December 20, 2023

Funding troubles, privately-educated VCs and the fall of fintech: UK tech in 2023

Sifted looks back on a choppy year in UK tech

2023 has been a sobering year for the UK tech sector.

It marked a definitive end to the post-Covid boom times as investors continued to tighten the purse strings. 

Growth funding was the worst hit: the total value of $100m+ rounds dropped by more than half compared to the $42.2bn in 2022, and more than two thirds on the record $61.9bn set in 2021. Early-stage rounds have fared better, falling to $39.3bn in 2023, from a record $56.5bn in 2021.

Despite all that, total funding still remains higher than in both 2019 and 2020, both themselves record years before 2021.


Fintechs bagged the biggest rounds of 2022, but the sector has hit its own choppy waters, and VCs have begun to pump money into climate tech and AI: the weightiest cheques have been spread more evenly across the tech sector this year. 

EV battery scaleup Zenobe Energy raised the biggest UK round of 2023, picking up £870m in September. Autonomous vehicle company Conigital raised £400m and dog food company Butternut picked up £280m — also both in September. 

Fintech Abound, energy company OVO Energy, and AI SaaS platform Builder all raised north of £150m. 

Despite those hefty rounds, the UK unicorn stable has seen very few newcomers this year as tech valuations have tumbled. Just two freshly minted $1bn companies have joined their ranks in 2023 — AI startup Synthesia and AI-powered financial crime startup Quantexa.

But what else has been happening on the UK tech scene this year? Sifted looks back through its coverage of a tumultuous 12 months, to bring you the key moments of 2023. 

New funds fall to lowest levels since 2017

43 new UK VC funds were raised in 2023 — the lowest number for six years — as LPs played it safe amid global economic uncertainty. 

Emerging managers felt the brunt of LP nervousness, but several funds managed to convince the folk with the money to write hefty cheques.

Atomico and Highland Europe raised the biggest funds of the year, both picking up funds of €1bn or more. Dawn Capital raised a record $620m fund to back B2B startups at Series A and B alongside an $80m follow-on fund.

Northern Gritstone also raised a £312m fund to back spinouts in the North of England, Notion Capital raised a €300m fund to back SaaS and fintech companies at Series A and deeptech VC IQ Capital announced the first close of a $200m investment vehicle. 

A bad year for fintech

2023 saw fintech lose its crown as the country’s top-funded startup sector for the first time in a decade.

Funding has hit just $3.3bn so far this year, falling 72% from $11.7bn in 2022 — a similar drop to fintech funding across European tech as a whole — but far further than the broader UK tech sector.


Late stage capital has seen the biggest dip — but investor nervousness has also begun to trickle down to the earlier stages, too.

Aside from funding, there have been other stumbling blocks for the UK’s biggest fintech darlings.

Neobank Revolut’s bid for a banking licence has continued to fall foul of the UK regulator and Sifted sources say a number of the company’s shareholders have internally marked it down from the £27bn valuation it hit after a SoftBank and Tiger raise in July 2021. also slashed its internal valuation and laid off a number of staff.

The rise of AI

Unless you’ve been living under a rock for the past 12 months, it’ll come as no surprise that the two new unicorns to grace the UK stable in 2023 were both AI startups — but the UK government has also been scrambling to carve out its place in the brave new world of AI. 

In November, Britain hosted the world’s first global summit on AI, as it looked to stake a claim as a global leader in the field.

While some questioned the UK’s credentials to blaze a trail in AI, the summit was broadly hailed as a diplomatic success, bringing together senior Chinese and US officials, as well as seeing appearances from European Commission president Ursula von der Leyen and Elon Musk. 

But despite the UK playing host, the US came out calling the shots. US vice president Kamala Harris said the US voluntary commitments to responsible AI practices, adopted by a range of large AI labs in the US, are just an “initial step” toward legislation on AI safety. She added that those domestic policies will “serve as a model for global policy.”

The fall of Babylon

2023 was the year that one of the UK’s first generation of tech darlings died. 

Healthtech Babylon, which listed in the US at a $4.2bn valuation in 2021, collapsed after it ran out of money over the summer — following a months long will they, won’t they (go bust) narrative. 

So, what happened? 

In June, Babylon shareholders were wiped out as the company’s debt funder, AlbaCore Capital, stepped in to take it private after stock value fell off a cliff. Then in August, it was announced that the deal AlbaCore had brokered to form a new entity with Babylon and Swiss digital therapeutics unicorn MindMaze had fallen through. 

Babylon abruptly exited its US business (which brought in the vast majority of its $1bn annual revenue) and scrambled to sell what remained of its UK operations. The pieces of the business the company did manage to sell brought in less than $7m. Just 0.17% of the $4.2bn Babylon was once worth.

It was a seismic fall but, for many industry watchers and former employees, the writing was on the wall.

UK tech still flounders on inclusivity

Women are paid less than men at 19 of the UK’s 20 best-funded tech companies, according to the government’s 2023 gender pay gap filings. 

While a pay gap doesn’t necessarily mean a company pays women less for the same jobs as men, it does point to a lack of women in the highest-paid roles at startups. 

​​Companies like Cazoo,, Deliveroo and Revolut all have pay gaps wider than the national average in the UK — which sees women earn 90.6p for every £1 men earn. The only scaleup that didn’t have a pay gap was energy provider Octopus Energy. 

There are big imbalances among the UK’s investor community, too. 

A recent report from Diversity VC found that socioeconomic background has a huge impact on the type of people that get jobs in the industry. 

71% of partners at UK VC firms attended a fee-paying school, dropping to 45% for all roles at VCs — compared to just 7% of the wider UK population that’s privately educated.

Tech nation shuts down… and starts back up again

At the start of 2023, UK startup organisation Tech Nation announced it would cease operations in March after the government awarded key funding to Barclays.

A chorus of outrage from UK tech founders followed — and more than 400 entrepreneurs signed an open letter calling on the government to rethink its decision to award the grant to Barclays. It didn’t.

But in April, it was announced Founders Forum Group has acquired what was left of Tech Nation and the organisation relaunched in October. Founders Forum CEO Carolyn Dawson said it would continue to run its visa programme until at least the end of 2024, and a more slimmed down list of programmes would kick off in the new year. 

Mixed year for government support

2023 saw the UK government launch something of a tech charm offensive. 

Alongside hosting the AI summit, it announced a plan to direct £75bn from pension funds to startups, greenlit plans to rejoin the EU’s €95bn research funding scheme Horizon Europe and saw Prime Minister Rishi Sunak travel to Silicon Valley to promote UK tech companies as part of oddly-named campaign “Unicorn Kingdom”.

Despite all that, midway through the year there were signs that the UK tech sector had fared worse than many other ecosystems. And some of the UK’s most renowned tech leaders didn’t hold back in their criticism of the country’s support for its startup sector. 

Monzo founder Tom Blomfield described the UK as “not always favourable to ambitious founders” and upped sticks to Silicon Valley. Revolut’s Nik Storonsky said the country’s tech sector had experienced a “slowing down”. Blossom Capital’s Ophelia Brown said it’d been over two years since her fund saw a UK tech company it wanted to invest in.

Silicon Valley Bank

For one weekend in March, UK startupland stood still. 

On Thursday March 9, US regulators closed down SVB UK’s parent bank in California, and the following day British operations were placed into insolvency proceedings. Cue two days of nail biting from founders as major uncertainty around what would happen to startups’ deposited cash reigned. 

“The 48 hours over the weekend were terrifying and one of the most difficult things I’ve faced as a founder,” said one

The government stepped in to help find a solution and a number of potential buyers emerged on Saturday and Sunday, before it was announced on Monday morning that HSBC had bought Silicon Valley Bank UK for the princely sum of £1

Note: Funding data pulled from Dealroom on December 8.

Kai Nicol-Schwarz

Kai Nicol-Schwarz is a reporter at Sifted. He covers UK tech and healthtech, and can be found on X and LinkedIn