London-based Xylo has secured a £2.8m seed round to develop AI agents for government departments, with backing from prominent angels including DeepMind and Gensyn founders. The raise was led by Capital T, signaling strong investor confidence in the growing intersection of artificial intelligence and public sector transformation.

The funding reflects increasing appetite for AI solutions that can streamline government operations, from processing benefits to managing citizen services. Xylo's approach targets efficiency gains in bureaucratic processes that have traditionally lagged behind private sector automation.

Participating investors include YF Partners, Bethnal Green Ventures, Entrepreneur First, and other institutional angels who see government technology as an untapped market opportunity. The UK's push for digital public services has created demand for specialized AI tools that understand regulatory compliance and security requirements.

This seed round positions Xylo to compete in the emerging govtech AI space, where startups are racing to modernize public infrastructure. The involvement of major tech angels suggests confidence that AI agents could become standard tools for government efficiency within the next decade.