UK VC Investment in Q3 Dominated by Health Tech and Life Sciences

UK health tech startups have experienced a remarkable surge in venture capital (VC) funding in 2024, raising a total of $2.3 billion year to date, including nearly $1 billion in the third quarter alone. This impressive growth positions the health and life sciences sector as the fastest-growing area for VC funding in the UK, according to recent analysis from HSBC Innovation Banking UK and Dealroom. This increase reflects a significant rise from previous quarters, as the sector climbed from fifth place in Q2 to joint second place alongside enterprise software for the year, only trailing behind fintech.

Among the notable funding highlights in Q3 2024, three of the largest VC rounds were secured by biotech firms Myricx Bio, ViceBio, and F2G. The sector has also produced half of the unicorns created in the UK this year, including notable companies such as EyeBio, IntraBio, and IIElevenLabs, underscoring the growing investor confidence in health and life sciences.

The UK has established itself as a leader in the femtech sector, attracting $652.9 million in VC funding since 2019. This figure surpasses the combined investment received by femtech companies in Germany, Belgium, and France over the same five-year period. A standout achievement in Q3 2024 was the $200 million funding round for newly-minted femtech unicorn Flo, making it the largest UK VC round of the quarter. Flo's success not only secured its place as Europe’s first femtech unicorn, with a valuation exceeding $1 billion, but it also ranks as the fourth-largest femtech funding round globally.

Overall, UK startups raised $2.9 billion in new funding during Q3 2024, with the largest share coming from Series B and C rounds. While this represents a decline from Q2 levels, it aligns with seasonal trends typically seen during the summer months, when investment activity often slows.

Despite this slowdown, UK venture capital firms are projected to raise a record $12.2 billion in additional dry powder by the end of 2024, surpassing the previous record of $11.5 billion from 2021. This significant influx of capital indicates a strong outlook for the UK VC market heading into 2025. So far this year, $9 billion of dry powder has been raised by UK VCs, fueled by the launch of new funds from notable investors like Index Ventures, Atomico, and Balderton Capital.

In terms of regional performance, the UK ($12.4 billion) remains the top destination for startup innovation and investment in Europe this year, raising nearly as much VC funding as Germany and France combined ($13.2 billion). London continues to assert its dominance as Europe’s leading innovation ecosystem, attracting $8.7 billion in VC investment. Meanwhile, cities such as Cambridge and Oxford have emerged as significant hubs for VC funding, with Edinburgh, Manchester, and Nottingham experiencing over 100% growth, particularly in biotech and sustainability sectors.

Foreign investment, especially from the US, plays a crucial role in supporting UK startups, accounting for over 70% of VC investment in UK companies in 2024—one of the highest proportions to date.

Simon Bumfrey, Head of Technology and Life Sciences at HSBC Innovation Banking UK, commented on this positive trend, stating, “2024 has seen several top global funds actively raising capital to be deployed in UK start-ups and scale-ups at all stages of growth, with UK-based funds anticipated to raise record levels. This deep pool of liquidity is testament to the opportunity that many see in the UK innovation ecosystem and signals a buoyant outlook for 2025 and beyond.”

As the health tech landscape continues to evolve, the significant investments and growing interest in UK health and life sciences startups indicate a promising future for innovation and development within the sector.