AI-centric health-tech start-ups in the UK raised more investment this year than their peers in the fintech sector, according to a new study. Fintech has been the darling of the UK’s start-up sector in recent times, but the pandemic and the ongoing digitisation of healthcare triggered a global boom in health-tech investment.
AI investment in the UK
Investment in UK-based ‘AI-centric’ companies soared to £3.1bn this year after a slump in 2020, according to the study of 2,000 ‘AI-centric’ start-ups by Deep Knowledge Analytics and Innovation Eye.
Healthcare-related AI start-ups attracted the most investment in 2021, raising a total of £683m – more than double the figure in 2020. Recipients included Babylon Health, which raised $200m (£150m) in ‘sustainability-linked investment’ from private equity firm Albacore Capital in October. Later in the month, the company floated on the New York Stock Exchange via a SPAC.
This surge in ‘health-tech’ investment was a global phenomenon, spurred by the pandemic and the digitisation of healthcare via smartphone apps. In the US, health-tech saw record highs in both deal volume and size in 2021, according to a recent report by Deloitte. In Europe, venture capital investment in health start-ups nearly doubled in 2021, from £3.5bn to $6.8bn.
UK-based AI start-ups played a role in the Covid-19 response, the report notes. In January 2020, scientists from drug discovery start-up BenevolentAI analysed previously approved drugs that had the potential to treat Covid-19. It discovered that baricitinib, a rheumatoid arthritis drug, has previously unknown anti-viral properties. Japan has approved baricitinib for Covid-19 treatment, and the EU is following suit.
Meanwhile, the UK’s AI-powered fintechs drew in £567m in investment in 2021, a drop from £660m last year. HR-related AI start-ups raised the third most, up 155% to £212m – examples include HR software provider Hibob raised $150m (£115m) – while the fastest-growing segment was ‘consulting and outsourcing’, which grew sevenfold to reach £184m.
The UK’s best-funded AI start-ups
Deep Knowledge Analytics and Innovation Eye have tracked investment in UK-based AI start-ups since 2019, and the new report reveals the best-funded start-ups during that time.
OakNorth, an SME bank that uses machine learning to inform lending, has raised the most in the past three years, with £790m of investment including $440m (£330m) from SoftBank in 2019. Earlier this year, however, the bank was hit with loan defaults worth nearly £100m. In October, one of its largest investors sold its shares for 25% less than their most recent valuation.
Other big recipients include Bristol-based AI chipmaker Graphcore, which has raised £522m since 2019, and Babylon Health.
UK leads AI preparedness in Europe
An analysis of the most recent iteration of Tortoise Media’s Global AI Index found that the UK currently leads Europe in terms of AI preparedness while ranking third globally, coming behind China and the US. Other countries like Germany, France, and the Netherlands are close behind as Europe attempts to close the gap with other regions.
The UK scored particularly high because of the strength of its recently announced national strategy, private sector investments, as well as its spending commitments. However, it has been pointed out that the number of patent filings for AI innovation in the UK has dropped by 11%, and the current healthcare surcharge for migrants may be a deterrent for promising regional and international AI talent to work in the UK.
This article originally appeared on Tech Monitor.