Sifted - A Labour of love for UK tech?

Good morning there,

In the aftermath of the UK Labour Party’s landslide election victory I spoke to dozens of tech folk Friday to get their thoughts on what it means for the country’s startup sector. The mood? Broadly optimistic with work to be done. I get into the main things they want from the government below.

Also, founders, join us in person in London tomorrow for a discussion on the impact of AI at work, how you can take advantage of the technology and whether it’s likely to take your job. There’ll also be networking and (free) canapés and drinks. Spaces are limited — RSVP now to secure your place.

Elsewhere today:

• How to manage a cofounder breakup without killing your company.
• The EIF's David Dana is expecting a lot more defence tech pitches this year.
• Munich-based quantum startup planqc raises €50m Series A.

— Kai Nicol-Schwarz, reporter

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Is UK tech set for a Labour of love?

The last time the UK’s Labour Party won a general election the country’s tech sector was a very, very different place. 

It was May 2005, and digital bank Zopa (then only two months old) was the only one of the UK’s current crop of 40+ active unicorns that existed. London’s 'Silicon Roundabout' — the spiritual home of startups in the capital's east — was years away from development; it would be many years more before the area near the city’s King’s Cross railway station would be home for the likes of Google and Meta.

In the final year of that government in 2010, UK startups picked up $2.2bn, according to data platform Dealroom. This time round Labour is grappling with a different beast; last year UK startups raised $19.7bn. But money aside, the feeling among founders and investors is it’ll take some serious elbow grease to get the wheels turning properly on UK tech. 

Speaking to dozens of tech folk in the hours after the results came in last week, two themes came up time and again: funding and access to overseas talent. 

The outgoing Conservative Party — which has come under fire at times from the tech community — got the ball rolling on one of those things. Its proposed Mansion House reforms — which would unlock tens of billions of pension fund capital for startups — is seen as a promising step toward filling a (disputed) growth-stage funding gap. Many founders and VCs said that pushing through those reforms should be a priority for the new government.

“Closing this scaleup gap isn't just about catching up with Silicon Valley; it's about harnessing a massive economic opportunity to accelerate this country’s growth and prosperity,” said Catherine Lenson, COO at Phoenix Court, home of UK VC funds LocalGlobe and Latitude.

At the earlier stage there’s also broad support for the government to continue investment schemes like the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) tax incentive programmes — which are designed to give tax breaks to investors who back new companies. One VC described them as the “blast furnaces of the startup economy”.

The Conservatives didn’t do so well on access to overseas talent. It implemented a series of reforms in the past year designed to curb net migration to the country — which has seen a 25% drop in visa applications, according to recent data from the Home Office.

Tech voices decried Tory pledges to cap migrant visas at the start of the election campaign — and many tell me that ensuring access to migrant talent is crucial to the success of the startup sector. 

In the last week, Dr John-Arne Røttingen, the head of biomedical research charity the Wellcome Trust, said that top international researchers were turning down jobs in the UK because they can’t afford the upfront costs for visas. Fixing that should also be a priority if Labour is to deliver on its manifesto promise to work with UK universities to support the commercialisation of research and create more spinouts — which would be helped by a steady stream of strong researchers into the country. 

“It's vital that the government makes visas for the tech talent UK startups need more accessible and does not impose further restrictions,” said Sean Kane, cofounder of startup network F6S.

Simon Murdoch, managing partner at VC Episode 1, added: “We have to subdue the anti-immigrant rhetoric [...] Immigration can be a force for good outcomes. In Silicon Valley over half of all unicorns have at least one immigrant founder, including Google, Facebook and Tesla.”

So will the UK startup sector get what it wants? While Labour’s manifesto was light on tech policy detail, the mood is positive among the tech talking heads I’ve spoken to. 

There’s a sense that there’s been huge progress made in the UK tech sector in the past 14 years, and many have high hopes that the support needed to continue that growth will be available under a Labour government.

The reality is that only time will tell — and many point out that a ruling Labour Party has never had to govern a tech ecosystem.

But what do you think? What’s the key thing that the tech sector needs the government to focus on in its first 100 days? What will be Labour’s biggest challenges? Get in touch and let me know. 

— Kai Nicol-Schwarz, reporter

🇩🇪 Munich-based quantum computing startup planqc is today announcing a €50m Series A round, led by the European Family Office CATRON Holding and Germany’s deeptech and climate tech fund (DTCF).

• Founded in 2022, planqc — a spinout from the Max Planck Institute in Munich — builds quantum computers using a technique known as “neutral atoms”, which involves using lasers to trap and stabilise single atoms to make qubits (stores of quantum information).

💪 The Enhanced Games — a Peter Thiel-backed pro-performance enhancement sporting event — is in talks to raise around $300m, its cofounder Christian Angermayer told Bloomberg. The London-based company announced a “single-digit million dollar” raise in January this year; it’s planning its first event in summer 2025.

• At the Enhanced Games, the “couple of hundred competitors” will be able to take any performance-enhancing substances they like — from anabolic steroids to growth hormones and testosterone replacement therapy.

❤️‍🩹 How to split with a cofounder without sacrificing your startup. Around 65% of startups fail because of conflicts in the founding team — but breaking up doesn’t have to signal the end of the company. 

• “It’s not an easy way to go [but] it should always be the main objective to put personal egos apart and find the best solution for the company,” says Johannes Roggendorf, founder and CEO of Medwing. Sifted’s Sadia Nowshin chats to a trio of founders about how to spot the end of a relationship and stop it from killing your startup.

🪖 The European Investment Fund (EIF) gets a lot of pitches from VCs — but until recently, few have been defence tech funds. That’s changing, EIF’s head of VC investments David Dana tells Sifted.

• Since the EIF recently clarified that it’ll invest in dual use technologies (but not weapons), VCs have been more eager to pitch Europe’s largest LP. The EIF has already received about 10 proposals for defence-focused funds; “I would say between now and the end of the year, I would expect at least twice the amount that we have,” says Dana. Read the full interview here. 

🌍 How the investment world is trying to navigate geopolitics. (Financial Times)

📣 Readers, we want to hear from you. What’s the best thing on European tech you’ve read recently? Drop us a line.

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Coimbra, Portugal-based Eneida, which develops grid tech that helps grid operators and energy players build zero emission neighbourhoods, raised €10.5m in Series B funding. Junction Growth Investors led the round and was joined by investors including Santander Alternative Investments, Korys and HCapital. 

Berlin-based alcemy, a software solution that helps cement and concrete producers make low carbon concrete, raised $10m in funding. Norrsken led the round and was joined by investors including Galvanize Climate Solutions and AENU.

Paris-based Orus Energy, a platform that predicts energy use and needs in buildings, raised €2.2m in pre-seed funding. B2venture led the round and was joined by investors including Asterion Ventures and Ring Capital.

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