Last month, the British Private Equity and Venture Capital Association (BVCA) released a report examining the state of U.K. investment. At first glance, it made for worrisome reading up and down the country and all around London’s Silicon Roundabout. The data showed venture capital and private equity investment into U.K. businesses down more than 30%.
As ever with these kinds of statistics, commentators immediately searched for cause and effect. Europhiles decried it as a consequence of Brexit and further proof of the U.K.’s dwindling global reputation. Advocates of other European technology hubs, such as Paris, Berlin, and the Nordics, claimed that this showed their own ecosystems were catching up.
The truth is more complex—and less remarkable. This downward trend in venture capital investment is global. The common denominator is the asset class, rather than the country. We are seeing an inevitable drop-off from the market’s peak a few years ago when spectacular amounts of capital were being deployed, catalyzed by almost non-existent interest rates. Against this backdrop, the BVCA report is unsurprising, although it does confirm the early pandemic era of near-limitless liquidity and a wide IPO window is over, for now at least.
All that said, if we were to zoom out, we’d find that 2023 levels of investment, for example, (widely considered one of the worst years on record for VC) are actually on par with those of 2020. There’s been a short-term dip within a long upward trajectory.
The truth about how the U.K. tech and investment ecosystem is faring
My VC firm, Antler, has offices in 30 locations around the world. We’ve backed over a thousand startups in more than forty industries and boast an 8,000-person alumni network. Through that wide reach, we can chart technology trends and understand the formulae needed for successful entrepreneurship.
There are two axiomatic ingredients for building world-changing companies: Capital and talent. In both areas, Britain is at a huge advantage. The City of London continues to be a global financial powerhouse, with its banking heritage, convenient time zone between Asian and North American markets, and appealing regulatory frameworks. The bond between London’s financial services and tech industries runs deep, in part thanks to the pedigree of local fintech startups such as Starling, Monzo, and Revolut.
From a talent perspective, London remains one of the most attractive places to live. But perhaps more importantly, the U.K. is world-beating when it comes to tertiary education. The prestigious QS World Universities Ranking found four of its top 10 universities were British (Imperial College London, University of Oxford, University of Cambridge, and University College London). All these universities are fostering the brightest minds of the next generation, as well as acting as incubators for startups.
This April, Imperial University (ranked second on the list globally), launched its AI SuperConnector to help researchers build high-growth startups. And according to a recently published report from Tech Nation, the U.K. has the biggest AI sector in Europe (if you’ll indulge Britain being called European), worth $92 billion.
In this next technological gold rush, where AI is set to disrupt every single industry, the U.K. is well-positioned to capitalize on its strengths. It remains outside of what seems to be a highly assertive European Union regulatory environment while having the right private and public institutions to foster AI innovation domestically.
At Antler, we fundamentally believe that entrepreneurial talent is evenly distributed. Where you are based is less and less essential to the success of your startup. Lower technology costs are allowing businesses to scale faster, and startups can be global from day one. That said, it’s hard not to bet on Britain for the next generation of technological innovation. The nation of Alan Turing, Alexander Graham Bell, and Tim Berners-Lee seems well-placed to produce the next inventor to change the world.
More must-read commentary published by Fortune:
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.