- KPMG Private Enterprise Venture Pulse outlines spike in interest from American backers due to UK’s growing role in frontier tech across artificial intelligence (AI), fintech and crypto.
- Positive news comes as new figures show the UK has rebounded with a strong Q3 in terms of venture capital (VC) investment following a Q2 which saw it record its slowest quarter of VC investment in five years.
The future of venture capital (VC) investment in the UK has been boosted after a new KPMG report revealed a major rise in interest from US based investors due to the market’s ‘attractiveness’.
Research undertaken as part of the latest KPMG Private Enterprise Venture Pulse outlined that the longer-term outlook for UK VC investment was ‘encouraging’ and ‘constructive’, especially among American based backers, due to many of them seeing UK startups as a cost-efficient entry point into globally scalable companies, making the UK a strategic hub for cross-border investment.
This shot in the arm for the investment community comes as the report also revealed that the UK had bounced back in Q3 of this year following a Q2 which saw it record its slowest quarter of VC investment in five years.
New figures released today showed that investment levels jumped to £4.6 billion across 594 deals, up from £2.6 billion across 435 deals last quarter, thus making the UK number one in Europe when it came to VC investment in Q3.
The ‘attractiveness’ for US based investors and the latest positive figures has been attributed to the UK being highlighted for its growing role in frontier tech with large deals in AI, fintech, crypto and computing underscoring growing strength for investors when it comes to next gen tech.
The quarter was defined by a mega deal in the AI sector with NScale securing a £1.1 billion investment with other major deals including Rapyd Financial, which offers payments, mobile wallets, money transfers, card issuing, and fraud protection, netting £370 million and crypto and cloud infrastructure firm PS Miner landing £259 million.
Nicole Lowe, UK Head of KPMG’s Emerging Giants practice, said:
“It is extremely encouraging and constructive to see the UK rebound strongly in Q3 with high levels of VC investment but what is most positive is the fact that the country is being recognised for its attractiveness when it comes to future investors. Something which continues to show a level of confidence in the country in this quarter and for many more to come.
“The deals during Q3 also continue to showcase the UK’s growing role in being a hub for frontier tech across a range of areas including AI and crypto.
“This is a massive shot in the arm of firms looking for investment across the UK and provides a very strong platform for future growth and renewed interest despite headwinds from geopolitical conflicts and trade concerns.”
This means, across the first quarters of the year, the UK has seen £11 billion invested across 1,536 deals so far.
Looking ahead, trends expected for quarter four include VC investment in cleantech, AI and defence tech-based firms.
Elsewhere in the world, global VC investment rose from £84 billion in Q2 to £90 billion in Q3 across 7,579 deals.
The Americas led with £63 billion across 3,474, while Asia saw muted investment at £12.6 billion across 2,310. AI continued to dominate VC activity, with significant funding rounds for AI model development and applications. The US accounted for most of the VC investment in the Americas, while Europe as a whole saw solid growth with £13 billion across 1,625 deals. Looking ahead to Q4, global VC investment is expected to remain stable, with AI continuing to dominate. Robotics and defence tech will also continue to be focus areas.
“AI is obviously the biggest ticket right now for VC investors globally. If startups aren’t embracing AI in some way, shape, or form, it’s very difficult for them to attract attention,” said Conor Moore, Global Head, KPMG Private Enterprise, KPMG International.
“Many of the industries where we’re seeing strong investment are being driven in part by AI-driven solutions—like defence tech and health tech—or by their importance to the AI ecosystem—like energy and datacentres.”
