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1、Understanding the UKs high-growth artificial intelligence companiesNovember 2023 Executive summary In the rapidly evolving landscape of artificial intelligence,the UK stands out as a leading hub of innovation.Though the nations Artificial Intelligence(AI)industry is in its infancy,high-growth AI com
2、panies are attracting unprecedented public and private investment to fuel their expansion.The UKs 1,797 active,high-growth AI companies are highly concentrated in Greater London,with 1,027 companies,or 57.2%,headquartered in the capital.This can be attributed to many factors,including talent availab
3、ility,better infrastructure,and government support in the capital.Another populous region is the East of England,with 133 companies,and a notable cluster in the Cambridge region.Many AI companies operate in the software-as-a-service,internet platforms,and mobile apps sectors,offering tools like bank
4、ing apps and eHealth platforms.Fintech is another significant sector,with AI aiding in automation,fraud prevention,and service quality,as seen by companies like Thought Machine.Equity investments have fueled AI growth,with early-stage businesses benefitting significantly.High-growth AI companies wit
5、hin the UK attracted 3.21b in 2022 via 746 deals,indicating strong investor confidence.High-value deals in diverse sectors show the sectors expansive impact.Amongst investors,SFC Capital leads in terms of UK equity deals in AI,participating in 104 deals since 2013,leveraging SEIS and EIS funds.Merci
6、a Asset Management invests outside London,partnering with universities to support spinouts.Crowdfunding platforms also actively fund AI ventures.The UKs AI sector shows a significant gender disparity,with 78.7%of companies having all-male founding teams and only 6.62%being all-female.Efforts are und
7、erway to enhance diversity,with initiatives like the Barclays Female Founder and Black Founder Accelerator.Age-wise,founders aged 30-59 are predominant,suggesting challenges for younger entrepreneurs.66.3%of these founders are UK nationals,underscoring the domestic origin of AI innovation.Amongst th
8、e top 200 active AI companies from 2013-2022,ranked in terms of equity raised,41.7%of founders obtained masters degrees,30.7%bachelors,and 22.3%PhDs.Oxford and Cambridge lead in founder alumni,followed by Imperial and UCL.Notably,some founders attended global universities like Toronto,Harvard,and St
9、anford.Despite the relatively nascent nature of the AI industry,there already exists a promising cohort of companies nationwide that are securing substantial public and private funding to bolster their expansion.As AI becomes increasingly more integrated into various sectors,companies within the AI
10、industry will continue to experience increases in investment,fuelling innovation and technological advancements.Page 1Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutIntroduction to artificial intelligenceArtificial Intelligence
11、(AI)refers to the technologies employed to perform tasks that would otherwise require human intelligence.AI has evolved to impact a myriad of sectors across the UK ecosystem,including healthcare,finance,and manufacturing.Today,AI technologies are at the heart of groundbreaking applications in patter
12、n recognition,problem-solving,and process automation.In recent years,AI has become a household name by embedding itself into common consumer goods and services.Within its expansive wealth of applications,AI encompasses a range of sub-techniques,including machine learning,deep learning,natural langua
13、ge processing,and robotics.Amongst these,machine learning is one of the most prominent branches,as it involves the analysis of large datasets by mimickinghuman learning patterns and refining its performance over time.Machine learning is prevalent in diverse applications,such as speech recognition,se
14、lf-driving cars,and cybersecurity.The accelerated growth of AI has fuelled considerable debate and given rise to multiple ethical and legal considerationsincluding recent debates as to how the dataset models used to train machine learning algorithms can introduce bias and error to its AI models.Reco
15、gnising the challenge,governments are instituting regulatory frameworks to mitigate associated risks.The UK,in particular,has outlined the core principles of transparency,safety,and accountability,as guidelines for integrating AI within various industrial sectors.This strategy aims to optimise the b
16、enefits of AI-driven innovation while safeguarding societal interests.Moreover,these concerns have been addressed at the recent AI Safety Summit in November,with a direct focus on how to best manage the risks from advances in AI and further understand the variables influencing the potential risks.A
17、key takeaway from the summit was the necessity for a global regulatory framework to collectively manage the risks posed by AI.The AI market in the UK is currently valued at more than 16.9b,with projections indicating an exponential increase to 804b by 2035.1 Various factors are catalysing this growt
18、h,including the increasing ubiquity of data,technological advancements,and a surge in demand due to the post-pandemic digital transformation.Geographically,despite a higher concentration of AI clusters in London and the South East,there has been nationwide growth across the last five years.The UKs s
19、tartup ecosystem is supported by leading AI research centres,often affiliated with academic institutions.Investors in both Cambridge(Cambridge Innovation Capital and Cambridge Enterprise)and Oxford(Oxford Sciences Enterprises,Oxford Technology and Innovations Fund)have been active backers of AI star
20、tups.Furthermore,the UK government is vigorously endorsing AI initiatives through various funding mechanisms,which has led to the technology becoming widely adopted and integrated.International tech giants like Google,Amazon,and Hewlett Packard Enterprise(HPE)have also substantially invested in the
21、UKs AI landscape,amplifying its growth prospects.Financial support through funding and grants continues to encourage early-stage businesses within this industry.Innovate UK,the UKs national innovation agency,has further earmarked 100m specifically for Page 2Executive summary Introduction Business de
22、mography in the UK Funding and innovation Ecosystem Founders Methodology About1 United Kingdon Artificial Intelligence Market AI and machine learning projects,2 thereby providing substantial momentum for technological advances in this realm.This report examines the 2,319 active or historically activ
23、e high-growth AI companies within the UK.The large number of high-growth companies in this sector indicates a fertile ground for investment,thus driving innovation.These companies serve as vital catalysts for technological,economic,and social growth.Their collective impact is further enriched by the
24、 ecosystem of academic collaborations,governmental partnerships,and cross-industry applications.By increasing and supporting the number of high-growth AI companies in the country,the UK can ensure development and competitiveness across the budding industry.To qualify as an AI company for this report
25、,the business must be engaged in the development or application of AI technologies.The report underscores the diversity of AI-related businesses and expounds on the sectors considerable potential.Page 3Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Foun
26、ders Methodology About2 Innovate UK launches 100 Million AI fund for UK Business The highest concentration of high-growth AI businesses(58.8%)is found within London,with key clusters in Westminster and Camden.The Silicon Fen cluster in Cambridge is another highly populated region,with 78 high-growth
27、 companies.The top sector for high-growth AI businesses is analytics,insight and tools(814),followed closely by software-as-a-service(734),and internet platforms(418).Over the past decade,there have been a collective 179 exits,with the highest concentration of these occurring in 2022(46).Business de
28、mography in the UKPage 4Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutRegional distributionLondon leads in terms of active company population,with over 1,000 high-growth AI businesses headquartered in the capital.The boroughs
29、of Westminster and Camden have the highest concentration,with 177 and 149 companies respectively.This position validated by the study conducted by software analytics company SAS,ranking them as the most AI-ready boroughs.The close proximity to research institutions render these locations ideal for n
30、urturing AI clusters.The East of England is another highly populated area,with 133 companies.This region exhibits a dispersed landscape,benefitting from a network of prestigious universities.The Silicon Fen cluster in Cambridge is home to 78 high-growth businesses,and has paved the way for several s
31、uccessful startups,playing a pivotal role in the technology underpinning modern AI,encompassing applications in machine learning,chatbots,and speech recognition.0Number of high-growth companies per UK region(September 2023)200+85677201331,027184Page 5Executive summary Introduction Busines
32、s demography in the UK Funding and innovation Ecosystem Founders Methodology AboutCompany spotlight:Genie AI The legal industry is increasingly adopting AI technologies in an attempt to streamline processes and improve efficiency.By developing an AI-powered legal assistant,London-based Genie AI aims
33、 to reduce the burden of repetitive tasks and provide support to lawyers.Founded in 2017 by CEO Rafie Faruq and CTO Nitish Mutha,Genie AI is a legal tech company hosting the UKs largest open-source legal template library.Whilst undertaking their masters in Machine Learning at UCL,Faruq and Mutha ide
34、ntified many AI opportunities within the legal sector and sought to create a legal assistant that could function like a knowledgeable and experienced team member.Genie AIs Legal Assistantutilises a combination of GPT-4,Claude-2,and proprietary models to read legal documents,understand questions,and
35、provide tailored answers.Even though the assistant currently is limited to drafting,reviewing and asking questions on existing documents,Mutha says:Soon users will get an AI agent which directly edits,updates,and even automatically negotiates their legal documents.”Genie AI has attended several acce
36、lerator programmes including Tech Nations Applied AI and Entrepreneur First.Alongside the 2.55m raised in equity,these experiences have facilitated significant 30-fold year-on-year in new company accounts for Genie AI.The company has also secured several Innovate UK grants,the most recent being 198k
37、 in February 2023.According to Faruq,The UK is one of the easiest countries to set up and run an international business,and the governments Industrial Strategy and AI Sector Deal has cemented its position at the frontier of global AI.Through the digitisation of public sector services and maintaining
38、 open data sets,the UK AI sector will be able to make rapid advancements.Faruq also expressed optimism about the UK governments proactive stance.Genie AIs commitment to collaborating with industries and partnering with the government is evident in its role as the sole legal tech company to participa
39、te in UK AI Safety Summit events.Shedding light on Genie AIs commitment to innovation,Faruq explains:“We are developing our own large language models(LLMs)that will outperform the next generation of foundation models at legal specific tasks.Legal accuracy is so important to us that we maintain a mod
40、el-agnostic approach,so well use Open AI or Anthropic tools(as well as our own).This is especially important for AI companies to embrace,given that were operating in an industry that is evolving at such a rapid pace.”Faruq encourages upcoming entrepreneurs to visualise future scenarios,highlighting
41、that were only at the beginning of a Cambrian explosion of new products.Page 6“The impact of AI over the next decade will be underestimated,so the government must be more nimble than it has ever been to be able to adapt and embrace the best progress.“Rafie FaruqCo-founder and CEO of Genie AIExecutiv
42、e summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutTop sub-sectorsWithin the UKs high-growth AI landscape,the leading application sector is analytics,insight and tools,with 814 companies.Due to the ability of AI to identify patterns and ge
43、nerate well-informed analysis,this sector particularly benefits from the advantages of AI tools.The sector includes Quantexa,a company specialising in the field of data analytics by harnessing the power of AI to analyse big datavast and complex datasets generated from various sources.They offer a de
44、cision intelligence platform that helps clients make more informed decisions by processing and extracting valuable insights from their data,ultimately facilitating data-driven strategies.Since its incorporation in 2016,Quantexa has raised 286m over six rounds of funding.Given the large number of bus
45、inesses offering AI-driven products and services,there is an unsurprising number of companies operating in the software-as-a-service,internet platform,and mobile apps sectors.AI tools are increasingly becoming more mobile-friendly,and are found in a number of consumer applications.These readily avai
46、lable tools might include banking applications,eHealth platforms,or personalised recommendation software.Another prominent sector across high-growth AI businesses is fintech.With 162 companies in the sector,AI is used in the automation of critical processes,identifying threats,preventing fraud,and e
47、nhancing the overall quality of service.Companies in this area include Thought Machine,a London-based banking software developer,which provides integrated solutions for managing financial products.To date,the business has raised 398m in equity via seven deals,with investors including ING Ventures,IQ
48、 Capital Fund,and Molten Ventures.Top application sectors for high-growth AI companies(September 2023)Analytics,insight,toolsSoftware-as-a-service(SaaS)Internet platformMobile appsFinTechBig dataBusiness banking and nancial servicesSecurity services(physical and virtual)Cloud computingDigital securi
49、ty73423581101329894Page 7Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutCompany spotlight:Dragonfly AIDragonfly AI develops tools that help businesses understand how their advertising grab consumer attention,using ey
50、e movement data to improve marketing strategies.Spun out from Queen Mary University of London,the company combines AI with neuroscience to understand where people are looking when viewing ads and product packagingan approach known as gaze path analysis.Founded in 2018 by co-founders David Mitchell a
51、nd Mark Bainbridge,Dragonfly AIs technology replicates human attention patterns through eye movement analysis in combination with machine learning algorithms.This results in the creation of visual heat maps,offering insights into the initial seconds ofconsumer engagement.This data can then be utilis
52、ed to optimise content for maximum impact,leading to increased sales.Among the clients in Dragonfly AIs portfolio are Diageo,GSK,and Vodafone.Since 2019,Dragonfly AI has secured over 5m in funding with support from Guinness Ventures,Foresight Ventures and Capita.King highlights the importance of fos
53、tering innovation within the organisation,stating,“All of our engineers and data scientists allocate 20%of their time to projects using new tools.Innovation has always been the driving force behind Dragonfly AIs success,and giving our talented team the opportunity to explore and experiment with tech
54、 is essential to our success.”In a competitive tech landscape,attracting and retaining top talent is pivotal to a companys success and sustainability.King acknowledges this,remarking,“One of our biggest challenges and opportunities is keeping world-class AI talent when they can earn a lot better mon
55、ey away from a start-up.For that,we need to make sure Dragonfly is an incredible place to work”.Furthermore,King emphasises the importance of leveraging the UKs emerging talent:“The UK really benefits from having strong academic foundations with our universities,which in turn creates a rich and dive
56、rse talent pool.We work tightly with universities to onboard the brightest young minds”.Despite the challenges of securing and retaining AI talent as a relatively new company,Dragonfly AI has already established an internship programme that equips university students with the skills and knowledge es
57、sential for thriving in a tech startup environment.Looking ahead,Dragonfly AI has ambitious plans for the future.As AI continues to advance and reshape industries,the company is focused on expansion,specifically into the US market.This move represents its commitment to global innovation and belief i
58、n the transformative power of technology.Page 8“The landscape of AI is extremely dynamic,the next few years will really determine if the UK can compete on the AI stage with the US and Europe.“Steve KingCEO of Dragonfly AIExecutive summary Introduction Business demography in the UK Funding and innova
59、tion Ecosystem Founders Methodology AboutExited companiesBetween 2013 and 2022,179 companies successfully achieved exits,either in the form of an acquisition or initial public offering(IPO).Notably,46 of these exits took place in 2022,marking a substantial 21.0%increase compared to the previous year
60、.Acquisitions dominated the exit landscape,constituting a significant 94.9%of all exits by AI companies,while 5.02%ventured into the public marketa trend seen across most sub-sectors.The rapid evolution of AI technology has been a significant driver of exits.As AI companies develop innovative soluti
61、ons,they become attractive targets for larger corporations.For example,DeepMinds acquisition by Google was a strategic move to help it compete against other major tech companies.The company acquired DeepMind for 400m in 2014,topping the list in terms of highest acquisition prices.The high rate of ac
62、quisitions often reflects a broader industry trend towards consolidation,to expand product offerings,access specialised talent,and reduce competition.There was a noticeable decrease in exits in 2020,most likely attributed to companies biding their time for more favourable market conditions.As a resu
63、lt,there was a surge in public exits the subsequent year,exemplified by the 226m IPO of pharmatech company Exscientia in October 2021.Leveraging artificial intelligence techniques for faster and more efficient drug discovery,Exscientia had secured 300m over seven rounds of private funding,as well as
64、 three grants totalling 5.40m prior to its listing on the NASDAQ stock exchange.Babylon,a digital health chatbot company,went public via a SPAC merger with Alkuri Global in 2021.This valued the company at 334m.Babylon previously raised 518m across five deals since its incorporation in 2013.In 2023,t
65、he company is now part of eMed,a digital health company.Exits by high-growth AI companies(2013-2022)200002246212Page 9Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutCompany spotlight:
66、Inicio AIAIs integration into sectors like healthcare,education,and financial services holds the potential for profound societal benefits.In this landscape,Inicio AI,founded in April 2020 and led by CEO Rachel Curtis,is actively addressing social challenges through advanced AI technologies.The compa
67、ny is focused on developing a sophisticated conversational AI tool tailored for effective debt support.By leveraging AI technology to enhance financial literacy and understanding,Inicio AI demonstrates a forward-thinking approach,illustrating how AI can be harnessed for tangible,positive impacts on
68、individuals and society.Inicio AI utilises natural language processing(NLP)to simulate conversational affordability assessments that are usually held with human agents.As with most AI implementations,this tool not only has cost efficiencies associated,but also time.The developed tool is set to be ut
69、ilised in banks,debt management firms,and charities.Curtis further elaborates,stating,We are actively collaborating with partners such as Whenfresh,Credit Reference Agencies,and Open Banking providers to seamlessly integrate data into their solution.This not only enhances the user experience but als
70、o fortifies the datas reliability and verification for businesses.Inicio AI recently graduated from the University of Edinburgh AI Accelerator 2023,and Barclays Eagle Labs Female Founder Accelerator 2023.Both of these platforms have enabled the company to secure significant equity investment and exp
71、and their team.Inicio AI has so far raised 1.5m in equity funding.AI,while transformative,does have challenges.Integration into daily operations sparks concerns about potential misuse,fostering consumer uncertainty.Curtis highlights the risk this worry plays in the eroding of confidence in AI applic
72、ations.This is followed by an emphasis on the crucial role regulators must play.Curtis acknowledges the perpetual challenge of regulation and how to keep pace with the rapid innovation in the AI landscape.Within the tech ecosystem,a common challenge encountered by early-stage businesses is the talen
73、t shortage.Curtis states,Recruit those truly passionate about what you are doing and the problem you are solving with the technology.Curtis advises aspiring entrepreneurs in the sector to find a solution to a problem,not try to find a problem for your solution.In her view,deep understanding and pass
74、ion for a specific use case are key to gaining traction in an industry flooded with technological marvels.Inicio AI stands as an example of this philosophy as it continues to deliver positive societal impact through purposeful and innovative solutions.Page 10“AI can be used as a force for good to he
75、lp both consumers and businesses.Its development allows us to pick some low-hanging fruit to support both end consumers and businesses alike.“Rachel CurtisCo-founder and CEO of Inicio AIExecutive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology
76、 AboutThe UKs high-growth AI landscape has experienced remarkable growth in regards to investment over the past ten years.Companies secured an unprecedented 3.21b in equity funding during 2022 alone.Similarly,the number of published patent applications surged from 39 in 2012 up to 513 in 2020.Fundin
77、g and innovationPage 11Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutPublic fundingPublic funding into AI is an essential component of the UKs National AI Strategy,which aims to promote innovation,research and development acro
78、ss the sector.The positive trend observed in grant funding levels across the decade underscores the growing recognition of AIs importance.Public funding can fill funding gaps and also allow companies within the AI sector to undertake ambitious projects without taking on all the financial risks thems
79、elves.The period between 2013 and 2022 witnessed an almost tenfold increase in the total value of grants allocated to high-growth AI businesses.In the year 2022 alone,a total of 102m was awarded in the form of 279 grants,marking a 63.7%increase from the 62.0m allocated in 2021.The top recipient in 2
80、022 was DIOSynVax with grants totalling 32.1m.A spinout from the University of Cambridge,DIOSynVax utilises a combination of AI and synthetic biology to identify and develop vaccines against existing and future outbreaks.The company received this grant from Coalition forEpidemic Preparedness Innovat
81、ions(CEPI)a global partnership supporting pandemic vaccine development.As of today,DIOSynVax has been awarded a total of 34.9m across six grants.This growth comes despite a challenging economic landscape in the aftermath of the COVID-19 pandemic and evolving regulatory frameworksfactors that contrib
82、uted to a downturn in both the number and value of grants in 2021.However,as the number of active AI companies has consistently increased on an annual basis,grant funding has correspondingly expanded.In 2020,the high-growth AI industry witnessed a surge in the number of grants secured with 467 issue
83、da majority of which were awarded by Innovate UK.This figure marked the highest annual total of grants awarded to high-growth AI companies in the past decade.2000022Amount receivedNumber of grants102m86.3m62.0m59.3m13.6m43.7m7.60m23.7m11.6m46.3m20326112180
84、27976Grant funding secured by high-growth AI companies(2013-2022)Page 12Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutPrivate fundingEquity investment plays a pivotal role in encouraging growth within the AI sector,particularl
85、y for SMEs.The last ten years have marked a significant growth period for high-growth AI companies in the UK,culminating in an unprecedented 3.21b in 2022.This influx of equity capital is crucial for SMEs,as it can be a very patient form of capital,offering financial support to engage in sustained r
86、esearch and development(R&D),a cornerstone of innovation in the sector.From 2013 to 2022,there has been a consistent annual rise in the number of deals made.The number of deals in 2021 and 2022 appear closely matched736 and 746 respectivelypointing at the growing investor confidence in the industry.
87、These investment volumes include a number of large deals,such as Ceras 264m and Wayves 147m deal in 2022.Partially available data for 2023 reveals a lower deal number within the sector,aligning with levels observed in 2020.Nevertheless,as AI technologies continue to grow into mainstream applications
88、,the investment landscape is expected to present even more fertile ground for funding in the coming years.Some of the top investees include OneTrust,a software development company specialising in security and privacy.It secured 699m via four rounds since 2013,with its largest totalling 224m in 2020.
89、Similarly,Graphcore,a semiconductor firm engineering AI and machine learning accelerators,raised 528m in total equity via nine deals.Over the past decade,the UKs AI sector has not only seen a steady uptick in domestic investment,but has also benefited significantly from foreign capital funding.This
90、includes Insight Partners,a US-based private equity and venture capital fund,which has been involved in deals worth 860m in investment to UK-based high-growth AI companies since 2013.2000022Amount receivedNumber of deals3.20b2.12b3.10b1.97b496m852m170m260m87.7m1.18b5
91、53464344288746155Equity investment secured by high-growth AI companies(2013-2022)Page 13Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutTop investorsSFC Capital leads in terms of the number of equity deals into high-g
92、rowth AI companies in the UK,and since 2013,has participated in 104 deals.SFC Capital invests into early-stage businesses eligible for the Seed Enterprise Investment Scheme(SEIS)and Enterprise Investment Scheme(EIS)funds.These figures hence underscore the important role of the schemes in supporting
93、early-stage companies within the UK,as it can often prove difficult for these businesses to access sufficient sources of funding at such an early stage.SFC Capitals broad investment portfolio primarily includes the AI Seed Fund,which has supported early-stage AI businesses through 15 deals since 201
94、3.This includes an 18.8m fundraising round by debt capital market data platform 9fin in December 2022.With a focus on early-stage businesses,Mercia Asset Management PLC is another fund investing in the high-growth AI sector.The fund tends to invest into regions outside of London and the South East,a
95、cknowledging available investment opportunities outside of those regions.This approach is also aligned to the intended aim of the governmental Digital Growth Grant.Mercia takes a proactive approach to cultivating talent,collaborating with 19 universities nationwide,including the universities of Edin
96、burgh,St Andrews,and Warwick.These academic partnerships have led to successive spinout funding rounds,such as with Eyoto,a University of Astons spinout,which raised 19.5m across eight deals since its incorporation in 2013.Additionally,crowdfunding platforms Seedrs and Crowdcube are significant cont
97、ributors to the funding landscape within the high-growth AI sector.In 2022,they jointly participated in 13 deals,further solidifying the important role crowdfunding plays in the sector.Savings platform Chip secured funding via multiple crowdfunding rounds,with its most recent funding round landing i
98、n November 2022,totalling 2.06m.SFC CapitalParkwalk AdvisorsMercia Asset Management PLCSeedrsCrowdcubeSyndicate RoomBritish Business BankAmadeus Capital PartnersMMC VenturesIQ Capital PartnersScottish EnterpriseCambridge AngelsOctopus GroupDevelopment Bank of WalesAscension575946414042403
99、83635Top fund managers by number of equity deals into high-growth AI companies(2013-2022)Page 14Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutInvestor spotlight:MMC Ventures“During the past decade,the European venture capital
100、ecosystem has scaled new heights.Europe now represents nearly 20%of global VC funding,marking a significant increase over the past five years.The UK specifically is still the centre of European venture capital,with twice as much capital invested in the UK as the next two countries combined,”says Sim
101、on Menashy,Partner at MMC Ventures.MMC Ventures is a venture capital fund investing in early-stage tech companies with a focus on enterprise AI,cloud and data infrastructure,fintech,and data-driven health.MMC has a large AI and data infrastructure portfolio,with investments including Synthesia,Signa
102、l AI,Red Sift and Ably.The fund has also seen a recent string of exits Including the$400m sale of Current Health to Best Buy,the$360m sale of Brightpearl to Sage and the 1.5bn acquisition of Interactive Investor by Abrdn.“The AI market,which has been buoyed by the breakout successes of the past deca
103、de,has a growing generation of unicorn alumni becoming founders themselves.Talent is being redeployed,and we will continue to see this as the AI market continues to mature,”says Menashy.“The UK maintains a rich ecosystem of academia,with universities excelling in computer science and engineering.We
104、consistently see global leaders in AI coming from these centres of excellence which are driving the next generation of AI innovation,both as advisors and partners to startups and also sometimes as their founders and executives”.Having a defined strategy is important when investing in early-stage bus
105、inesses operating within the AI sector.Menashy says,“Specific considerations we take into account when evaluating AI companies include the suitability of AI or machine learning to solve a problem,the scope for network effects through data and the scalability of AI solutions.Factors that are also imp
106、ortant when evaluating AI companies are safety,security,and privacy,as well as compliance with existing regulations.Traditional points,on which we place greater emphasis for the assessment of AI companies,include the quantifiability of ROI and the commerciality of management teams,which is a reflect
107、ion of the dynamics of the AI market.We also think carefully about ethical issues such as potential bias and the risk of misuse.”Securing investment within the AI sector may prove difficult due to competitiveness.Menashy advises entrepreneurs to“be clear on the problem that you are solving,the ROI i
108、t can deliver and for whom”.Page 15“We have one of the largest AI portfolios in Europe,so a key differentiator we can offer is access to this community,sharing knowledge and best practice,and providing peer-to-peer support.“Simon MenashyPartner at MMC VenturesExecutive summary Introduction Business
109、demography in the UK Funding and innovation Ecosystem Founders Methodology AboutCera 264m Aug 2022Cera operates healthcare hubs across the nation providing in-person home care,nursing,telehealth consultations,and prescription delivery services.Its digital app uses data analytics and machine learning
110、 to improve the way healthcare professionals monitor patients health.The London-based eHealth company was established in 2015 and is currently led by CEO Dr Ben Maruthappu.Cera is an alumnus of the DigitalHealth.London Accelerator(2016),a programme focused on enhancing the adoption of healthcare tec
111、hnology in Londons NHS.It subsequently participated in PwCs Scale Programme(2017),and GovStart(2017).Managed by PUBLIC,Govstart supports tech companies that have a strong public sector appliance.Since its establishment,Cera has raised 366m in investment via nine fundraising rounds,attracting investm
112、ent from international firms such as US-based Jane Street and Kairos HQ.Lendable 210m Mar 2022Lendable is a London-based fintech unicorn,providing an online lending platform that leverages AI to expedite loan approvals.Established in 2014 by founder and CEO Martin Kissinger,the company has offices i
113、n London and New York to manage its expanding global presence.The firm provides a diversified portfolio of financial services,including personal loans,credit cards,and car financing.Lendable attended AG Elevate in 2018,an accelerator with a specialised focus in nurturing fintech startups.To date,the
114、 company has raised 216m in equity over eight rounds,with its biggest round in March 2022.This round totalled 210m in equity and was led by Ontario Teachers Pension Plan.This latest fundraising effort catapulted the companys valuation to over 3.5b.Page 16amount raisedamount raisedDateDateExecutive s
115、ummary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutExecutive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutInvestor spotlight:Cambridge AngelsIt is an exciting time to be in AI a
116、nywhere in the world,says Michelle Tempest,angel investor at Cambridge Angels.The UK cannot rest on its laurels.The AI analogy is the space race,and I am searching for the AI global moonshot.Cambridge Angels is a leading UK business angel network.Founded in 2001,the network invests in a range of sta
117、rt-up and scale-up businesses with a particular focus on deep-tech,healthtech,and other hi-tech sectors.Cambridge Angels portfolio is mainly located in Cambridge,with some companiesspread across London and the UK.Over the past ten years,the network has backed over 110 portfolio companies,investing o
118、ver 150m.This includes Healxs 43.9m deal in 2019,as well as semiconductor manufacturer Paragrafs 16.2m round in 2019.“The UKs biggest strength is its wealth of startups”,says Tempest.“The law will always lag behind innovation,and in a post-Brexit world,we need to leverage this as a strength to lead
119、on global standards”.The agility to set global standards could be the UKs ace,but as Tempest notes,this opportunity is yet to be fully seized,with the UK often waiting in the wings rather than taking centre stage.When considering the UKs capabilities relative to global competitors,Tempest underscore
120、s the imperative need for a more expansive vision:“We cannot rely on history.The race is now,and to lead we need to be aware of what is happening in China,USA,India,to name a few.”With the global summit in Bletchley,Tempest highlights the investment gap between nations like China,which pours billion
121、s into AI,compared to the UKs millions,is not just a gap in funding,but a chasm in future prospects.Tempests view on the UKs position in the AI world over the next decade is clearits a race,and to lead,the UK must acknowledge and respond to the advancements of other nations rapidly and robustly.For
122、entrepreneurs aiming to secure AI funding,she advises,“dont get distracted.AI is full of buzz,so know what problem your business is trying to solve.Keep your true beliefs,and keep updated around the latest research to help you solve issues you are passionate about.You need to lead by example,not by
123、hype”.The changing regulatory landscape for AI is seen by Tempest as an opportunity for investment.Especially in the realm of AI for good,these changes hint at potential growth areas that can mature as regulations become more defined.Page 17“For start-ups a lot of my diligence is about the team.An i
124、nvestor has to bring something to the company,but the investor and team must work in harmony to enjoy the journey together.“Michelle TempestAngel investor at Cambridge AngelsExecutive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutUK inn
125、ovationHigh-growth AI companies in the UK have significantly increased their domestic and international patenting since 2011,with a more than tenfold increase in both patent applications and granted patents between 2011 and 2019.The data on this page offers a preliminary view of patent activity by h
126、igh-growth AI companies in the UK and is subject to change.The downturn in both published and granted applications from 2020 onward aligns with the 18-month latency period between the submission and publication of patent applications.The surge in patent activity between 2011 and 2019 has been driven
127、 by a substantial increase in the number of active,high-growth AI companies in the UK.The second expanded from 257 companies in 2011 to 2,063 in 2023.Widely publicised breakthroughs in AI since 2011 have also spurred investor interest in the associated technologies and helped fuel innovation by prov
128、iding a strong foundation for entrepreneurs.Part of the increase in patent activity may be due to increased investment in the sector,providing founders with the means(and potential pressure)to protect their IP in a robust manner.Such a move is not only a defensive strategy,but also a proactive appro
129、ach to establish a strong market position and create barriers for would-be competitors.200002020212022Published patent applicationsGranted patents28342049236174Patent activity by high-growth AI companies(2011-2022)Page 18Ex
130、ecutive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutAmidst the various challenges within the industry,the UK government sets out regulatory policies to strike a balance between maintaining a competitive edge,mitigating constraints,and
131、 supporting the wider ecosystem.The distribution of spinouts across the UK is varied,with a total of 173 companies falling within this classification.Clusters are present in regions with academic institutions,including Oxford,Cambridge,and London.The industry faces challenges relating to access to s
132、killed talent,diverse teams,and regulation.Different schemes have been put in place to address these challenges in the ecosystem.EcosystemPage 19Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutGovernment and policyThe UK governm
133、ent has a pro-innovation approach to AI regulation,but deliberately aims to balance responsible innovation with public trust.This balance has been previously outlined in the National AI Strategy,with the UK aiming to concentrate on investment,support functions and governance.3 This strategic posture
134、 is indicative of a broader commitment to maintain a competitive edge whilst mitigating the social and ethical pitfalls often associated with rapid technological adoption.In the recent AI safety summit,the importance of regulation was emphasised.With further meetings in South Korea and France to be
135、held in coming years,an international shared responsibility will allow actionable plans to be agreed upon and implemented.Prime Minister Rishi Sunak insisted that the UKs approach will ensure that safety issues are dealt with in a way that avoids hampering innovation in the sector.However,the challe
136、nge remains:how to evolve these regulations at the same pace as AI technologies without causing regulatory lag or stifling innovation.The government has invested more than 2.5bn since 2014,including nearly 600m towards the 2018 AI Sector Deal,which kickstarted growth of the AI landscape in the UK,as
137、 well as significant investments into the NHS AI Lab(250m),and the Centre for Connected and Autonomous Vehicles.In the 2023 Spring Budget,the government pledged a further 900m to establish a new AI Research Resource to develop an exascale supercomputer to enhance computation capacity,and 100m to est
138、ablish the Frontier AI Taskforce,which will now form the UK AI Safety Institute.An additional 54m investment was announced to develop AI research,with universities nationwide set to benefit from increased funding.The financial commitment the UK government has set forward signal an optimistic stance
139、on the future potential economic impact of AI technologies.However,whilst significant funding has been set for R&D and infrastructure,the allocation of public funding raises important considerations,including the extent to which early-stage startups will benefit in comparison to established tech gia
140、nts.The Department for Science,Innovation and Technology(DSIT)has launched an advisory service aimed at assisting new UK businesses in adhering to regulatory standards and facilitating their market entry.This service will consolidate the efforts of different regulatory bodies operating in sectors in
141、fluenced by AI.Startups stand to benefit from government-funded programmes like BridgeAI,an initiative led by Innovate UK which aims to establish an AI innovation network within wider industry sectors with high-growth potential,such as construction,transportation and agriculture.Engaging with such i
142、nitiatives not only offers financial support,but also provides access to valuable networks and resources crucial for the success of early-stage businesses.Page 20Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology About3 National AI Stra
143、tegy 4 Industrial Strategy,Artificial Intelligence Sector DealMapping spinoutsThe UK boasts a large network of universities,supporting the ecosystem through skilled grads and the commercialisation of intellectual property(IP)through spinouts.Of the total high-growth AI ecosystem,university spinouts
144、represent 7.47%of the total landscape,constituting 173 companies.Oxford University has the largest share,representing 8.5%of the total spinout cohort.The universitys portfolio includes Oxa,which develops software designed to power driverless vehicles.The company has secured 185m via five rounds of f
145、unding,as well as 14 grants totalling 14.6m.Out of the 32 companies in its portfolio,four have already exited via acquisition or IPO.London shines as a central hub for AI spinouts,f acilitated by the proximity of top institutions and research centres in the capital,including UCL and Imperial College
146、.Meanwhile,Scotland also exhibits a robust presence,with a total of 12 companies.Scotlands strong network of partnerships,including the Scottish AI Alliance,plays a pivotal role in nurturing the growth of AI enterprises in this innovative landscape.1Number of high-growth companies per UK region(Sept
147、ember 2023)30+13214539Page 21Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutChallenges within the ecosystemAs AI has evolved from its earliest beginnings in the 20th century to the dynamic landscape of the 2010s and
148、beyond,it has played a pivotal role in shaping industries and societies.The UK has emerged as a thriving hub for AI innovation,with active contributions from companies,research institutions and innovation centres nationwide.Due to the importance of AI across a range of industries,the UK boasts a wel
149、l-established support network committed to fostering innovation,providing funding,and offering guidance to small and medium-sized enterprises.Innovate UK is set to allocate up to 1m through its Creative Catalyst program,targeting companies engaged in AI-focused projects within the music industry5.Ho
150、wever,despite its remarkable growth and deeply-rooted support network,the AI industry is currently facing a range of multifaceted challenges,notably in addressing the skills gap and fostering diversitywithin teams,particularly concerning female founders.The talent gap in the AI industry has also bee
151、n exacerbated by insufficient public awareness regarding career prospects and vocational opportunities within the sector.This barrier of entry remains an obstacle,particularly for startups and small and medium sized enterprises(SMEs).There are a number of programmes providing support and advice,such
152、 as The Alan Turing Institutes initiative delivering bespoke AI and Data Science advice for SMEs.One of the key challenges in the industry is the increasingly significant skills gap.AI companies consistently seek candidates with technical skills in areas such as machine learning,software development
153、,and a general understanding of complex concepts like deep learning.According to a study by AND Digital6,the demand for digital skills is present in 23.5%of all job vacancies in the first seven months of 2022.However,the talent pool for these specialised disciplines remains limited and in high deman
154、d,often leading to higher salary expectations for these specialists.Consequently,smaller and medium-sized businesses might find themselves in direct competition with industry giants who can offer higher salaries and benefits.Despite the sectors dynamic nature and an escalating demand for AI expertis
155、e,the widening skills gap is more troubling when seen through the lens of diversity and representation.Among the top 50 active AI firms,as assessed by equity raised,only 4.00%have founding teams comprising 50%or more female founders.A similar pattern emerges within leadership teams,where only 12%of
156、companies within the top 50 have teams of 50%or more female directors.This underrepresentation is also reflected in the lack of ethnic diversity across AI teams nationwide.A 2020 study by Ipsos MORI7 revealed that 40%of the 118 firms studied had no employees from ethnic minority backgrounds.The Depa
157、rtment for Science,Innovation and Technology(DSIT)is attempting to manage this problem through innovations such as the Hyperlink Digital Growth Grant.This specific scheme is in place to help improve diversity and access to the industry,whilst continuing to foster innovation.Barclays Eagle Labs has a
158、lso recently launched a new industry vertical focused on AI,led by Luke Christoforidis.Page 22Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology About5 Creative Catalyst:AI in the Music Industry 6 The nature of the UKs digital skills ga
159、p,AND Digital7 Understanding the UK AI labour market:2020.Ipsos MORI.Male founders overwhelmingly dominate the landscape.However,strides are being taken to foster greater diversity within entrepreneurial teams.Notably,founders between the ages of 30-39 and 40-49 constitute the largest demographic.Am
160、ong the top 200 active companies,ranked by equity raised,a significant 41.7%of founders have masters degrees,closely followed by 30.7%with bachelors qualifications.The universities of Oxford and Cambridge are the most frequented institutions among the cohorts attendees.FoundersPage 23Executive summa
161、ry Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutFounder diversityThe UKs high-growth AI sector exhibits some gender disparity among its founders,with a striking 78.7%of these companies featuring all-male founding teams.Of the remaining compani
162、es,just 6.62%have entirely female founding teams.This trend is more pronounced when contrasted with the broader landscape of UK high-growth companies,where the proportion of all-male founding teams is 57.4%.While this concentration of male founders may not be surprising given the historical gender i
163、mbalance in tech industries,it nevertheless adds to wider concerns about diversity and inclusivity within the AI sector.There have been efforts to mitigate this imbalance and promote a more diverse talent pool,including specialised accelerators for underrepresented founders.Examples include the prev
164、iously referenced Barclays Female Founder Accelerator and Barclays Black Founder Accelerator,both of which are funded by the Digital Growth Grant.Founders within the age brackets of 30-39 and 40-49 are nearly equally represented,comprising 32.4%and 31.4%of the industry total,respectively Founders in
165、 these age groups have witnessed the evolution of these technologies,allowing them to navigate AI innovation more adeptly.Interestingly,founders aged 50-59 account for 21.2%of the demographic,surpassing those in the 20-29 age range,who constitute 6.06%of founders.The limited presence of younger entr
166、epreneurs in the high-growth AI sector could be indicative of barriers such as a lack of mentorship,resources,and networking opportunities for younger talent.66.3%of founders in active,high-growth AI companies are UK nationals.These proportions underscore the domestic origin of AI innovation but als
167、o hint at the scope for greater international diversity.However,as the sector matures,a more diverse array of founder nationalities is expected,reflecting the international reach of AI innovation.Gender composition of high-growth AI company founders(September 2023)Age composition of high-growth AI c
168、ompany founders(September 2023)Nationality composition of high-growth AI company founders(September 2023)Page 2478.7%14.7%6.62%All maleMixed genderAll female66.3%21.3%12.5%32.4%31.4%21.2%7.42%6.06%0.08%20-2930-3940-4950-5960-6970-7980+United KingdomEuropeRest of the worldExecutive summary Introducti
169、on Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutFounder/leadereducationalbackgroundsAn evaluation of the top 200 active high-growth AI companiesmeasured by the highest equity funding raised from 2013-2022reveals that the majority of founders have pursued a
170、dvanced educational qualifications.A significant 41.7%of these founders have attained a masters degree as their highest level of education,followed by bachelors degree holders at 30.7%.Meanwhile,22.3%of founders hold PhDsa figure that suggests specialised knowledge is highly valued in navigating the
171、 complex landscape of the AI sector.The University of Oxford and the University of Cambridge are prominent academic institutions,with 43 and 41 founders respectively.This is perhaps not coincidental,considering that these institutions are renowned for their AI research programs,and as a result,are o
172、ften the origin of spinout companies.Their strategic locations also offer significant support to early-stage businesses.Following these universities are the London-based institutions,namely Imperial College London and University College London,with 26 and 16 founders respectively.Despite the majorit
173、y of founders attending UK-based universities,there is also significant representation from international institutionsthe University of Toronto,Harvard University,and Stanford University each had six founders attend their courses.The heavy concentration of founders from UK-based institutions,however
174、,may indicate regional advantages such as better access to local talent pools,research collaborations,and funding opportunities,or students preferring to stay in the same region.41.7%30.7%5.2%22.3%PhDMastersBachelorsSecondary schoolUniversity of Oxford434666666University of CambridgeImper
175、ial College LondonUCLThe University of ManchesterLondon Business SchoolUniversity of BristolUniversity of TorontoUniversity of SussexThe University of SheeldThe University of EdinburghStanford UniversityHarvard UniversityBirkbeck,University of LondonThe London School of Economics and Political Scien
176、ce(LSE)Educational attainmentcomposition of AI companyfounders(September 2023)University ranking by number of AI company founder attendances(September 2023)Page 25Executive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutMethodologyDefini
177、ng startup and high-growth companiesBeauhurst identifies high-growth startup companies using eight triggers(outlined on this page)that it believes suggests a company has high-growth potential.More detail on Beauhursts tracking triggers is available via its website.Active companiesActive companies re
178、fers to companies that are at the seed,venture,growth or established stages of evolution by Beauhurst analysis.The term excludes companies that are zombie or dead,or have exited via an IPO or acquisition.Defining artificial intelligenceTo qualify as an AI company for this report,the business must be
179、 engaged in the development or application of AI technologies.Artificial Intelligence(AI)refers to the technologies employed to perform tasks that would otherwise require human intelligence.This might encompass machine learning,deep learning,natural language processing,and robotics.Equity investment
180、Equity investment refers to the purchase of shares within a company.This type of investment means buying into the equity(ownership)of the company rather than its debt.It is a common investment approach across various company types and stages,attracting a diverse range of investors.Venture capital fi
181、rms typically engage in equity investments in early-stage startups,providing capital to fuel their growth.On the other hand,growth investors and private equity firms often target later-stage or more established companies,with private equity investors sometimes acquiring large,or even controlling,equ
182、ity stakes.To be included in our analysis,any investment must be:Some form of equity investment Secured by a UK company Issued between 1 January 2013 and 31 December 2022The data included in this report is true as of21 September 2023.Page 26High growth triggersEquityinvestmentAcademic spinoutsScaleu
183、psHigh-growthlistsAccelerator attendancesMajor grant recipientsManagement Buy-outs/Buy-insVenture debtExecutive summary Introduction Business demography in the UK Funding and innovation Ecosystem Founders Methodology AboutBarclays Eagle Labs is a growing national network that provides business incub
184、ation,dedicated growth programmes,mentoring as well as co-working,and office space for ambitious high-growth businesses.By cultivating a community of like-minded entrepreneurs and providing a collaborative work environment,access to peers,and opportunities to maximise growth through digital connecti
185、ons and growth programmes,curated events,and funding opportunities,Eagle Labs is able to help startups to grow at pace.Eagle Labs also specialises in positively disrupting key industries by bringing together key corporate players,industry bodies,leading universities,and startups to enable rapid inno
186、vation and investment,by asking them to collaborate and currently have dedicated lawtech,healthtech,energytech and agritech industry-aligned programmes.With various Eagle Labs dotted all across the UK and many more in the pipeline,our focus is to help to connect,educate,inspire,and accelerate ambiti
187、ous UK businesses and entrepreneurs.Find out more at labs.uk.barclays.Barclays Eagle LabsImportant InformationWe have pulled together the resources in this document for you to help with your independent research and business decisions.This document contains opinions from independent third parties an
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191、ay have or be subject to.Although the statements of fact on this page have been obtained from and are based upon sources that Barclays believes to be reliable,Barclays does not guarantee their accuracy or completeness.Page 27Executive summary Introduction Business demography in the UK Funding and in
192、novation Ecosystem Founders Methodology AboutBeauhurst is a searchable database of the UKs high-growth companies.Their platform is trusted by thousands of business professionals to help them find,research and monitor the most ambitious businesses in Britain.They collect data on every company that me
193、ets our unique criteria of high-growth;from equity-backed startups to accelerator attendees,academic spinouts and fast-growing scaleups.Beauhursts data is also used by journalists and researchers who seek to understand the high-growth economy,and powering studies by major organisations including the
194、 British Business Bank,HM Treasury and Innovate UK to help them develop effective policy.For more information and a free demonstration,visit Contact4th Floor,Brixton House385 Coldharbour Lane London SW9 8GLT:+44(0)20 7062 0060E:BeauhurstPage 28Executive summary Introduction Business demography in th
195、e UK Funding and innovation Ecosystem Founders Methodology AboutBefore you goGet in touch if you would like to find out how we can support you and your business.Wed love to hear from you.Barclays Bank UK PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct
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