London overtakes New York and San Francisco for fintech funding

London has attracted $9.5bn (£7.8bn) in fintech venture capital funding since the start of the year, according to data from Dealroom, finishing ahead of New York’s $7.8bn and San Francisco’s $7.4bn despite they came third behind both US cities in 2021.

It marks a striking achievement for London, which has combined its strengths in financial services and technology to become a world powerhouse in fast-growing areas such as payment processing and online banking.

Laura Citron, Managing Director of London & Partners said: “Unlike many hubs around the world, London gives fintechs access to one of the world’s leading financial centres, together with Europe’s largest technology ecosystem. This combination is a recipe for innovation, while gives companies access to decision-makers, regulators and the financial institutions – all in one city.

“Despite a challenging VC funding landscape globally… we are seeing a strong appetite from international companies looking to establish and grow their fintech operations in London.”

Many London fintechs continue to expand and have begun new recruitment drives despite widespread tech redundancies across the pond. Yesterday, London fintech Zopa said it would extend employee benefits and raise the minimum wage in a bid to attract new staff, while fintech Wise last week said it had recruited over 1,000 staff since the start of the year, and planned to add at least 300 more. More than 140,000 employees at tech companies have been made redundant since the start of the year, according to online tracker layoffs.fyi, with US-based firms bearing the brunt of the cuts.

Russ Shaw, co-founder of London Tech Week, said: “It’s an encouraging sign that investors are telling their businesses to ‘go ahead’, while companies in Silicon Valley have been in significant downsizing mode.

“Our macroeconomic climate here has been very challenging for a while – you’ve had the pandemic and the challenges associated with that – but investors will think, ‘if you’ve come through the big impacts, you’re pretty resilient so you can withstand further headwinds .'”

It comes after a Dealroom survey revealed that London is Europe’s most successful place for employees of so-called ‘unicorn’ companies – privately held or newly owned firms valued at more than $1 billion – to set up new start-ups.

According to the findings, 27 London-founded unicorns produced the most new ventures at 168, with the lion’s share of activity coming from fintech. Paris had 125 startups from the founders of 22 unicorns, although a greater proportion of them were set up in the French capital, at 75%. In Berlin, 24 local unicorns generated 138 even newer businesses, with 70% of them living there.

GoCardless co-founder Hiroki Takeuchi told the Standard that “many alumni” of the Islington-based payment services provider had started their own companies, taking the experience they gained and learning from all the mistakes we made in the early days.”

“It’s great to see these numbers and it’s a validation of the mature tech ecosystem in London.”