The top cities for average funding per AI startup in 2023 were Bristol and Oxford

New analysis from the O³ platform, an AI-powered venture classification platform developed by the University of Oxford and early-stage venture capital investor OpenOcean, has revealed surprising insights into the UK's AI startup funding landscape. The findings challenge the common perception that London has always dominated the sector.

They show that, between 2012 and 2021, the average funding per AI startup was actually higher outside the capital. In fact in 2023, despite having more than half of the AI startups in the UK, London was only the fourth-highest UK region for average funding.

While the shelving of £1.3 billion in AI funding seems like a setback, the reallocation of £32 million to regional AI projects is poised to support AI startups outside London and help rebalance the UK's tech landscape.

South West England secured around £13.84 million per startup, more than three times higher than North West England, and Scotland attracted around £7 million per startup in 2023, nearly twice that of the North West. The year 2022 was the first on record where London-based AI startups raised more on average (£8.9 million) than those outside London (£7.47 million). 

O³ uses a unique taxonomy to understand and classify startups, bringing together traditional data and deep analysis of a company’s tech stack and GTM. It has been developed by combining Oxford Saïd’s research, which started in 2019, with OpenOcean’s nearly 13 years of experience investing and growing pioneering startups from across Europe. Its current data runs from Q2 2012 to Q2 2023.

After London, the South East, and Eastern regions, the North West was the next in line for AI startups, with 66 AI companies and a total funding of more than £256 million in 2023. The North of England has seen significant growth in the AI startup ecosystem over the past decade.

• As of 2023, the cumulative total funding raised by AI startups in the UK was £11.95 million, with London accounting for 61 per cent of this figure. 
• The top regions for average funding per AI startup in 2023 were South West England (£13.84 million), Eastern England (£12.19 million), South East England (£11.56 million), and London (£10.06 million)
• The top cities for average funding per AI startup in 2023 were Bristol (£43.25 million), Oxford (£34.75 million), Cambridge (£10.54 million) and London.

Ekaterina Almasque, General Partner at OpenOcean, said: "The £32 million allocation to regional AI projects is a far cry from the retracted £1.3 billion pledge, but it takes at least one step towards rebalancing the UK's AI landscape. From 2012 to 2021, AI startups outside London raised more funding on average, but the last couple of years have seen London reclaim its crown. In 2023, London-based startups boasted 61% of AI funding. This new investment in areas like Nottingham, Yorkshire, and Cambridge is crucial for tapping into innovation beyond the capital. 

“Labour's focus on devolution and expanded investment opportunities positions regional tech hubs to drive the next phase of British innovation. Supporting AI projects across the UK isn't just about equity, but maximising our economy's potential for growth. With a strategic framework that supports startups nationwide, we can build a tech ecosystem where breakthroughs can emerge from any region, strengthening the nation's overall attractiveness to leading researchers, founders, and investors.”