Short article on pros and cons of FDI

American investors have feasted on British technology businesses in record numbers, helped by the weak pound and a lack of funding for later-stage companies.

Tech companies received $4.4bn (£3.4bn) from US venture capital funds in the first 10 months of the year, against $4bn for the whole of last year, according to figures released this week. It is the highest investment level on record, says the research provider, PitchBook.

The data is being published as part of Silicon Valley Comes to the UK (SVC2UK), an annual series of events that seeks to build relationships between Britain’s entrepreneurs and America’s biggest technology investors.

The numbers were welcomed as a sign that the UK is producing high-quality tech companies, but will stoke concerns about losing control of our best businesses before they have developed in full.

This year, there have been bumper US -led funding rounds for the challenger bank Monzo, which raised $144m, and OneTrust, a developer of data privacy software that got a $200m investment.

British start-ups have no problem attracting funds in the early stages, but often struggle to find the cash required to scale up their operations. Drawn by the weak pound and a growing number of promising tech businesses, US venture capitalists are filling the funding gap.

“We should be excited that they’re over here, but a little bit nervous as well,” said Sherry Coutu, the serial investor who was an early backer of Lovefilm and LinkedIn and co-founded SVC2UK. “If the cash comes from the US, often that will increase the likelihood of [the company] being redomiciled and floated in a different country.”

She added: “It is a problem for the economy. If a large amount of the cash goes in at a later stage because we don’t follow on in our investing, and you get a tremendous return, then that money doesn’t go into UK pockets and it’s less likely it will get reinvested here.”

Britain is by far the most attractive destination for US venture capital investment in Europe, according to PitchBook. In the past five years, the UK has received $17.8bn from American funds, compared with $10.5bn for Germany in second place and $5bn for France in third.

London has attracted $3.5bn of investment this year, by far the highest amount for a city in Europe. Three of the top 10 cities for American investors — London, Cambridge and Oxford — are in Britain.

“For the UK to punch above its weight in tech globally, we have to attract capital from across the world,” said James Wise at Balderton Capital, a London-based investor that backed Revolut.

“While obviously it would be even better if more UK companies grew to be large and profitable . . . in their own right, foreign investment and acquisitions ultimately still create jobs, provide training and develop software that can have radical benefits to everyone in the UK, irrespective of where those funds originate.”