The headline from the past fortnight is how lopsided funding has become: artificial intelligence is soaking up a record share of the money, while everyone else works harder for a smaller pool. Here is what London founders should take from the latest data and deals.
AI now takes a record share of UK equity funding
The British Business Bank’s latest Small Business Equity Tracker, published on 2 July 2026, found that AI companies accounted for 44% of all equity investment into smaller UK businesses in 2025, the highest share on record, even as overall equity funding fell. For a non-AI founder that is the important half of the story: the market is not evenly soft, it is concentrated, so a broader funding mix of angels, grants and revenue-based finance matters more than it did a year ago. Read the British Business Bank release.
PhysicsX raises $300m and hits a $2.4bn valuation
London deep-tech firm PhysicsX closed an oversubscribed $300m (about £225m) Series C led by Temasek, with M&G Investments and Intrepid Growth Partners joining, valuing the company at roughly $2.4bn. Founded by former Formula 1 engineers, it builds AI models that predict how engineered parts behave in seconds rather than hours. The deal shows investor appetite is strongest where AI is applied to a hard industrial problem, not bolted on as a feature. UKTN has the full write-up of the round.
London still captures over half of UK startup funding
Despite the tighter overall market, London continues to pull in more than half of national startup investment, and the capital raised more in early 2026 than in the whole of the first half of 2025. That concentration cuts both ways: access to capital and talent is unmatched, but valuations and salaries are higher, so early-stage teams watching runway may find more forgiving terms outside the M25. Sifted tracks the UK funding picture deal by deal.
The takeaway for the next quarter: if you are building in AI, the money is there for a genuine technical edge. If you are not, plan for a longer raise and a wider set of funders.
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