New research has found that San Francisco and London have become two of the world’s leading hubs for VC investment into tech solutions which address one or more of the 17 UN’s Sustainable Development Goals (SDG), more commonly referred to as ‘Impact Tech’. They are followed by Paris, Berlin, Stockholm, Shanghai and Beijing.
Tech solutions for such pressing issues as the climate crisis and social inequality has seen a 280% increase in global VC investment from 2015 to 2020, while investment in this space more than doubled in both cities over the past five years. The report was put together by London & Partners and Dealroom as part of this week’s Silicon Valley Comes to the UK virtual event. Over 5,000 startups were surveyed to create the data.
According to the research, VC investment into London-based impact tech start-ups has grown by almost 800% (7.8 times) since 2015, compared to 3.1 times in Europe as a whole. 2020 is set to be a record year for London’s impact tech companies, which have received $1.2bn in VC investment from January to October, already matching 2019 levels. London’s impact firms have also secured 429 deals between 2015 and 2020, more than any other city globally.
San Francisco’s impact based tech companies have also shown strong growth over the past five years, with the data revealing that VC investment into its impact tech companies has almost tripled (2.8 times) from 2015 to 2020. So far this year, SF-based impact tech companies attracted $1.7bn of VC investment in 2020 – more than any other city globally. At a national level, the United States received more VC funding for impact tech companies than any other country in the past five years, with investors pumping $35.8bn into US firms since 2015, double the amount invested into China ($16.8bn) and the United Kingdom ($6.1bn).
The research also found that UK capital has produced 241 impact start-ups since 2006, with 95 companies founded in San Francisco. In London, ‘impact unicorns’ include Octopus Energy (green energy), Arrival (zero-emission, public transportation vehicles) and Gousto (food) and Babylon Health (AI healthtech).
Climate change and clean energy solutions have attracted the most interest from investors in both cities, making up over 50% of overall VC investment over the last five years. Funding rounds including at least one North American investor made up $234m of VC investment so far this year in London, up from $85m in 2018, and equating to a fifth of all VC investment into London’s impact startups.
Funding rounds for London impact companies involving North American investors in 2020 include a $118m growth equity round into Arrival by Blackrock, an $80m Series B round for COMPASS Pathways and a $25m Series C funding for Tractable.
Meanwhile, Impact startups are crossing the pond in both directions. Arrival is now operating in Los Angeles, while Octopus Energy launched in the US market in September after closing a $360m funding round in April and acquiring Silicon Valley-based startup Evolve Energy. And San Francisco-based Allbirds, the sustainable shoe retailer, opened its first European flagship store in London in July 2018.
Commenting, Janet Coyle, managing director for business, London & Partners said: “San Francisco and London are two of the world’s top hubs for innovation and technology. But today’s figures also show that they are leading the way in creating purpose-driven companies striving to tackle some of the most pressing environmental and social challenges.”
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