The British Business Bank has pledged up to £50 million to Longwall Venture Partners' latest fund to support early-stage deep tech companies.

Founded in 2008, Longwall Ventures is a UK early-stage venture capital firm that's so far invested in more than 50 deep tech companies, ranging from medical devices to defence and aerospace applications.

"The UK's strong research base across academia and industry has created a rich seam of opportunities to turn ground-breaking science into valuable businesses, but these businesses often struggle to raise long-term capital to support them on their journey to commercialization," said David Denny, managing partner at Longwall Venture Partners.

"We are excited to find the next crop of deeptech investments for our new fund."

This new British Business Bank commitment to the Longwall 4 fund follows similar investments in Longwall's Oxford Technology ECF LP in 2008, Longwall Ventures ECF LP in 2012, and Longwall Ventures 3 ECF LP in 2017.

The first of these was one of the first investors in OrganOx, which was sold in 2025 to Terumo Corporation for more than $1.5 billion – making it the biggest acquisition of an Oxford University spinout to date, and one of the UK's biggest-ever medtech exit deals. It delivered a 19.2x return for investors, including the Bank.

And with five exits so far in OTECF, the fund's private LPs have received a return of six times on their original investment.

"British Business Bank's investment into Longwall Venture's new fund will provide a major boost to startups across key growth sectors and is a shot in the arm for the UK's thriving technology sector," said business secretary Peter Kyle.

"This news demonstrates how this government is using our Modern Industrial Strategy to deliver long-term growth and opportunities that support skilled jobs and raises living standards across the UK."

The British Business Bank is the largest investor in UK venture and venture growth capital funds. Its Enterprise Capital Funds program aims to increase the supply of equity capital to early-stage UK companies with long-term growth potential, and reduce the barriers to entry for fund managers looking to operate in the VC market. It's backed 54 funds to date, representing around £2.7 billion of finance.

"The Enterprise Capital Funds programme plays a crucial role in helping early-stage funds raise capital with a cornerstone investment, increasing the amount of scale-up finance available for high-growth early-stage companies," said Mark Sims, managing director, head of development equity funds at the British Business Bank.

"With businesses like OrganOx already pushing the boundaries of what's possible, our continued partnership with Longwall Ventures will help uncover the next generation of breakthrough technologies and UK success stories."

Working with the same strategy as its previous funds, Longwall 4 will continue to target UK-based startup and early-stage science and engineering deeptech companies across a range of sectors, including the Industrial Strategy sectors of Advanced Manufacturing, Clean Energy, Defence, and Life Sciences.

Fund 4 is targeting investing between £500,000 and £2 million into around 15 companies, with a 'significant' amount of capital reserved for follow on investments. It has already raised £86.2 million, and is targeting £100 million at close.

The UK government is launching a £500 million Sovereign AI fund aimed at boosting support for domestic AI companies.

While UK AI startups raised £6 billion in venture capital last year, the government said too many firms are failing to make the leap from breakthrough research to large‑scale commercial success.

To drive industry growth, a new Sovereign AI Unit will act as a venture capital fund within the government, making targeted investments in UK AI firms.

In addition to funding support, the unit will provide direct access to the UK’s fastest AI supercomputers, such as the Isambard-AI supercomputer in Bristol and Dawn in Cambridge, along with specialist R&D support and grants.

The unit will also offer opportunities to engage directly with the government on procurement opportunities, along with help to navigate and shape regulatory innovation.

The fund will be chaired by investor James Wise, who will remain a partner at VC fund Balderton. Other staff will come from the AI Security Institute within the Department of Science, Innovation, and Technology (DSIT).

“If we believe AI is absolutely critical to our economic prosperity and our national security, which I do, then this fund, and the even bigger ambition behind it, is one of the single most important things this government will do for the future of this country,” said technology secretary Liz Kendall.

“We believe in Britain and we are betting on Britain. We are backing our brilliant innovators and entrepreneurs so we seize the benefits of this technology to reshape Britain for the benefit of all.”

At the official launch of the fund this evening, Kendall is expected to announce the first companies to receive backing through the scheme.

The announcement comes as London-based autonomous driving firm Wayve - which started out as just two engineers with a smartphone attached to the roof of a Renault Twizy - announced that it had received an extra $60 million investment from AMD, Arm, and Qualcomm Ventures.

"We’re building an AI Driver that works across the full automotive compute ecosystem, from architectures already used in millions of vehicles today to the platforms powering the next generation of automated vehicles," said the company's co-founder and CEO, Alex Kendall.

"Expanding our relationships with leading silicon companies helps bring that into production at a global scale, and we’re delighted to have these partners actively working with us on integration and deployment.”

UK government targets AI leadership

The announcement marks the latest in a series of moves by Downing Street to drive AI innovation across the country.

Over the last year, the government has designated five AI Growth Zones across the UK, launched the Isambard-AI supercomputer in Bristol, and committed £2 billion to expand UK compute capacity twenty-fold by 2030.

Meanwhile, a new AI Growth Zone Delivery Unit has been launched to speed up the development of data centers in a bid to meet surging compute demand.

Last month, chancellor Rachel Reeves said AI is the “defining technology of our era” and underscored the government’s commitment to establishing the UK as a global leader in the technology.

"The choice is this: we can bury our heads in the sand and leave it to other countries - whose values may differ from ours - to shape and own this technology," said chancellor Rachel Reeves last month.

"We can leave it to the market alone, and let the balance of risk and reward be determined by a super-wealthy few. Or we can chart our own course."

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Microsoft has teamed up with Nvidia and WeTransact to launch the ‘Agentic Launchpad’ – a new program aimed at helping UK software companies build next-generation AI platforms.

As part of the scheme, successful startups and scale-ups will be able to work directly with Microsoft and Nvidia, gaining access to advanced AI expertise, technical sessions, and opportunities for joint innovation.

This will include a range of events, workshops, and summits, including the Microsoft AI Tour and industry briefings.

Marketing support is a key focus of the scheme, helping startups to access broader markets through media campaigns and executive sponsorships, the duo said.

Long-term, the aim here is to improve time-to-market and visibility. Microsoft said participants will be able to promote their agentic AI apps to key stakeholders and target customers through dedicated campaigns. They'll also feature in communications, blogs, and press releases from Microsoft and its partners.

“This is a really exciting opportunity for innovative and ambitious AI-first software companies to accelerate the growth of their agentic AI solutions with the expert help of Microsoft and Nvidia,” said Darren Hardman, CEO, Microsoft UK & Ireland.

“We are passionate about helping to build the agentic AI future and see innovation flourish in the UK.”

Nvidia to beef up training resources

Nvidia has pledged additional support for the program by giving access to its existing training resources for startups and smaller enterprises.

“Nvidia is ready to support the Microsoft Agentic Launchpad through the Nvidia Inception program for cutting-edge start-ups,” said Serge Palaric, Nvidia vice president of EMEA hyperscaler and ISV alliances.

“This collaboration will provide start-ups with access to Nvidia Deep Learning Institute training sessions and a network of experts. By using Nvidia AI infrastructure, software companies will be able to accelerate their AI development and enhance performance.”

The program builds on Microsoft's GenAI Accelerator, launched this time last year in collaboration with Nvidia and GitHub. Participants were given free Azure credits, membership of NVIDIA’s Inception program, and support from Microsoft’s AI ‘Black Belt’ engineers.

“The GenAI Accelerator provided invaluable access to technical advisors, partner managers, and experts at Microsoft,” says Sharad Khandelwal, cofounder and CEO of SentiSum.

“We gained visibility in critical AI and SaaS communities, and it gave us the credibility to partner with enterprise customers who value Microsoft’s stamp of quality.”

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Secure access service edge (SASE) vendor Cato Networks has announced the acquisition of Aim Security, an Israeli startup focused on AI security, for an undisclosed fee.

The deal marks Cato Network's first acquisition and follows a period of strong growth, with the company recently surpassing $300 million in annual recurring revenue and securing an additional $50 million investment from Acrew Capital, taking its total Series G funding round to $409 million.

Founded in 2022, Aim Security has quickly established itself as a leading player in AI security, with its focus on addressing the evolving AI attack surface.

Aim's security capabilities will be integrated into the Cato SASE Cloud Platform to help enterprises securely adopt AI agents as well as public and private AI applications at a time when SASE adoption continues to climb.

"AI transformation will eclipse digital transformation as the main force that will shape enterprises over the next decade," commented Cato Networks' CEO and co-founder, Shlomo Kramer, in an announcement. "With the acquisition of Aim Security, we're turbo-charging our SASE platform with advanced AI security capabilities to secure our customers' journey into the new and exciting AI era."

Aim Security AI

Supported by a unified and advanced core engine and underpinned by a dedicated research team, Aim Security's offering spans various use cases, working to secure employee use of public AI applications, private AI applications and AI agents, as well as the agentic AI development lifecycle using AI security posture management (AI-SPM).

Employees can leverage Aim to securely use public and enterprise AI agents such as Microsoft Copilot, develop with new AI coding agents such as Cursor, as well as utilize local agents with Model Context Protocol (MCP) servers.

The Aim AI Firewall also secures internal AI applications and agents against runtime attacks and enforces corporate security and governance policies on all interactions.

Additionally, the solution works to secure the entire development lifecycle, from training ML models to building custom AI agents, through continuous discovery, detection, and remediation.

Cato Networks said the addition of Aim Security will extend the capabilities of its SASE Cloud Platform to enable organizations to address the unstructured nature of AI interactions, while tackling threats across the evolving AI attack surface.

Cato customers with current AI security requirements can deploy Aim today, while the capabilities will be offered as part of its SASE platform in early 2026 along with a "seamless migration path" for those that deployed the standalone solution.

Matan Getz, co-founder and CEO of Aim Security, said many organizations are already benefiting from the solution's ability to secure AI adoption, including one of the world's largest financial services companies.

"Aim had purpose-built a broad AI security platform, grounded in cutting-edge research and patented technology, designed to seamlessly integrate into complex enterprise environments," he explained. "Aim's solutions enable businesses to securely reap the benefits of their AI investments."

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VC investors are shifting their attention from generative AI startups to later-stage companies, new research shows, with the average deal size having tripled year-on-year to $1.5 billion.

According to EY Ireland’s latest Generative AI Key Deals and Market Insights study, global venture capital investment in generative AI surged to $49.2 billion in the first half of this year, outpacing the total for all of 2024, at $44.2 billion, and more than double the $21.3 billion total for 2023.

While the US accounts for 97% of global deal value and 62% of volume, EMEA makes up 23% of volume but just 2% of deal value.

“While there was substantial concern at the start of the year with the launch of DeepSeek that investment in GenAI was likely to trend downwards, the results for the first half of the year point to a very different scenario," said Grit Young, EY Ireland technology, media and telecoms lead.

"We are seeing a clear pivot to less but more substantial investments, which are pointed towards more mature companies and platforms that can demonstrate they can deliver real-world impact and return on investment."

There's been a wave of high-value investment into some of the most established players during the first half of this year, including SoftBank’s commitment to OpenAI, which could reach $40 billion, and xAI’s $10 billion funding round.

So far this year, the industry has also seen major funding rounds for Databricks ($5 billion), Anthropic ($3.5 billion), Mistral AI ($600 million), and Harvey ($600 million).

Investor focus is shifting

Agentic AI has emerged as a key growth area, with Capgemini’s $3.3 billion acquisition of WNS and Berlin-based Parloa’s $120 million raise among the more notable deals.

The report highlights a clear shift in investor focus towards generative AI platforms offering specialized, real-world applications. Meanwhile, venture capital is increasingly flowing into companies building software on third-party foundation models, with use-cases ranging from cybersecurity to regulatory compliance.

"We would expect that the investment trajectory is likely to accelerate through the second half of the year and beyond," said Young.

"It would appear that GenAI has skipped through the traditional ‘trough of disillusionment’ for new technology adoption quite quickly and has now moved into another upswing cycle."

In Ireland specifically, 63% of startups are using AI and 36% are embedding it at the core of their business models, yet many AI startups are struggling with access to capital and infrastructure.

"For AI startups, the funding environment remains challenging, particularly in the €1 million to €10 million funding space. Many high-potential startups find themselves in a difficult middle ground, too advanced for early-stage support, yet not quite large enough to attract global VC attention," said Young.

"However, Ireland has a deep and well-established pool of talented entrepreneurs, and with increased collaboration between businesses, founders, academic institutions and policymakers there are plenty of opportunities to be seized."

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When the house of cards came tumbling down for Builder.ai, it may have shocked some industry stakeholders, but for others it was a sign of an inherently broken ecosystem.

The high flying startup was one of a number of companies looking to capitalize on the generative AI boom, particularly the use of the technology in software development.

The profession has seen an influx of AI tools over the last 18 months, and this is now a booming marketplace, with industry giants battling it out over who can deliver the most value for engineers and devs, and most importantly, drive productivity.

Builder.ai was, arguably, among the pick of the bunch in this regard. Founded in 2016 and formerly known as Engineer.ai, the company offered AI-powered tools that allowed users to create applications with little or no coding expertise.

With the generative AI gold rush gaining momentum in late 2022 and early 2023, the company had suitors scrambling to get involved. It raised over $450 million in funding, including from big-name investors like Microsoft and Qatar's sovereign wealth fund.

So, where did it all go wrong? In May, a viral tweet accused the company of hiring a 700-strong army of engineers in India to basically carry out the legwork that the so-called ‘AI’ was supposed to be doing.

The company strongly disputes this claim, and there’s little evidence to suggest there’s any credibility in the accusation.

It’s worth noting that a 2019 report from the Wall Street Journal claimed the startup admitted to using human engineers, rather than AI, to carry out coding tasks.

Notably, the WSJ report mentioned that employees at the firm said the company exaggerated its capabilities in a bid to attract both customers and investors.

It appears that the grandiose claims bandied around by the company continued after its rebranding, but the real damage lay in the numbers, not the tech.

According to reports from the Financial Times, the startup is believed to have “overstated sales by as much as four times” and was facing serious debt problems.

The FT reported that the firm owed Amazon Web Services (AWS) $88 million and Microsoft around $30 million, for example.

Meanwhile, separate reporting from Bloomberg revealed a lender seized $37 million after finding it generated $50 million in revenue. That’s by no means a measly figure, but that stands 300% lower than the firm’s claim of a $220 million revenue stream.

The Builder.ai collapse is an indictment of the industry

Carrie Osman, CEO of private equity advisor, Cruxy, said the startup is the “latest example of FOMO investing”, whereby venture capital firms and industry stakeholders alike rush headlong into throwing money at companies.

Ultimately, it’s an indictment of the state of the industry and the hype surrounding the technology.

“Technology like GenAI has been massively overhyped in recent years, and investors and boards are under increasing pressure to find the latest, sexiest uses for AI,” Osman said.

“Driven by FOMO rather than fundamentals, investors are rushing into deals with minimal scrutiny, inflating valuations, and sidelining due diligence.”

The hype saturating this industry has sparked some concerns in recent months, particularly over the viability of many startups emerging in the space.

Indeed, a report from Silicon Valley Bank (SVB) in May issued a warning over the rise of ‘zombiecorns’ in the ecosystem.

These are essentially startups that raise huge sums of money but fail to build sustainable revenue streams. Fresh on the high of a major fundraise, many of these companies actually prove to be chronically unprepared post-funding.

The combination of high infrastructure costs, sluggish revenue growth, and the incessant demand for a quick return on investment (ROI) means a concerning portion of companies in the AI space are destined to fail.

Many of these failing startups seemingly fly under the radar without so much as a headline - and it’s largely due to the sheer amount of cash pouring into the space, which, it has to be said, is being driven by the leading industry figures banging the drum for the technology.

Analysis from the bank shows around 40% of all investment raised by funds last year came from those that “list AI as a focus”.

Compare that to 2021 where just 10% of venture capital investment went toward AI startups, and it shows many investors are willing to take the chance on investing in firms that are essentially just enterprise software with a shiny AI wrapper.

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The UK tech sector is now worth an eye-watering $1.3 trillion, with AI firms alone hitting a combined market valuation of $230 billion in the first quarter of this year.

UK AI startups raised $1.03 billion during the quarter – the biggest fundraise in three years – according to this year's Tech Nation Report from the Founders Forum Group. Indeed, during 2024, AI startups accounted for 27% of all UK venture capital raised.

Most investment is going to companies in the enterprise software space – $4.1 billion over the past two years – with VCs investing more in business-to-business AI solutions than in consumer tech. And London raised more than ten times as much as any other UK region during 2024 – although the North West and Scotland did well too.

The $230 billion market valuation makes the UK bigger than France and Germany combined – Europe's largest AI market, and third in the world after the US and China, and with a compound annual growth rate (CAGR) of 22% over the last five years.

A lot of this is down to ARM, valued at $118 billion, although even when public companies are excluded, the UK AI sector is more than 55% bigger than its closest European competitors.

However, it's not all good news. AI startup leaders said they were struggling with access to capital and talent, with one-in-three saying they were actively considering relocating their company's headquarters outside the UK.

"While the UK excels at startup creation, we struggle to retain our most promising companies as they scale," said Carolyn Dawson, CEO of the Founders Forum Group.

"Homegrown AI champions like Wayve, Darktrace, and Deepmind must turn to the US for investment and exit opportunities."

Half of AI startup leaders said they wanted to see the introduction of government-backed funds, along with policies to directly reduce the cost of talent, such as tax credits or other incentives, along with better policies on immigration and remote work.

"To help AI companies scale, the government should expand visa access for critical AI skills by streamlining work visas and allowing AI graduates to stay longer, similar to Canada's Tech Talent Strategy and France's Tech Visa, which attract top tech talent," said Husayn Kassai, founder and CEO of Quench.ai.

"They should also allocate a percentage of government procurement budgets to startups founded in the past five years, following the model of Israel's Innovation Authority, which funds early-stage companies to drive national AI leadership."

These changes, he said, would help UK startups retain talent and get a fair crack of the whip at public contracts, rather than being locked out by legacy vendor restrictions.

"The UK has the potential to lead the global AI revolution," said Dawson.

"Our task now is to create the conditions where our companies can thrive and scale without looking elsewhere, and to champion, connect and support the innovators who are building our AI future right here in the UK."

Wordsmith AI, a Scottish startup specializing in AI agents for legal professionals, has raised $25 million in a funding round led by Index Ventures.

The investment, which builds on a $5 million seed funding round last year, brings the Edinburgh-based startup’s valuation to $100 million and will be used to scale out its AI infrastructure and drive global expansion.

Founded in 2024 by Ross McNairn, a lawyer turned engineer, the company aims to transform the profession by embedding AI agents within legal teams to support general counsels (GCs).

McNairn describes its flagship Legal Enablement Platform as “air traffic control for GCs and in-house teams”, and allows users to automate tasks and streamline manual processes.

“For the first time, AI infrastructure can be embedded across companies, with fleets of agents that you can train to support every corporate function - cutting deal cycles, answering queries, and processing complex workflows,” McNairn said in a statement following the investment round.

Since launching, Wordsmith AI has cultivated a strong customer base which includes major firms such as Trustpilot, Deliveroo, Multiverse, Docplanner, and Remote.com.

The company has recorded strong revenue growth in both the UK and US markets thus far and plans to open offices in London and New York later this year.

"We are helping GCs embed their legal intelligence across the business,” McNairn said. “Gone are the days of legal being seen as a blocker, it is now a revenue accelerator."

Wordsmith AI targets agentic AI gains for legal teams

Agentic AI has quickly emerged as the latest industry trend in recent months, with a host of major big tech providers launching their own AI agent services.

Notably, there are a number of key emerging use cases for this latest iteration of the technology, such as customer service and software development. As ITPro previously reported, Salesforce has even touted the use of AI agents for frontline trade workers in recent weeks.

The legal profession is also an area ripe for automation, with the technology expected to play a crucial role in transforming the sector and helping reduce manual toil for workers.

Research from Gartner, for example, predicts the global legal technology market will reach $50 billion in value by 2027 as a result of generative AI adoption.

The consultancy believes the use of AI tools will help streamline processes such as spend management, e-billing, and legal document management activities.

With this influx of AI agents, the Edinburgh startup says the industry will also witness the emergence of an entirely new role within legal departments, dubbed the ‘legal engineer’.

The rise of this new, AI-focused role will require new skillsets, according to Wordsmith, meaning investment in training and deployment support will be crucial in delivering success.

“We’re witnessing the birth of an entirely new role in legal: the legal engineer,” McNairn said. “These are the people training, deploying, and managing fleets of AI agents. We’re helping to re-skill an entire generation to do it."

Wordsmith has invested significantly in training and upskilling for legal professionals so far, and this latest funding round will help accelerate activities in this regard.

“AI is revolutionizing the legal profession, and Wordsmith is leading that charge,” said Hannah Seal, partner at Index Ventures.”

“They’re not just building a copilot, they’re creating the foundational infrastructure for how entire organizations interact with legal. This is about reshaping enterprise operations, not just supporting legal teams.”

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While cash is flowing into the AI startup space, alarm bells are ringing over the long-term viability of many up-and-coming firms.

A new report from Silicon Valley Bank (SVB) shows venture capital investment in AI firms has soared in recent years. Analysis from the bank found roughly 40% of all investment raised by funds last year came from those that “list AI as a focus”.

This marks a sharp increase compared to 2021, in which just 10% of venture capital investment focused on AI startups specifically. Indeed, AI companies now make up 45% of US venture capital investment in enterprise software, again marking a significant jump from 9% in 2022.

A key factor in this sharp rise in funding came from ‘megadeals’, according to SVB, which in this case it defines as raises in excess of $100 million.

There were 107 megadeals across Q1 2025, the most since the second quarter of 2022 at the height of the post-pandemic goldrush. Major industry players such as OpenAI and Anthropic were found to be “leading the charge” in this regard.

But despite the bullish outlook among VC firms, cracks could begin to show across the industry. The report noted that this sharpened focus on the technology means startups in other business verticals are finding it increasingly difficult to raise cash.

“Exclude AI investment and the story changes,” the SVB report stated. “There is no meaningful uptick for companies not leveraging AI, with investment from this group essentially flat for the last year.”

What this means is that companies failing to lean into the generative AI trend are missing out on a potential goldmine of investment.

But there’s more to the tech sector than simply AI solutions and software, and the venture capital obsession with AI could risk harming the broader ecosystem, according to Sam Hields, partner at early-stage tech VC, OpenOcean.

"The Silicon Valley Bank (SVB) data confirms what we already knew: AI is the gravitational force in venture capital,” he said. “As capital gets more and more concentrated into AI, we risk sucking the oxygen out of the room for other breakthrough technologies.”

AI ‘zombiecorns’ are becoming a serious problem

While the diversity of funding warrants serious concern, SVB also noted that cracks are beginning to show with regard to the long-term viability of some startups in the space.

The report noted that many startups are woefully underprepared post-funding, largely due to poor revenue growth and unit economics. SVB describes these companies as ‘zombiecorns’.

Infrastructure costs, dwindling runway, and sluggish revenue growth due to an increasingly competitive marketplace represent a confluence of challenging conditions for these companies.

“While new unicorn creation has been impressive in recent years, unicorn exits are a different story,” the report noted.

“The enterprise unicorn herd stands above 300, with few exiting, closing their door, or taking a down round below a $1B post-money valuation.

“With the growth of the herd, so too comes growing demand for liquidity. But with the IPO window effectively shut, and large-scale M&A being tougher to execute with the overhanging macro climate, many run the risk of ending up in no man's land.”

Tom Glason, CEO and co-founder at ScaleWise, said the SVB report highlights a “harsh truth” about the generative AI trend.

“The AI boom has fueled a wave of overfunded startups that look healthy on the surface, but are commercially hollow underneath,” he said. “These so-called ‘zombiecorns’ raise huge rounds but fail to build sustainable revenue or viable unit economics.”

This has become a common recurring theme in the market, Glason suggested, with founders “confusing capital raised with genuine traction”.

Ultimately, capital efficiency and go-to-market execution still largely determine whether a company graduates to IPO or fades out, he added.

Hields echoed Glason’s comments, adding that the hype surrounding the technology has resulted in a trend in which companies rapidly pivot to become an ‘AI company’ which ends up being nothing more than a shiny veneer on top of an existing tech solutions stack.

“Today, folding an LLM into your product is enough to claim an ‘AI badge’. That’s perfectly natural - and, in many cases, it’s trivial to implement. But it won’t deliver durable returns,” he said.

“SVB is right to warn us about the rise of ‘zombiecorns’. If we avoid the temptation to over-index into dead-end, ‘wrapper-ware’ startups and push against the crowding out effect on deeper R&D, we have a chance to channel enthusiasm for AI into solving real, structural problems. That’s where the real alpha comes in.”

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National Grid Partners, the venture capital and innovation arm of the UK utility firm, has unveiled plans to invest $100 million in AI startups in the energy field.

With pressure on the grid increasing, the investment division is exploring solutions that will help make the grid more efficient, resilient, and dynamic. This means improving efficiency, cutting customer costs, reducing emissions, and ensuring energy security.

"Power systems like National Grid's are seeing unprecedented challenges, with soaring demand driven by data centers and the electrification of heat and transport, as well as requirements for a more flexible grid with the rise of renewables and EVs," said John Pettigrew, CEO of National Grid.

"We are seeing artificial intelligence play a vital role resolving these issues and delivering compelling results across our operations. Scaling AI will continue to help National Grid provide the most efficient, modern grid available for our millions of customers in the US and UK."

The first funding pledge has been granted to Amperon, a provider of AI-powered energy forecasting and analytics solutions aimed at improving grid reliability, managing financial risk, and optimizing renewables.

"As the energy landscape becomes more complex and dynamic, the need for accurate, real-time data and predictive insights has never been more critical," said Raghuram Madabushi, investment director at National Grid Partners.

"Amperon's AI-driven approach to forecasting is a perfect fit with our vision for a smarter, more resilient grid – and this marks the inaugural investment from our new, $100 million commitment to AI solutions advancing our energy system."

National Grid eyes tangible use-cases

National Grid Partners said it's already invested $150 million in 18 AI companies focusing on energy innovation, with more than 80% of its portfolio companies strategically engaged with National Grid business units.

One such is Sensat, which uses AI to help owners of critical infrastructure visualize and collaborate via digital twins, thereby accelerating projects and lowering costs.

The utility giant is currently using the firm’s tech to speed up substation upgrades and connect data centers to the grid.

AI is a mixed blessing when it comes to energy. Late last year, an investigation by Schneider Electric into the possible future of AI’s electricity consumption over the next decade found 'significant concerns' over capacity.

The International Energy Agency (IEA), meanwhile, has forecast that the electricity consumption associated with global data centers will more than double between 2022 and 2026, peaking at over 1,000 TWh next year. That's equivalent to Japan’s national electricity consumption.

Data center operators are concerned about pressure from AI-driven demands, with seven-in-ten IT decision makers recently telling Cadence researchers that energy grids are being pushed to breaking point.

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The UK is in danger of becoming an 'incubator economy' whose startups move overseas as they scale, according to lawmakers.

The House of Lords Communications and Digital Committee says the UK needs to do a better job supporting UK AI and creative tech startups.

Committee chair Baroness Stowell said the UK has the potential to “be a powerhouse of growth for AI and creative tech companies”, but so far these efforts have failed.

"We are at real risk of becoming an incubator economy instead, where UK start-ups develop innovative products and services before selling out or moving abroad, so other countries derive the economic benefit,” Stowell said.

“Too often it’s a case of the UK begins, other countries cash in. That has to change."

In recent months, UK fintech unicorns Revolut and Monzo have both announced that they may list in the US rather than the UK stock market.

Barriers to successful scaling up in the UK include limited access to capital compared with other countries, the committee warned. There are also challenges in recruiting in-demand tech talent along with a business and investment culture that can be too risk averse.

The report also highlighted a complex array of well-intentioned government schemes, including financial reforms, tax credits, investment incentives, and innovation focused initiatives - all of which actually create further barriers and bureaucracy.

The committee said the government should resist the urge to launch new schemes and instead focus on consolidating and streamlining existing programs for maximum impact.

"Action must be taken to unravel the complex spaghetti of support schemes available for scaleups. Various tax credits, British Business Bank funds and investment incentives combine to be so hard to navigate that companies have to employ consultants to advise them," Stowell said.

"We urgently need to simplify the help available and ensure it is set up to support our most innovative scaleups to grow, while also offering value for money to the taxpayer."

The government’s industrial strategy should provide a coherent, cross-sector vision for how technology scale-ups will be supported to drive economic growth, while financial reforms should be accelerated to unlock domestic growth capital.

Similarly, more should be done to incentivize founders to stay in the UK to grow their businesses, and public support for innovation should be streamlined. The government should also commit to AI delivery and sustain investment in the creative industries.

"Every UK unicorn that gallops overseas to list, or sells out to foreign investors, is a blow to UK PLC and our aspirations for growth," said Baroness Stowell.

“The government’s new AI Opportunities Action Plan is a good start, but a plan in itself is not enough. The key is its delivery. The government will need to drive through change to address fundamental barriers such as limited infrastructure and comparatively low levels of adoption if it is to have an impact."

Password management startup Passbolt has secured $8 million in funding as part of a Series A investment round.

Passbolt specializes in credential management for organizations ranging in size from small businesses to large enterprises, and boasts more than 400,000 active daily users.

While focusing primarily on password management, the startup also provides security for a variety of organizational credentials. This includes support for root accounts, SSH keys, passkeys, and API keys.

Additionally, Passbolt is fully open source, providing enterprise users with both self-hosting capabilities and the ability to customize management practices to match company policies or regulatory obligations.

The funding will be used to accelerate product development, the company confirmed, and enable it to scale international sales and marketing activities.

Among the first key milestones for the firm in the wake of the investment will be its next major release, Passbolt 5.0, which it said will “extend capabilities” for users.

"Organizations are trapped between consumer-focused password managers and complex monolithic enterprise solutions that don't meet the need for secure collaboration of agile teams operating in digital environments," said Kevin Muller, co-founder and CEO of Passbolt.

"We're building a new type of credential and access manager for organizations of all sizes. It enables technical teams to collaboratively manage access to the organization’s IT, software development, and security infrastructure. At the same time, it allows the broader workforce to automatically log into productivity tools and to share access credentials with colleagues securely."

Passbolt capitalizing on market growth

Passbolt operates in a market which is expected to grow significantly over the next few years.

Analysis from Gartner, for example, predicts the privileged access management (PAM) space will grow to $2.8 billion by 2027, underlining the huge demand for solutions.

The consultancy noted that a key factor in this growth rate is a surge in demand for secure remote access by external contractors and the continued trend of remote and hybrid working practices.

The funding round, which brings its total investment to date to over $11.5 million, was led by Netherlands-based investment firm, Airbridge Equity Partners, alongside existing partners such as Expon Capital.

“Since the very first funding round, we have supported Passbolt in its mission to transform password and access management for modern teams," said Alain Rodermann, partner at Expon Capital.

“We are thrilled to see Passbolt achieve this new funding milestone and continue innovating to serve thousands of organizations worldwide.”

AI infrastructure startup nexos.ai has secured $8 million in funding in a round led by Index Ventures.

Founded in 2024 by Tomas Okmanas and Eimantas Sabaliauskas, the co-founders of Nord Security, nexos.ai aims to tackle one of the biggest challenges faced by enterprises in 2025 – traversing the ever-growing ecosystem of AI models.

Nexos.ai frames itself as the “orchestration platform” and “connective tissue” for enterprises ramping up AI adoption, enabling them to efficiently deploy, manage, and optimize their IT infrastructure.

Upon launch, the nexos platform will provide users with access to over 200 AI models through a single interface. This includes models from leading industry providers such as OpenAI, Meta, Anthropic, and Google.

Key capabilities of the platform include:

• Smart model routing and load balancing to streamline performance
• Intelligent caching to reduce repeat query costs
• Monitoring and analytics tools for AI operations
• Enterprise-grade security and compliance controls
• Automated performance optimization for AI models

The nexos.ai platform will launch in Q1 2025, the firm revealed, and is already being tested by partners exploring use-cases such as automated customer support.

The inspiration behind nexos.ai was based on Okmanas’ experiences integrating AI at enterprises he was involved with. In some cases, these organizations struggled with deployment despite spending over $100k each month on large language models (LLMs).

Enquiries with other enterprises revealed the same recurring issue: mainly that while firms were keen to deploy AI, they lacked the appropriate infrastructure to accelerate adoption.

The rapid growth of LLMs over the last two years has outpaced infrastructure capabilities, the company said, meaning enterprises are struggling to manage both costs and performance requirements.

“Companies know that AI is an operational and competitive necessity, but they’re drowning in the challenges of managing multiple models, controlling costs and ensuring accurate and reliable performance,” said Okmanas, who serves as CEO at nexos.ai.

“At the same time, AI models are becoming increasingly autonomous and capable of handling complex tasks with minimal human intervention,” he added.

“We’ve built nexos.ai to be the enterprise-grade platform that makes working with AI as intuitive as working with human teams – providing the infrastructure and oversight to make sure these models perform at their best while remaining cost-effective and secure.”

The funding round also saw participation from Creandum and Dig Ventures, alongside angel investment from Klarna CEO Sebastian Siemiatkowski through Flat Capital, Olivier Pomel, CEO of Datadog, and Avishai Abrahami, CEO of Wix.

Following the launch of the government's Scale-up Sprint initiative earlier this month, TechUK has launched its own Scale-up Group.

The tech trade association has identified more than 100 companies within its membership that meet the OECD definition of a scale-up, and will soon be inviting them to join. 

"The group will be a focal point for techUK’s engagement with government, the opposition, government agencies such as the British Business Bank and National Infrastructure Bank, as well as private investors, to provide an enhanced level of support to some of our fastest growing companies," it said.

The companies it plans to invite have grown their revenue more than 20% per year for at least the last three years, and are located across the UK – although, predictably, London features heavily in the list. Most were founded after 2014, with a significant proportion founded between 2016 and 2020.    

While most of these firms are operating in the cyber security, fintech, artificial intelligence (AI) and data infrastructure industries, the group also contains a wide range of companies across the semiconductor, payment, health tech, and quantum sectors. And while the vast majority are SMBs with 250 staff or fewer, 13 companies in the group have more than 250 employees.  

"In total our scale-ups employee 11,000 people across the UK. They have seen a huge increase in headcount, more than doubling the number of staff employed since 2019," said TechUK. "If trend growth can be supported, TechUK's scale-up members could employ over 20,000 people in the next few years." 

The new government support package was launched by the Department for Science, Innovation and Technology (DSIT) earlier this month, with a pledge to make the UK a “scale-up powerhouse”.

It includes a new Scale-up Forum aimed at allowing UK tech scale-ups to help co-design the government's future business policies, as well as a science and tech-focused scale-up support service targeting 20 of the UK’s most promising scale-ups with government support.

A new regulatory support service is designed to help science and tech companies to navigate UK regulation and innovate with greater certainty, while DSIT will make data held by government more accessible to scale-ups.

"Scale-ups have an outsized contribution to the UK economy - they make up just 1% of SME firms, but account for 8% of SME employment and 22% of SME turnover, according to an analysis from the Social Markets Foundation.  Supporting scale-ups is seen as a key economic growth opportunity for the UK and the route to developing future globally leading companies in science and technology.," said TechUK.  

"With the right support, techUK’s scale-ups members have the potential for significant growth, with techUK analysis on Data City estimating an average headcount growth rate of 36.6% for the group and the potential to reach over £2 billion in turnover in the next few years."

TechUK says that it will approach those members it has identified as suitable for the group, but that any other interested members should get in touch.

Raising investment as a startup founder can often be an arduous and stressful process fraught with challenges. But for founders in the LGBTQ+ community, this challenge is exacerbated by long-standing issues around visibility, openness, and, on occasion, instances of discrimination.

LGBTQ+ founders face a myriad of hurdles when raising venture capital, with founders from the community raising 16% less on average compared to their counterparts, according to US industry analysis from the StartOut Index. StartOut statistics also show less than 1% of more than $2 trillion in venture capital has gone to entrepreneurs and founders from the community. This comes despite the fact that, across the country, 7.1% of the population identifies at LGBTQ+.

These rates highlight a significant disparity between LGBTQ+ founders and their counterparts outwith the community, and raises questions over why many find it so difficult. 

A key factor in this, research shows, is due to long-standing cultural issues and a lack of visibility and awareness of the challenges faced by founders from what is a growing – yet traditionally marginalized – social demographic. 

LGBTQ+ founders often ‘conceal their identities’ 

A major issue faced by founders from the LGBTQ+ community lies in perception, research shows. Earlier this year, a study from Proud Ventures found nearly one-quarter of startup founders believe disclosing their sexual or gender identity could “pose disadvantages” when seeking investment. The LGBTQ+ Founder report suggested 18% of founders think their identity may negatively impact fundraising attempts, while 27% believe their identity could create a “general disadvantage” during the process. 

This culture of concealment isn’t restricted to startup founders from the LGBTQ+ community either. The study revealed that investors in the VC space also frequently withhold their identity from colleagues, which Proud Ventures said merely exacerbates visibility issues and adversely affects founders. 

Christian Tooley, CEO at i3 Investing, a UK-based angel syndicate which specializes in supporting LGBTQ+ founders, tells ITPro concealment is, unfortunately, a common tactic among many founders from the community. 

“They often conceal their identity and do not conform to certain ‘norms’ within investor circles - often reinforced by affinity bias,” he says. “Their identity should be seen as a positive, bringing unique life experiences and a level of grit and empathy that enhances their ability to build great businesses.”

Discrimination against LGBTQ+ founders was found to be a lingering issue, according to Proud ventures. Citing examples of discrimination, the firm’s study highlighted a specific incident where a bisexual founder was the victim of abusive slurs from an investor who subsequently backed out of a deal. 

Intersectionality and diversity as box-ticking

A frequently unacknowledged element of LGBTQ+ funding disparities also centers around the “intersection of sexuality and other identities”, Tooley adds. This reflects analysis from Proud Ventures showing gay founders raised a median of 2.25 times more than bisexual founders. Similarly, the disparity with lesbian founders is even more jarring, with gay men raising 22 times more. 

“Within the LGBTQ+ community, it is often the most privileged that still get funding. StartOut in the US has data showing that queer men still get more funding than queer women, showing the intersection of gender and sexuality.”

Tooley also notes a pervasive culture of diversity-related ‘box ticking’ in some investor circles is also an issue that must be addressed. All too often, he says, investing in LGBTQ+ founders is still seen as a “one-time investment to diversify a portfolio and tick some ESG boxes”. 

While Tooley says there has been a degree of improvement in this regard, there is still a long way to go. “There is greater awareness of this identity - and the underestimated nature of these founders- but it is still few and far between. Without queer voices on your IC, and without engaging with local communities and initiatives, you will not find or understand these founders’ experiences.”

How can LGBTQ+ founders be supported?

Although VC investors told Proud Ventures that they are taking “proactive steps” to address funding disparities and cultural barriers for LGBTQ+ founders, the report notes that there is still vast room for improvement on this front. 

A key recommendation was that VC firms should place a “stronger focus on hiring more diverse investment teams” to create a more welcoming environment for founders from this community. 

Across the tech industry, other efforts are being made to raise awareness of LGBTQ+ founders and companies. In June, for example, Crunchbase unveiled the launch of new LGBTQ+ ‘diversity spotlight tags’ which aim to improve visibility for founders in the community. 

The ‘LGBTQ+ led’ and LGBTQ+ founded’ tags were specifically launched to “help close the inequity gap” for the community, and builds on several years of work with diversity tags at the organization. 

Long-term, Tooley believes that a stronger focus on ‘intersectional investing’ and ‘queer investing’ may prompt closer ties between LGBTQ+ founders and the investor community – a drive i3 has been passionate about for some time. This will ensure that investors “have access to the innovation from these founders in our community” and maximize exposure and awareness for founders. 

The global startup landscape has changed markedly over the last 18 months, with deteriorating economic conditions prompting a dramatic dip in the volume of venture capital (VC) investment worldwide. In the first quarter of 2023, global venture capital funding stood at $76 billion, according to Crunchbase, marking a 53% decrease against the same period in 2022. This significant drop came amidst a backdrop of major funding deals, including a $10 billion investment in OpenAI, further underlining the decline witnessed in the industry. 

Inflation, rising energy costs and the possibility of recession have, to put it lightly, caused VCs to adopt a more conservative approach. The pre-pandemic gravy train has very much ground to halt, and VCs are becoming increasingly strict in allocating funding, according to Megan Wood, chief product and strategy officer at DigitalOcean. This confluence of higher operating costs, inflation, and a more stringent fundraising landscape is, in turn, causing serious issues for many startups. 

“Fundraising continues to be a struggle,” she says. “Expectations are much higher in terms of revenue, growth, path to profitability, and the diligence and underwriting process of VC investment is more difficult than it was five years ago. It's probably not more difficult than it was one year ago. But it just continues to stagnate. And that shows up in how founders are operating startups and SMBs – if it's harder to access capital, then they can't spend on growth in the same way they would always like to.”

Larger startups are feeling these changing conditions acutely, Wood notes. Some later-stage firms that raised funding at the peak of the cycle in 2021 with high valuations that find themselves in a fundraising scenario now can often end up in a precarious position. 

“I think later-stage companies are probably the ones struggling the most right now,” she says. “They have very high valuations, and for them to raise money again they either have to have grown precipitously or they have to eat a valuation number that they may not be excited about. That might be a down round for their investors, which is a very difficult proposition.”

These are uncharted waters for startups

The current conditions in the global VC market mean startup founders are now contending with an environment that many have never witnessed before, Wood adds. These are very much uncharted waters for many founders, which is placing significant strain on firms and forcing them to make difficult choices that could harm their long-term growth. 

Cashflow considerations are more critical than ever for a startup embarking on its growth journey. In years gone by, simple decisions such as allocating funds toward marketing are being re-examined in favour of diverting funds elsewhere in the business. 

“We just lived through a 13-year bull cycle in the VC market,” she says. “And so for a lot of founders this is a whole new world to them in terms of how you navigate it. We’re seeing a lot of people who haven't lived through a true recession before who are running companies, and there's a lot of different tactics involved.

“So you know, hard questions like ‘How much do I invest in performance marketing’, that may have been a staple of growth in the past, but it's a very costly channel of acquisition relative to things like SEO.”

Wood says considerations such as these are critical, given the levels of investment required and necessity of tangible growth and path to profitability as a staple requirement for future fundraising prospects.

“How much do I invest here during this time, knowing that growth is important?” she ponders. “It’s a case of knowing that if I don’t continue to grow, it will be hard to get fundraising in the future as well.”

Plugging critical talent and funding gaps

The importance of hiring right has long been a well-documented challenge for startups. With limited cash resources and a growth strategy that requires top talent, failing to hire correctly can be a critical hurdle many fail to pass. 

Research from the UK’s Department of Education this year found that nearly half (46%) of startups across the country believe a lack of talent is a key challenge for them moving forward. This prompted over 80% of those surveyed to invest in upskilling for existing staff to accommodate for acute talent shortages. 

These talent shortages, combined with potential cash flow issues, presents startups with a dire quandary; spend more and reduce your runway, or risk losing talent that is vital to your long-term success. 

“There’s been a lot of layoffs in the last few years,” she says. “When you think about operating expenses of people, which are critical to your business going forward, it’s been incredibly challenging. How do you grow with less people?” 

Many startup founders are also adopting novel approaches to ensuring their cash flow doesn’t impede growth in current conditions, Wood says.

“One thing I'm seeing is that a lot more startups are looking at prepayment, or minimum commits or things like that in their order taking process in order to de-risk their sales process and their investments,” she says.

These practices, Wood notes, do represent a way for startups to ensure that revenue streams are maintained and lessens the risk of reducing their long-term cash runway. “They’re focused on how they can get that cash assured up-front to fund their growth cycle,” she adds.

Fundamentally, however, this period represents an opportunity for startups to truly differentiate themselves from competitors. Having faith and confidence in the products and services they are developing is key, but many fall into the trap of underselling themselves. 

“Focus on the product and services, you're only going to differentiate yourself with your customers,” she says. “There can be this temptation to lower prices and compete in that manner, but I think as a startup and founder you have to think about what's your differentiating factor.”

Focusing on sustainable traction

One particular tactic Wood has observed recently has been a prevailing focus among founders to focus on ‘sustainable traction’. This concept, based on the ‘rule of 40’, allows firms to support long-term growth while ensuring cash burn isn’t reaching critical levels. 

The rule of 40 is a concept that the venture capital industry uses to measure whether a company is healthy or not, Wood says. This takes into account an organisation’s annual revenue, plus free cash flow as a percentage of revenue. 

“As an example, if your revenue was growing 20% year over year, and you were producing in profit 20% of your revenue, you would meet the rule of 40,” she explains. “The idea here is that it's not just revenue growth, but it's profitability and positive unit economics that matter to whether a business is healthy when it's in this growth stage.”

Reflecting on the previous VC cycle, Wood notes there were a slew of companies that reached IPO several years ago, but are still struggling to reach profitability. Founders now are keen to avoid this pitfall and the “growth at all costs” mentality prevalent across the industry in years gone by. The current economic environment simply creates too much risk. 

“I think that profitability is more of a hot topic with VCs than it used to be. And it doesn't mean that early stage companies have to be profitable, but it has to be something where you're building a path to profitability. And that's really important.”

Short-term pain and long-term success

Weathering the current economic climate will remain challenging for founders across the globe, Wood says, and there will likely be more casualties along the way. Data from Carta shows that Q2 of 2023 saw the highest number of startup closures ever recorded, highlighting the current environment is precarious. 

However, long-term, this predicament could create a more vibrant startup landscape, allowing serious players and those focusing on sustainable growth to differentiate themselves from competitors and cut the wheat from the chaff. 

“I think it’s good for us in the long run that we’re making sure we’re building scalable and sustainable growth startups,” she says. “While there may be a lot of startups shutting down right now, I think long term we'll see that this was an innovation cycle and that so many new startups are born out of it. So I'm bullish coming out of that.”

London and the southeast of England have always been a proverbial tractor beam with regard to venture capital (VC) investment in startups. 

Billions have poured into firms based in Oxford, Cambridge, and the capital in recent years while firms in other major cities have been forced to contend with a slower stream of funding in hopes that a ‘trickle down effect’ may one day benefit them. 80% of all UK VC funding has been absorbed by firms operating in the ‘Golden Triangle’, to be precise, highlighting a serious disparity in the allocation of funds across the country. 

It’s not just about funding, either, it’s about awareness. From a founders’ perspective, it must be tedious seeing top startups to watch roundups being utterly saturated with firms from the Golden Triangle. Are there no exciting, high-growth firms outside the region, or are journalists just stuck in the same ecochamber as their VC friends?

Now, that’s not to say that these startups don’t deserve it. The region is undoubtedly an economic powerhouse, produced a myriad of high-performing global companies, and has played a key role in helping the UK establish itself as a leading global tech hub. But if the UK has ambitions to retain its crown as the third-best performing tech industry in the world behind China and the US, then a redistribution of wealth appears drastically needed. 

There’s light on the horizon for Northern startups

Recent events show the tide could be turning and that a more concerted effort to champion regional tech startups is dawning. Better still, it’s more than just pandering to regional communities with empty promises – there’s going to be serious cash flowing into startups across the north of England and Scotland. 

Edinburgh-based venture capital firm, Par Equity, announced a new £100 million fund to support startups in the north of the country this week. The ambitious fund aims to support and nurture early-stage startups in the north and Scotland. This should be lauded from the rafters as far as UK startup support goes. Creating opportunities for high-growth potential firms and entrepreneurs in the north of the country could go a long way to bridging what has been a long-running gap. 

London-based startups receive eight times more in early-stage investment compared to their counterparts across the UK, according to the Startups 100 Index. Tech Nation rightly flagged the lingering issue of regional funding disparities before its untimely demise, suggesting that the lack of access to cash for founders outside London and the Southeast was a serious challenge for the broader UK tech industry.

Par Equity may not immediately put a dent in this, but the mere fact it’s seeking to tackle this disparity and focus on traditionally underserved regional ecosystems is a welcomed move and could shed greater light on these areas. This group isn’t alone in supporting underserved ecosystems either. To its credit, Barclays Eagle Labs has made clear its intention to focus on a broader array of areas across the country since taking over the Digital Growth Grant fund at the expense of Tech Nation.

Eagle Labs said 80% of the startups it plans to support will be from “outside London”, which should be applauded. 2021 programmes run by Tech Nation, by way of comparison, saw only 58% of participants from outside the capital.

An ode to the 'real' North

Looking at Scotland’s tech ecosystem as an example, there have been frequent complaints about the lack of VC investment over the years despite consistently strong performances by the country’s tech sector. Excusing my tartan-tinted glasses for a second, Scotland’s tech startup scene is perhaps the best example of a high-performing ecosystem in the North - the 'real' North, if we’re being pedantic – that has been consistently overlooked. 

There are institutional issues at play here, not least of all the fact that Scotland’s underlying startup infrastructure has required a government-backed cash boost to create dedicated tech hubs for founders. However, recent statistics from the British Business Bank speak for themselves. The state bank ranked Edinburgh as the UK’s top ‘innovation-led’ cluster for equity deals outside of the Golden Triangle. Evidently there’s a dearth of quality in this particular city, so any efforts to continue raising awareness and pour much-needed cash into the ecosystem will do wonders long-term. 

Glasgow, Scotland's larger, grittier city with a deep history of manufacturing and industrial excellence, is also making a strong case for itself. The city recorded 8% growth in VC funding during Q2 2023 amidst a period of torrid conditions for firms. It also now ranks third on a list of UK cities for VC investment, behind Manchester and Birmingham. It’s important that investors recognize the sector north of the border for what it is – ripe with opportunity and a chance to target a veritable goldmine of exciting companies. 

Scotland as a whole has also been punching above its weight in recent years despite macroeconomic challenges. While venture capital investment across the UK dipped in 2022, KPMG research shows that the Scottish ecosystem bucked industry trends and raised a record-breaking amount. If Scotland can do this, then there’s nothing to suggest regions in the north can’t do the same. 

Banking on regional strength

Manchester, Liverpool, Leeds, and Newcastle all boast strong tech ecosystems. The former of the aforementioned cities raised a record amount of funding across 2022 – £532 million in total. This marked the highest volume of VC investment in any city outside of London and the Southeast and secured Manchester’s place as the best-funded ‘northern’ tech hub. Better still, Manchester-based startups raised £1.8 billion in VC funding between 2018 and 2023, more than firms in major European capitals.

If the UK is serious about retaining its position as a leading global tech hub, its regional neglect needs to change. Investment will go a long way, but championing startups from regional ecosystems and acknowledging the merits of cities such as Manchester, or Edinburgh, is equally powerful. Whether or not London-centric investors, politicians, and industry talking heads will adopt this approach is another question entirely, but there are positive signs on the horizon.

Cyber security provider CrowdStrike has agreed to acquire Israeli application security posture management (ASPM) startup Bionic.

The addition will extend the company’s cloud native application protection platform (CNAPP) with ASPM tools to provide users with comprehensive risk visibility and protection across the cloud estate, including applications and services.

Announcing the move at its Fal.Con 2023 event in Las Vegas, CrowdStrike said the acquisition will make it the first cyber security company to offer complete code-to-runtime cloud security through a single unified platform.

“The cloud is cyber security’s new battleground, yet the industry’s answer to-date has been disjointed point security tools or ‘platforms’ with multiple consoles and agents,” said George Kurtz, CrowdStrike co-founder and CEO. “We are delivering what customers need: Modern protection to address cloud security risk comprehensively, through one unified platform. 

“We pioneered cyber security for the cloud era, and the addition of Bionic further extends our cloud security leadership on our mission of stopping breaches. Bionic shares our passion for customer-focused innovation and will make a great addition to the CrowdStrike team.”

CrowdStrike said it plans to offer Bionic ASPM as an independent offering as well as fully integrated as a capability of Falcon Cloud Security, which forms part of its wider Falcon platform.

Bionic will extend Falcon’s agent-based and agentless protection of cloud infrastructure by providing visibility into application behavior and vulnerability prioritization for both server-based and serverless infrastructure.

CrowdStrike said Bionic’s real-time application visibility will help facilitate the discovery and mapping of application services, databases, microservices, third-parties, APIs, and data flows across cloud service providers, as well as both hybrid and on-premises application deployments. The offering removes the requirement for sensitive source code access, with applications automatically deconstructed while seamlessly integrating with CI/CD pipelines.

Users can also leverage the solution to instantly prioritize application-level vulnerabilities, as well as gain complete visibility into serverless infrastructure such as Azure Functions and AWS Lambda.

Bionic was founded in 2019 and now has a team of around 100 employees based at its offices in Tel Aviv and Palo Alto, all of whom are expected to join CrowdStrike.  Company CEO Idan Ninyo said the firm was founded with the sole aim of providing complete visibility into application risk. 

“We have built a ‘Google Maps for your apps’, delivering a complete picture of application security risk in a truly frictionless way that does not interfere with the development process,” he said. 

“CrowdStrike has taken the mantle as the modern cyber security platform of choice and the company to beat in the cloud security market. Its strength and scale as a market leader and innovator will help us dramatically accelerate the adoption of ASPM by every business and organization on the planet.”

CrowdStrike did not reveal the cost of the acquisition but said the purchase price would be paid predominantly in cash, with a portion delivered in the form of stock. 

The acquisition is expected to close during the company’s fiscal third quarter, subject to customary closing conditions.

Venture capital (VC) funding has become one of the main drivers of the tech economy. However, new startups are exploring alternative funding options, as these may be more appropriate or offer greater flexibility that business founders are looking for.

When they start investigating, however, business owners can feel overwhelmed by the sheer variety of what’s on offer. It’s essential, therefore, that founders arm themselves with as much information as possible.

“When exploring alternative funding options, it’s important to have a strong understanding of what’s available,” says Jessica Bonner, head of origination at Capita Scaling Partners (CSP). “Whether it’s debt funding, grants, crowdfunding, revenue-based financing or others, each option carries its own benefits, risks, and criteria. It’s therefore crucial to determine the type of funding that best suits specific circumstances and aligns with long term plans.”

Types of alternatives to VC funding for startups

While not an exhaustive list, these are some of the main alternative funding options that startups searching for additional sources of finance other than venture capital should consider.

Government funding and grants

Central and local governments have offered startup businesses loans and grants for decades, although they often target a specific business process, such as research and developing a new product. Innovation grants are also available, as well as R&D Tax Credits, Patent Box and Creative Industries tax relief. For those aged 18-30, the Prince’s Trust Enterprise Programme is also an option and has supported thousands of young entrepreneurs.

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are closely linked to VC funding but could offer the funding level a new startup business is looking for. Detailed information is available on the Gov.uk website.

Bootstrapping

Self-funding your new startup business should always be considered first. Using your own financial resources will give you ultimate control over how the money is spent and the level of reporting that needs to be completed. Using family and friends should also be explored, as they can often be an untapped source of support for new businesses.

Angel investors

Wealthy people who want to support new businesses often invest significantly in high-risk companies. These early-stage investments are risky, but they can deliver potentially massive rewards to the angel investor. For your business, angel investors tend to be less stringent with their requirements than a VC, but may want more hands-on, day-to-day influence over your company. Locating an angel investor can take time. One of the most effective routes is to use one of the many angel investor networks.

Crowdfunding

One of the most active funding channels is crowdfunding. If your business has an innovative new product, asking potential customers to support its development for rewards – often significant discounts on the final price of the product – could help bring your idea to market, as it has thousands of other new products. Among the best known crowdfunding platforms are Kickstarter and Indiegogo, which are reward-based systems. An alternative is equity-based systems that offer a stake in your new business such as Crowdcube and Seedrs.

Be prepared to make what could be a significant investment in the explainer video; you will need to communicate information about your new product to entice backers to make a pledge.

Incubators and accelerators

Many of the most well-known tech companies were funded by incubators. These differ from venture capital as they usually only invest in a limited number of companies yearly. This means they can become highly competitive, but if you’re accepted expertise and mentoring are often also included. If your business needs more than money to start, these funding options, which include the likes of Entrepreneur First and Active Capitals among others, could be for you.

Debt financing

Borrowing the money you need to start your business can be approached in several ways: Startup business loans are always available from the leading banks and the British Business Bank for up to £25,000. You will need a detailed cash flow forecast and a detailed business plan, especially when approaching the big four retail banks. Peer-to-Peer lending could also be an option. Individuals back the businesses they like the look of by lending small amounts along with what could be many other lenders. You will sometimes hear these schemes described as debt crowdfunding. Platforms include Funding Circle and Crowdstacker.

Invoice financing

This method of financing uses the outstanding invoices your new business has to release the money needed to expand. The financing company pays the invoice value, which can give you the required cash. The improvement in cashflow could provide your business with the financial resources it needs. The low cost of these schemes has made them very popular. Options include The British Business Bank and SME Invoice Financing.

Understanding potential VC funding alternatives for startups

The funding landscape has many options to choose from. Sophie Lonergan, head of startup investment at Digital Catapult, advises that founders should fully understand each funding type and what the lenders’ expectations will be.

“Every funding option comes with its own set of pros and cons, but in general founders should look out for two key components of any funding option: control terms and economic terms. The former refers to what, if any, control a business or lender has over the company they’ve invested in, which a founder should consider carefully and assess on an individual basis,” Lonergan explains. “Economic terms refer to the financial implications of an agreement, and founders should make sure they understand what, if any, repayment or interest might be required as well as any other financial implications.”

“Startup founders should always seek their own legal advice before agreeing to any new funding options, and establishing a network with other founders can be a great way to share ideas and experiences,” she adds.

With so many alternative funding options available, it’s vital to understand how each one differs. Looking closely at what your business needs the money for will direct you to which funding options may be more appropriate than venture capital. Drawing up a shortlist for further research is always a good first step and always seek advice if unsure which option to choose and look closely at the costs. 

Data analytics firm Quantexa has committed to invest £125 million in funding for artificial intelligence (AI) development by 2027, as the company looks to cement its place in the UK AI ecosystem.

The UK-based firm will invest £85 million within the UK alone and is set to create 170 new jobs as it opens its new London AI Innovation Center.

Quantexa works in data and analytics, and aims to help firms pull out the meaning in their data stacks using its decision intelligence platform.

With its AI stack the firm has combined techniques such as machine learning (ML) and natural language processing to draw complex data together with added context, with the aim of empowering businesses to make more informed decisions.

Its new AI tool Q Assist, currently in tech preview, will allow business users query big data, both structured and unstructured, using natural language inputs. Quantexa intends for the tool to empower analysts to carry out investigations at a high skill level.

In an example, the firm stated that the AI assistant could allow a junior analyst to carry out a complex examination of potential financial crime and automate the creation of reports on any suspicious data.

Q Assist is large language model (LLM) ‘agnostic’. This means it can operate using popular models such as ChatGPT, open source models, or a firm’s own proprietary model.

“We are investing our time, money, and resources into the biggest technological breakthrough for generations as it will transform how organizations make decisions,” said Vishal Marria, CEO and founder of Quantexa.

“We’re proud to invest in London-based innovation but the impact will be felt by the global economy and will start a ripple effect that will unlock decision intelligence capabilities for our clients and their respective industries.” 

University of Washington analysis has suggested that the total £200 million in investment could lead to a £600 million benefit to the global AI industry by 2027, as a knock-on effect of innovation and job creation.

In April Quantexa became the UK’s first unicorn of 2023, with a valuation of $1.8 billion.

Singaporean investment entity GIC led an investment round that raised a total of $129 million for Quantexa.

The company’s success has come at a pivotal moment for the UK startup sector, with the growth rate of UK unicorns (companies valued at more than £780 million or $1 billion) having slowed dramatically.

Tech Nation’s noted in its recent How to Build a Scale Up report that UK unicorn creation across 2022 happened at a rate ten times slower than the previous year.

Despite the recent downturn in unicorn creation, the report’s authors speculated that the UK could soon see a “glut” of unicorns, driven by the persistent growth of sub-$1-billion companies with strong value potential.

The UK government has placed AI at the core of its strategy to grow the UK tech scene. Chancellor Jeremy Hunt used the Spring Statement to announce £1.8 billion ($2.3 billion) in tax relief credits for SMBs, as well as an annual £1 million ($1.3 million) prize fund for AI innovators.

“We want to ensure the UK remains the best place in the world to build, test, and use safe AI technology,” said Prime Minister Rishi Sunak.

“Quantexa’s new £85M London AI Innovation Centre will help cement this reality. It will create over 170 jobs, harness the extraordinary potential of AI as we grow our economy, and lead the way on responsible AI development around the world.”