London-based startups attracted £2.69bn in venture capital (VC) in the first three months of the year, marking a robust start of the year despite a fall in deal volumes.
According to KPMG’s latest venture pulse report, while deal count dropped from the previous quarter, the overall value of funding reached nearly 90 per cent of the £3bn raised in 2024’s last quarter.
A total of 221 investments were made in London startups during the first quarter, highlighting strong investor appetite – particularly in emerging tech.
“The resilience of VC activity in London over the first quarter of 2025 underlines investor confidence in the innovation economy, with a clear focus on developments in AI”, said Anna Purchas, London office senior partner at KPMG UK.
The sectors fuelling momentum
Artificial intelligence (AI) played a central role in London’s largest raises, according to the report.
The largest raises included £450m raised by Isomorphic Labs to further develop its next generation AI drug design engine and £138m raised by Synthesia to advance AI video for enterprise communications.
Laura Cintro, chief executive of London and partners, said the capital’s momentum in AI investment reaffirmed its global leadership.
“In 2024, London proved its status as a global hub for AI, with record investment flowing into our companies. Frontier innovation, including AI and life sciences, will be at the heart of London’s 10-year growth plan”.
HSBC Innovation Banking’s Simon Bumfrey said: “It’s exciting to see UK health tech firms thriving and attracting near-record investment, driven by AI innovations transforming the sector”.
Founders attract funding, but with strings attached
Investors remained selective, backing businesses with strong fundamentals.
Nicole Lowe, UK head of KPMG’s emerging giants practice, said: “In a financial climate that is currently fluctuating on a daily basis, investors are backing companies that offer the fastest path to profitability”.
She warned that while IP-rich sectors may be struggling in the short term, these areas remain critical to long term economic growth.
“We should ensure we’re doing all we can to make the investments more attractive”, she said.
Notably, the backdrop to the first quarter’s robust performance was a strong preceding year of fundraising for London-based VC firms, which collectively raised $9.9bn in 2024, almost doubling 2023 levels.
Funds like Atomico, Index ventures and Balderton all closed significant rounds, creating a deep well of dry powder.
Catherine Lenson, chief operating officer of Phoenix Court – which backs startups in the capital – said that “with world-class talent, access to capital, and a supportive regulatory environment, a new generation of tech companies with the potential to become global champions are being born.”
London remains a VC powerhouse
London’s leading drive was clear, accounting for the largest portion of the UK’s total raised in the first quarter – more than France, Germany, and Spain combined.
With a growing share of unicorns, consistent deal flow and large funds ready to deploy capital, London continues to outpace Europe’s other tech hubs.
Hannah Seal of Index Ventures said: “The record breaking investment in AI startups in 2024 highlights the strength of the UK’s talent pool. Tackling the talent bottleneck must now be a top priority if London is to maintain its global edge.”
As the city prepares for London tech week, the results from the first quarter offer early evidence that the capital remains one of the world’s most resilient ecosystems.
