London Calling: impact tech investments continue rapid growth
Impact technology (impact tech) covers technological solutions addressing one or more of the UN’s 17 Sustainable Development Goals (SDGs). The SDGs were drafted in 2015 and tackle climate action, clean energy along with societal issues such as poverty, education, inequality, prosperity, peace and justice.
Impact tech startups have grown during the five years since 2015 as companies solve or alleviate climate or societal problems through technology. Not surprisingly, these startups have gravitated towards cities with a track record of tech savvy and here we find London to the fore. The much-heralded Silicon Roundabout in East London has been a magnet for cutting-edge tech startups and the “hipster” tag associated with the area has brought in funding from investors who might avoid traditional financial institutions.
A report recently published by London & Partners (London promotion agency) and Dealroom.co (startups database) quantifies the venture capital (VC) investment pouring into impact tech companies. It shows a 2.8 times increase globally between 2015 and 2020 and places London, along with San Francisco, at the vanguard of the movement.
London, with an almost eight-fold hike over the five years, has further bucked the market contractions caused by the Covid-19 pandemic by attracting $1.2bn (£900m) VC investment in impact tech companies between January and October. This matches the full-year total for 2019.
The growth of impact investment in London startups is also highlighted by the foothold gained in the overall financial markets where the sector accounted for almost 15% of total VC investment this year so far. During 2020, London has seen three new impact unicorns (startups with a valuation in excess of $1bn) – Octopus Energy, Gousto and Arrival – join the existing Babylon Health.
London still trails San Francisco which has seven impact unicorns and has attracted $1.8bn in VC investment in impact tech companies in 2020. The two cities have combined since 2006 to further the cause of technological entrepreneurship through the Silicon Valley Comes to the UK (SVC2UK) series of events. Its success is evident as American investment in London impact tech companies this year amounts to at least $223m (£168m) and the trend is reciprocal with both Arrival and Octopus Energy launching operations in the U.S.
Impact tech investment, along with climate tech investments and the growth of sustainable bonds, is further evidence of how sophisticated and conscientious VC investors have embraced the duality of investing wisely and “building back greener”.