2022 has been a tale of two halves for UK startups.
$21.5bn was raised in the first six months of the year — just shy of the record $22.3bn raised in the second half of 2021 — as megarounds rolled in and VCs seemed oh-so-happy to splash their cash.
Then came the downturn, and investor caution washed over the global tech sector. During the second half of 2022 (up to December 14), just $8bn has been pumped into UK startups, according to Dealroom.
So, what have been the key stories across one of the most topsy-turvy years in UK tech? Sifted looks back through its 2022 coverage to bring you the most important moments.
Big rounds dried up
The first half of the year saw some whopping raises from UK startups, with fintechs landing the biggest of the lot. Checkout.com raised a $1bn Series D — the biggest round of the year — while GoCardless picked up $312m and Lendable £210m.
Outside of fintech, Euan Blair (son of former UK PM Tony) raised $220m for his edtech Multiverse, and consumer electronics manufacturer Nothing and speedy grocery company Zapp both picked up $200m. All in all, 14 tech companies raised rounds of more than $200m.
But it’s been a very different story from July onwards. Just three tech companies have raised more than $200m, and November was the first month without a $100m+ round for a UK startup since December 2019.
The downturn brought layoffs
As the tech slowdown took hold towards the end of spring, founders became less confident in their ability to convince investors to part with funds. So they had to find other ways to keep their runway healthy.
For many, that meant dialling back on aggressive growth plans that had become commonplace during the frothy days of 2021, and in Q2 UK tech listings on jobs platform Otta were down 20% compared to Q1.
But startups didn’t just put the brakes on hiring, and from May the UK tech scene saw companies begin to reduce their headcount.
Speedy grocery delivery startup Zapp was one of the first to announce it was planning layoffs, telling 200 to 300 employees — about 10% of staff — that their jobs were at risk. Others like fintech Curve and insurtech Zego cut staff in June, as did car marketplace Cazoo — which laid off 750 employees — before announcing it planned to lay off 750 more in September.
Many more followed over the summer.
UK tech’s gender pay gap is (really) bad
The gender pay gap at UK tech companies in 2022 is worse than the national average 30 years ago. According to data from salary benchmarking platform Figures — which looked at the salaries from 317 UK tech companies — women are paid 70p for every £1 men earn at startups in the UK.
To put that into perspective, that gap is wider than infamously unequal industries like construction and finance, and far wider than the UK’s national average in 2022 — which sees women paid 86p for every £1 men earn.
The pay gap is narrower at most of the UK’s unicorns, but two thirds of them still have a pay gap worse than the national average. Just one, Octopus Energy, had a pay gap in favour of women.
While it’s difficult to tell if women are paid less than men for the same role by looking at the gender pay gap — as it compares the median pay from a company as a whole — it does point to a lack of women in highly paid roles at UK tech companies. Other data that Sifted looked at this year also backed that up, with women massively underrepresented at C-suite level at UK startups, and 34% of European startup boards being male-only.
But looking at the “adjusted” gender pay gap suggests women are paid less than men for the same role. Figures’ adjusted pay gap — which compares the pay gap in similar jobs and factors in location and seniority — showed that women at UK startups were paid nearly 5% less than men.
There are also major imbalances among startup founders. While 52 UK tech companies raised a $100m+ round this year, none of those had an all-women founding team. The highest round for an all-women founded company was surgery tech startup Proximie’s $80m Series C.
Part of the problem is how few female investors there are — and how few female-founded startups get backing as a result. A report by the UK Business Angels Association and data platform Beauhurst found that just 14% of UK angels are women, but 25% of the businesses backed by them have a female founder.
UK’s first generation of tech darlings in trouble
2022 has been the year a number of the UK’s tech giants hit choppy waters. Telehealth platform Babylon, cybersecurity scaleup Darktrace, AI drug discovery company Benevolent AI and food delivery app Deliveroo have all spent large parts of the year grappling with financial woes amid the collapse of public markets and failed takeovers.
Benevolent AI hasn’t yet brought a newly discovered drug to market, has been reporting increasing losses over the past few years and has seen its market cap more than halve. Deliveroo is also still reporting losses — despite an early pitch deck promising investors an easy path to profitability — and its market cap is 20% of what it was when it listed for an underwhelming $7.4bn in 2021. While Darktrace is posting profits, a $6bn takeover deal collapsed in September.
The worst fall from grace on the public markets has been at Babylon, which has seen its share price drop 95% since its peak, when it listed in October 2021. Things got worse for the telehealth giant as it was forced to consolidate its shares on the New York Stock Exchange in September to avoid delisting, when its share price fell below $1 for more than 30 days.
This all came as the telehealth giant was trying to make up a $200m shortfall caused by its botched SPAC deal, which founder and CEO Ali Parsa called “his biggest mistake” in an interview with Sifted over the summer.
What went wrong at green battery startup Britishvolt?
It’s also been a rocky year at sustainable battery startup Britishvolt, which is now desperately looking for funding after narrowly avoiding administration in November.
Things weren’t always this bleak, and in January the company leapt to fame after the UK government promised it £100m in funding to build its gigafactory in Blyth, and it secured £200m from private markets. Gigafactories manufacture batteries for electric vehicles and to store energy, and are seen as key to the green transition.
But in April, Britishvolt became embroiled in a multimillion-pound lawsuit for allegedly breaching a £1.7bn contract it had with a private equity firm, and in November the company told Sifted it was yet to receive any of the government money it was promised. Currently, the gigafactory is way off completion, staff have taken a pay cut and Britishvolt’s future hangs in the balance.
Events startup Pollen raises $150m in April, goes bust in October
London-based Pollen was at the centre of another riches to rags story, which started when it laid off 22% of its workforce in May just weeks after it had raised $150m from investors.
The company organised music festivals and events around the world, and in June Sifted spoke to a number of customers who’d been waiting “months” for refunds after events were cancelled due to lack of interest or lockdown restrictions.
In August the company was placed into administration, amid funding woes and discontent among staff after it missed payroll, owing more than £78.6m.
Brexit: Bad for bugs but good for drugs
2022 was another year that saw Britain grappling with the fallout from Brexit, and that hasn’t been good news for the edible insect sector.
While the UK previously followed the EU’s process for approving “novel foods” like insects, no transitional measures were put in place when the UK’s Food Standards Agency (FSA) took the helm. As a result, edible insects that were once approved in the EU suddenly became unauthorised in the UK.
It cast major doubt over the future of the roughly 25 edible insect companies in the UK, as application costs — including an £80k toxicology report — for a novel food to the FSA can be out of reach for smaller startups. While some have clubbed together to submit an application — like the 25 edible insect companies that make up the Woven Network collective — it could still take 18 months to get approval. The FSA more recently announced that transitional rules would be applied, easing the path for bug-based startups to get their critters into supermarkets.
But leaving the EU has not been all bad news for UK startups, and post-Brexit Britain is also becoming something of a haven for psychedelic startups. It stems from the UK’s new drug licensing authority — the Innovative Licensing and Access Pathway (ILAP) — which makes communication between other important bodies in the regulatory process, like the UK’s Medicines and Healthcare products Regulatory Agency (MHRA), far easier.
“Without the MHRA and without Brexit, I think we would have been several months behind on our side,” Dr Malcolm Barratt-Johnson, chief medical officer at Albert Labs — which Iisted on the Canadian Securities Exchange in March — told Sifted.
Kai Nicol-Schwarz is a reporter at Sifted. He tweets from @NicolSchwarzK.
