Leveling up AI: SW England tops list for average AI funding as North of England skyrockets
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LONDON, UK, 31st JULY 2024 - New analysis from the O3 platform, an AI-powered venture classification platform developed by the University of Oxford and OpenOcean, has revealed surprising insights into the UK's AI startup funding landscape. The findings challenge the common perception that London has always dominated the sector, showing that, between 2012 and 2021, the average funding per AI startup was actually higher outside the capital. In fact, in 2023, despite having over half of the AI startups in the UK, London was only the fourth-highest UK region for average funding.
South West England, for example, secured $17.6 million per startup, more than three times higher than North West England, and Scotland attracted $9.0 million per startup in 2023, nearly twice that of the North West. 2022 was the first year on record where London-based AI startups raised more on average ($11.3m) than those outside London ($9.5m).
O3 uses a unique taxonomy to understand and classify startups, bringing together traditional data and deep analysis of a company’s tech stack and GTM. It has been developed by combining Oxford Saïd’s research, which started in 2019, with OpenOcean’s nearly 13 years of experience investing and growing pioneering startups from across Europe. Its current data runs from Q2 2012 to Q2 2023.
Regional AI funding gap
After London, the South East, and Eastern regions, the North West was the next in line for AI startups, with 66 AI companies and a total funding of over $326 million in 2023. The North of England has seen significant growth in the AI startup ecosystem over the past decade. In 2013, the North of England had a total funding of $9 million, but by 2023, the total funding had reached $568 million, showcasing the effects of the so-called 'AI boom' beyond the borders of London and the South East.
Other key findings from the O3 platform include:
- As of 2023, the cumulative total funding raised by AI startups in the UK was $15.2bn, with London accounting for 61% of this figure.
- The top regions for average funding per AI startup in 2023 were South West England ($17.6m), Eastern England ($15.5m), South East England ($14.7m), and London ($12.8m).
- The top cities for average funding per AI startup in 2023 were Bristol ($55.0m), Oxford ($44.2m), Cambridge ($13.4m), and London.Note 6
- The pandemic had a significant impact on the growth of AI startup funding both in London and outside the capital. The annual growth rates dropped from an average of 74% and 51% pre-pandemic (2018-2020) to 40% in London and 30% outside during the pandemic and post-pandemic period (2021-2023).
Given the $15.2bn in funding secured by AI startups since 2012, the AI hype continues to build as founders seek to capture a part of this growing market. An increasing number of startups are eager to join the ‘hype’ and capitalise on the technology's promise, with the number of AI startups increasing by more than 8 times since 2012.
In accordance with the number of startups attempting to join this wave of investment, OpenOcean’s internal data showed that the mention of AI technologies in startup pitches has increased significantly, from 10% in 2022 to 27% in 2023. By 2024, OpenOcean expects over one-third of startups to reference AI in their investor pitches.
Ekaterina Almasque, General Partner at OpenOcean, said: “We're thrilled to see the O3 platform continue to provide unparalleled open-source access into the UK's AI startup ecosystem. This latest data analysis not only highlights London's impressive funding total, but also underscores the pressing need for increased support and investment across all regions. The surge in AI-related pitches shown by our internal data highlights the growing awareness and enthusiasm among startups, as well as the increasing pressure to showcase AI capabilities to attract investors in a competitive funding landscape.
“While London's success is a testament to the UK's potential, we must recognise that continuing to foster growth and innovation throughout the country is essential to maintain our competitive edge. Other nations are already investing heavily in nurturing the next generation of AI leaders, and the UK cannot afford to be left behind. The O3 platform's insights provide a roadmap for targeted investment and support that will create a more balanced and thriving AI ecosystem across the UK. By working together and strategically investing in AI development in all regions, we can unlock the UK's full potential and cement our position as a global leader in AI.
“As the election approaches, it is crucial that policymakers and industry leaders prioritise the development of a comprehensive AI strategy that ensures the UK remains at the forefront of this technological revolution. The decisions we make now will shape our future success in the AI-driven world, and secure our place as a pioneer in this field.”
About O3
The O3 platform aims to improve the health of the entire technology ecosystem by providing highly accurate, granular information about the underlying technology and go-to-market approaches of technology ventures. The open-source dataset serves as a valuable tool for founders, investors, and policymakers to identify opportunities, shortfalls, and areas of excellence in the UK's AI startup landscape.
To access the O3 platform, follow the link here: https://o3.ventures/
About OpenOcean
OpenOcean is an early-stage venture capital firm investing across Europe with offices in London and Helsinki. With an entrepreneurial background from building several category-defining software businesses, we engage with founders to build and scale global companies delivering data solutions for the new economy. OpenOcean typically leads or co-leads Series A funding rounds.
