UK startups are considering switching to us as a fund fall to low after funds die

Investments in UK startups have dipped to a post-pandemic low-minded attitude, with fledgling technology groups looking to move their headquarters to the US in a capital search.

The research company’s dealroom figures showed that the UK startup raised just £16.2 billion in 2024 at its lowest distance since 2020. In contrast, Silicon Valley peers raised over £65 billion over the same period, up 71% from 2023.

Chief executives of several UK startups told the Financial Times that their desire to attract American investors had already urged them to incorporate them into the US despite their London-based company.

“We were founded as a Delaware company, recognising that most venture funds are from the US, a familiar structure that is favorable to US investors.”

Of the 70 high-tech startups in the UK, it is now headquartered in the US, making it almost the fifth since 2020.

This trend points to the burgeoning AI sector as a potential route to economic growth, so startup founders and investors say the quality of UK engineers and tech staff suits American contemporaries.

However, fledgling companies warned that the difficulty in accessing capital is that it prevents UK companies from competing with global peers. In the past, major UK technology groups from Deepmind to Arm have also been acquired by much larger international investors.

Barney Hussey-Yeo, which has raised $140 million since its establishment in 2016 by London-based AI startup Cleo, said it is considering moving from the UK. He said the draw to move to the US was “stronger and stronger each year,” pointing to a better investor mindset and the UK government’s recent decision to increase capital gains tax.

Hussey-Yeo, who already spends four months a year in San Francisco, “We’re reaching certain sizes where the UK has no capital. The problem is getting worse,” he added. “To be honest, if the UK doesn’t deal with it then it’s a bit f**** (issue).”

Alex McDonald, who recently launched his second startup, has chosen Miami as its headquarters with a British subsidiary structure designed to avoid later relocations.

“I am an investor too. My advice to current founders is to incorporate it into the US with a UK subsidiary, while improving access to capital.

MacDonald, who hired a large portion of his operations team in London, said that the talent in the UK is in a much smaller geographical area, if not better than the US.

“The UK is a great place to start a business, but we need to see changes, such as encouraging pension funds that invest in venture capital, driving further startup growth,” he added.

The UK pension industry has historically been reluctant to invest in the private market compared to its overseas counterparts. A New Financial, Think-Tank survey found that last year the UK pension scheme invested just 5% in private equity.

Last month, UK pension minister Torsten Bell said it was pushing for retirement funds to invest in the private market as part of a broader government plan to improve performance and consolidate UK pension assets of £130 million.

Two UK-educated founders in their early 20s, Timon Gregg and Kylin Shaw said they incorporated the company into the US as investors and clients have improved attitudes.

“US clients and investors are willing to try faster and more. The level of ambition is completely different,” said Greg, who introduced AI insurance business stralas in San Francisco last year.

Shaw, who also moved to San Francisco, health technology company Hippos Exoskeleton, said, “The mentality is different. People want to take risks.”

Last year, 57% of global venture capital companies entered US startups, surpassing 50% for the first time in a decade, and has increased by 30% since 2023, according to a Dealroom survey.

In contrast, UK startups received only 4.8% of global funding, with total investments falling by 11% over the same period.

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Techuk’s Associate Chief Executive Antony Walker said that if more was not done to correct the growing “investment gap” with the US, the country “is at risk of losing its brightest companies to the international market.”

“Without action, many high potential SMEs will consider moving abroad and sacrificing UK employment, tax revenue and economic growth,” he added.

Dom Harras, who founded the startup coalition, an industry group, said the UK is a victim of its own “partial success.”

“We have created a technology ecosystem that is worth scrutinizing for the founders by US and other international investors,” he said. “We need a real plan to encourage them to stay.”