well as transport and logistics.
Foreign investment in the UK’s high-growth ecosystem
The Beauhurst platform tracks every equity investment in the UK, even those that go unannounced to the public (so-called stealth rounds). This includes the 3,564 equity deals secured by UK companies between January 2011 and December 2021 that saw participation from foreign investors. These rounds account for 6.5% of all equity deals secured by UK companies in this time, but a massive 47.5% of total pounds raised (at £53.2b).
The volume and value of rounds involving non-UK investors has grown pretty steadily over the last decade. As expected, almost half (47%) of the foreign investors involved in these rounds were US funds. Meanwhile, the average size of deals involving foreign investors between 2011 and 2021 came to £16.1m, considerably higher than the £2.09m average seen across all deals. This makes sense given that it tends to be later-stage companies looking overseas for funding, with only 25% of deals involving foreign investors during this time going to startups operating at the Seed stage, versus 54% across all fundraisings.
Top 10 foreign investors in the UK
Here, we profile the 10 most active foreign funds in the UK’s high-growth ecosystem, based on the number of announced equity rounds they participated in between 2011 and 2021. But you can download the full list of top foreign investors below, from Swedish and Singaporean VCs to Hong Kong and Switzerland-based investment firms.
Download the full list of the UK’s top foreign investors.
1. Accel
Head office location: United States
UK equity deals announced: 92
Topping the list of the UK’s most active foreign investors is Accel, a US-based venture capital firm that backs technology businesses across the world. Whilst it’s headquartered in Palo Alto, the firm also has offices in San Francisco, London and Bangalore.
Accel has announced an impressive 92 equity deals with high-growth companies in the UK so far, totalling a massive £3.14b worth of investment. Its portfolio includes leading challenger bank Monzo, digital security firm Snyk, fintech company Zepz (formerly WorldRemit) and online events platform developer Hopin—all UK unicorns (private companies worth $1b or more).
2. Beringea
Head office location: United States
UK equity deals announced: 74
Beringea is a venture capital firm that has offices in Michigan and in London. For the past three decades, Beringea has been working with entrepreneurs to build unicorn companies. Our research indicates that the fund typically invests between £1m and £10m, focusing on the healthcare, cleantech, consumer, media, business services and software-as-a-service (SaaS) sectors.
The fund invests in businesses based in the US and Europe, having backed UK companies such as Learnerbly, DeepStream and Lantum. It has participated in 74 announced equity deals in the UK so far, worth £370m in total.
3. Global Founders Capital
Head office location: Germany
UK equity deals announced: 46
Global Founders Capital (GFC) is a global seed and growth investor, with 18 offices, spread across the US, Canada, the UK, Germany, France, Sweden, Italy, Turkey, Israel, the UAE, Singapore, Indonesia, China, Brazil and Mexico. The fund is managed by Rocket Internet, which incubates and invests in tech and internet businesses.
The fund looks for businesses with exceptional management teams, and its portfolio includes high-growth UK companies iwoca, OpenRent, Koru Kids and Uncapped. It has taken part in a total of 46 UK equity rounds so far, totalling £494m in funding.
4. GV
Head office location: United States
UK equity deals announced: 37
Formerly Google Ventures, GV is the corporate venture capital arm of Alphabet (Google’s parent company). It has $8b+ under management, and provides VC funding to businesses in the life sciences, enterprise tech, consumer, and frontier tech sectors. The firm is headquartered in Mountain View, California, but also has offices in San Francisco, New York, Boston and London.
To date, GV has announced its participation in 37 equity deals secured by UK companies, worth an impressive £1.06b in total. These companies include Blockchain.com, Multiverse, GoCardless, and Currencycloud (recently acquired by Visa).
5. Epidarex Capital
Head office location: United States
UK equity deals announced: 36
Foreign investors Epidarex Capital is a transatlantic venture capital firm, headquartered in Maryland but with a second office in Edinburgh, Scotland. The early-stage fund looks to invest in healthtech and life sciences companies in under-ventured regions or research hubs in the US and the UK.
Epidarex Capital has participated in 36 announced equity rounds with UK companies so far, totalling £131m. Its portfolio includes clinical diagnostics company Edinburgh Molecular Imaging (EMI), and pharmaceutical firms Epsilogen, LUNAC Therapeutics and Macomics.
6. Y Combinator
Head office location: United States
UK equity deals announced: 35
Y Combinator is a California-based accelerator programme for tech startups. As part of the programme, Y Combinator provides seed funding and intensive business support to its cohorts. Since 2005, it has backed over 3k startups, with a combined valuation of more than $600b.
To date, Y Combinator has announced 35 equity deals with UK companies, worth £206m in investment. Its portfolio includes businesses operating in a wide range of tech sectors, such as app development software company Stacker, fintech startup LifeFlow, clinical diagnostics company Cambridge Cancer Genomics (acquired by Dante Labs in 2021), and dating platform Muzmatch.
7. Kima Ventures
Head office location: France
UK equity deals announced: 32
The most active French investor in the UK equity market, Kima Ventures, is the private investment vehicle of Xavier Niel (founder of telecoms company Iliad). The fund is sector-agnostic, and looks to invest in around 100 companies per year.
Kima Ventures has backed 32 UK companies via announced equity deals so far, amounting to £59.3m in total funding. Its UK investment portfolio includes Wise, Green Man Gaming, eHealth company Cera, open source software developers QuestDB and Primer, and lawtech firm SeedLegals.
8. Partech
Head office location: France
UK equity deals announced: 30
Also based in France is Partech, a venture fund with over €1b under active management. It invests in promising and disruptive tech businesses in Europe, North America, Africa and Asia. The firm is headquartered in Paris, with offices in San Francisco, Berlin and Dakar as well.
Partech has so far announced its participation in 30 UK equity deals, amounting to £470m in funding for UK companies. The international investor’s portfolio includes MADE (which underwent a £100m IPO on the LSE last year), Drover (acquired by Cazoo in 2020), Privitar, and foodtech operator Collectiv Food.
9. Insight Partners
Head office location: United States
UK equity deals announced: 27
Insight Partners is a US venture capital firm, based in New York City, which looks to invest in scaleup companies in the software sector. It was founded in 1995, and invests globally, with more than $30b in capital commitments.
The fund has announced 27 equity rounds with UK companies so far, totalling £1.96b in scaleup investment. Insight’s UK portfolio includes billion-dollar businesses like Checkout.com, OneTrust, Darktrace (which floated on the LSE in April 2021) and artificial intelligence company Tractable.
10. 500 Startups
Head office location: United States
UK equity deals announced: 26
Based in San Francisco, 500 is a global venture capital firm, with over $2.3b currently under management. The firm also has offices in Seoul, Dubai, Kuala Lumpur, Tokyo, Toronto, and Riyadh. Alongside providing growth capital to startups, 500 also offers seed accelerators and founder programmes.
500 focuses its investments on fast-growing tech businesses, but is geography and sector-agnostic. The fund has participated in 26 announced equity deals with UK companies so far, totalling £52m. Its UK investment portfolio includes Plum, Fidel and (now exited) SimplyCook.
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