How the UK can turn DeepTech ambition into global leadership
by David Grimm
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Over the past decade, DeepTech has become a strategic pillar for the UK, with the potential to build global category leaders. Nowhere is this more evident than in the once-overlooked but now thriving field of Compute—a DeepTech subsector pioneering new computational modalities and technologies. Investment in this highly technical space has surged, fueling the rise of highly promising startups. This essay explores the key trends driving this momentum and what’s needed to unlock Future of Compute’s full potential.
A decade of growth and resilience for DeepTech
Today the UK is home to 5,613 deeptech companies that have raised over £32 billion over the past decade, with £9.68 billion raised in 2023/2024.
Despite an 18.4% reduction in the number of deals from 2023 to 2024, mirroring the broader 24% drop in the equity market, DeepTech companies raised more funds in 2024 (£5.19b) than 2023 (£4.49b).
The underlying trend is that the proportion of deals that are significant enough to drive companies through inflection points and create value has also been growing. Before 2020 the average proportion of deals over £2m was only 15%. In 2024 that had nearly doubled to 28%. Not only have there been a lot more deals, but crucially an even greater growth in deals of significant size.
Transformational rise in the number of startups, investment, and substantial rounds across the Future of Compute
While DeepTech as a whole is fundamental to the UK economy, at AlbionVC we believe that a pivotal focus for UK tech over the next decade will come from the Future of Compute companies as they sit at the heart of enabling the AI paradigm shift and are core to building tech stack that will enable AI to transform whole industries.
Ten years ago the whole UK sector raised only £3 million via two funding rounds compared to a quarter of a billion (£284m) raised in 2024 across 31 rounds.
Future of compute companies raised on average £5.3 million more per deal than the wider deeptech cohort. This is to be expected as, by its very nature, the sub-sector is particularly deep, requiring significant capital to make progress and almost exclusively driven by fundamental innovation from universities.
There were more significant Future of Compute deals in 2024 than in the entire five years from 2015 to 2019.
In 2015, no equity deals in Future of Compute exceeded £10 million, but by 2024, nearly 40% did. This marks a notable transition towards larger investments, as deals under £100k have steadily declined, representing just 3% of all transactions in 2024. The moment is also accelerating with 12 investment rounds exceeding £10 million in 2024, double the number in 2023. In our own portfolio, a UCL photonics spinout, Oriole Networks, raised £27.5 million within 18 months of incorporation.
According to data from Beahurst, the quantum computing segment with the Future of Compute is delivering strong results with companies in the segment topping the list of the fastest growing companies (Oxford Ionics, AegiQ and our own portfolio company Phasecraft) and the ranking of top investment recipients (Oxford Quantum Circuits raised £79.5 million, Riverlane raised £73.6 million, and Quantum Motion closed £42.5 million round). More on the analysis here, and a full list of 69 Future of Compute companies to watch here.
What’s behind the growth
A number of factors are behind the transformation in the investment landscape.
At the macro level there is a recognition that technological breakthroughs are needed to help solve the world’s biggest problems – climate change, aging population and falling productivity. Solutions to these hinge on fundamental innovation and applying scientific research to practical problems. Thus the once unsexy field of DeepTech now attracts the attention of aspiring entrepreneurs, investors and policy makers.
The increase in the amount of funding available to DeepTech startups has made it possible for the companies to grow to significant size. With a saturated software market, where it’s increasingly difficult to find value, the attractiveness of DeepTech has led to VCs and LPs increasingly looking to DeepTech to generate returns. A near doubling in the amount invested in £2m+ DeepTech rounds between 2019 -2024 means that the current generation of startups have a strong capital base to scale into global leaders.
A decade ago, UK founders’ ambitions were constrained by the availability of capital, and were often forced to sell too early. Today, UK DeepTech startups are raising globally significant funding rounds – recent notable ones being the £104m raised by AlbionVC backed AI unicorn Qunatexa, the £217m raised by a UCL spinout Synthesia, and £833m raised by AI self-driving car startup Wayve.
A DeepTech talent fly wheel is starting to emerge with the early successes recycling talent. Founders and employees who cut their teeth at startups like ARM, Darktrace, DeepMind and Graphcore are helping to build the next generation of companies. According to the recent Lakestar/Dealroom report, former DeepMind employees have launched 25 companies with a combined $1.7bn funding, while former Darktracers have launched eight companies with $29m raised between them.
When it comes to the Future of Compute, the urgent need for breakthrough innovation is even more evident as Moore’s Law falters while the AI-driven demands for computational power surges. The previously unsexy fields of semiconductors, quantum and photonics are now hot as the thinking has moved beyond just squeezing more transistors on a chip to keep up with the demand. Companies like Nvidia exemplify how critical advanced hardware is to the software revolution. Big tech’s commitment to the sector is driving growth in the space. Indeed,Sam Altman, CEO of OpenAI, has consistently emphasised that access to compute power is the primary constraint on AI development, not talent or algorithms.
A vibrant early-stage investment ecosystem has emerged
Today in the UK there is a good spread of experienced and collaborative DeepTech investors:
Angel investors are a critical part of the investment landscape, with the most active ones listed below:
Cambridge Angels, a syndicate of experienced entrepreneurs focused on £150k to £1.5m, are a key player for early-stage ventures with 80 DeepTech companies backed by the most active angels as of January 2025.
Opportunity for UK tech
The UK has strong foundations in place with world class research and strong technical talent. The country is home to four of the world’s top ten universities, producing world class companies like DeepMind and Synthesia from UCL, and ARM and Darktrace from the University of Cambridge.
At AlbionVC we believe that there is still more to come. Just like the US, the UK has four of the top ten global universities (two are London-based), yet over 60% of global spinout capital goes to the US and just over 10% to the UK. The US outpasses the UK 12x in the number of spinout unicorns created.
As the UK DeepTech ecosystem continues to mature, it will help unlock significantly more value from its world-class research base. Understandably, London’s supply of capital, talent and potential first customers centres the ecosystem on the capital:
42% of all DeepTech companies in the country are based in London, with Cambridge and Edinburgh coming second and third in the top local authority ranking by the number of active DeepTech companies.
When it comes to the number of university spinouts, the London ecosystem, represented by Imperial College London and UCL, ranks second with a combined total of 71 spinouts:
Exits are still few and far between, and very few crystalised unicorn returns. While the overall number of exits has gone up over the decade, the number of exits of above £100m remains low, with only five in 2024 (see below).
As the recent Lakestar/Dealroom report notes, it typically takes DeepTech companies 11 years to reach $10m in revenue. Looking back at the funding landscape and DeepTech ecosystem in 2015, it’s not a surprise that we haven’t yet had a lot of success stories. However, with signs of maturity now appearing in the ecosystem we can expect to see a great number of unicorn exits.
What’s needed to unlock the opportunity
With UK DeepTech gaining momentum, now is the time to double down and maximize the value created from one of the UK’s core strengths—its science and research base.
At the top of the pipeline, the government’s spinout review was a positive step towards improving the process of commercializing university innovations. Many universities are making progress with their policies and workflows, but too much friction remains. Greater standardization—particularly in reducing the time it takes to spin out companies and begin commercial operations—would help. VC-backed startups thrive on speed, and this execution-first culture must be embedded from the start. Slow, drawn-out negotiations hinder progress.
Talent is another critical factor. Simplifying the process of hiring and retaining global talent significantly improves the success rate of early-stage startups. We welcome the chancellor’s ambition to ease the hiring of high-skilled workers and look forward to further details in the upcoming white paper.
Finally, while DeepTech investment is growing, capital constraints remain—especially at the growth stage. As sovereignty in critical sectors like Compute, AI, Defence, and Future Energy becomes increasingly vital, the government could help fill this gap. The government could consider establishing a series of vertically focused sovereign wealth funds to support companies that have scaled to the point of needing £100m+ funding rounds, ensuring they remain competitive globally while securing local backing and helping to consolidate UK innovation into full-stack solutions. For instance, imagine a UK supercomputing capability built on the latest wave of domestic compute innovations.
By harnessing the UK’s world-class research base, streamlining spinouts, attracting top global talent, and securing the right growth capital, we can unlock unprecedented value from UK DeepTech. With the right support, the next generation of breakthrough companies will not only drive economic growth but also shape the future in critical areas like AI, clean energy, and advanced computing—cementing the UK’s position as a global leader in innovation.