We talk to startups and investors, you get the value.
There is one specific city in Europe, which, by the majority of startup founders, is considered a perfect place for developing a technological business. Among success factors are talented human resources, easy access to the investors, experts and consultants, and also, money, which they are ready to invest at different stages.
We talk to startups and investors, you get the value.
Today we’re talking about London — the capital of Great Britain, and its transformation from the capital of British Empire on which the sun never sets into the European startup capital that never sleeps.
Despite all the benefits, London has one big drawback — closeness. It is harder to get into the London startup community and “blend in” than in the Silicon Valley. You may feel like you are welcomed as an individual in London, but building a business there can be more difficult.
Unlike the Valley, startup founders in London do not like to give options to all employees, which also affects the entrepreneurial landscape of the city and is, to some extent, a legacy of British culture and closedness.
Another feature of London is its focus on finance as opposed to other places that focus on innovation and technology. And for this, London competes with New York for the title of “the world’s financial capital”. Unlike New York, where the main value is the big win, London focuses on “stability, security and privacy”, which is, in many ways, a legacy of the British Empire.
Startup ecosystem in London is estimated at an astronomical $47 billion, which is even more than the budgets of some countries. In the world rating, London is the second in Fintech industry and the fourth in Edtech.
There are more than 13 500 startups in London, and the majority of them have teams of up to 10 people (almost 5000 startups). There are up to 300 startups with 200+ employees. With this, only 15% of startup founders in London are women.
With everything mentioned above, the only question arises: “Who are those lucky ones, who founded their technological business in London and became successful?” We’ve gathered the most successful startups and we’re up to tell you about them.
TransferWise is a world-known fintech startup, that was founded in 2011 and became famous thanks to its convenient online platform and currency exchange commission, which is lower than in banks. Since then, the company has expanded its offering over the years to include business accounts and multi-currency debit cards, and it is now also looking to add an investment feature. The company was valued at $5 billion in the last investment round in July 2020, a secondary stock sale, in which investors acquired shares from employees and early sponsors. The new investment puts TransferWise on a par with such European fintech startups as Revolut and Klarna, all valued at $5.5 billion.
Worldpay is the largest payment provider in the UK with hundreds of thousands of business customers, from small and medium-sized enterprises to households. It is a payment gateway service that also allows PayPal transactions. It integrates with multiple applications and various business systems, from ApplePay to Oracle and QuickBooks. It was founded back in 2005 and was valued at $6.3 billion, and raised $2.2 billion at the IPO. This is a global project, but its “roots” are in the City of London.
Flypay is a startup that has created a universal Flyt platform that allows restaurant and hotel groups and hospitality service providers around the world to both integrate their POS systems with third-party services and combine various technology solutions and services, from booking and loyalty to things like shipping and reviews. The Flyt platform has made it much easier to implement innovations in the digital commerce industry. The startup was valued at $22 million at the time of purchase in January 2019 by JustEat.
City Pantry is a marketplace that connects local food service providers with companies, businesses and private consumers; it is designed to supply food for events, meetings, regular team and individual dinners. This is another startup that was bought by JustEat in July 2019 for £16 million. It is important to mention that the project was founded in 2013 and, in more than 5 years, it has become the largest B2B marketplace in the UK catering and food delivery market.
It would be unfair not to point out that success stories are only one side of the coin, which hides a “darker” one: the stories of failures, which are also numerous in the London ecosystem. We can remember Wonga (short-term loans to solve cash problems), Enecsys (solar microinverters), WorldStores (online store of goods for home and garden), Powa Technologies (mobile commerce, e-commerce services, PowaTag mobile application) or Aquamarine Power (renewable energy sources based on sea water). If you look at the statistics of startups founded in 2014, only 80% survived until 2015, 70% were able to survive until 2016, 62% broke through in 2017, and only a few more than half (56%) existed in 2018 in the fifth year of its work.
If we analyze everything that happened and is happening in the London ecosystem, we will notice that the key concepts will be “stability, security and privacy”. Despite the fact that London is among the top places in the world in order to create innovative technological solutions, these three concepts remain the London “genome”, which in one way or another affects all products born in it.
It would be unfair to talk about only entrepreneurs whose merit in creating an innovative climate is obvious, and not to mention the rest of the ecosystem: government, investors, users, lobbyists.
And about the money that one can raise in London, we’ll talk further.
More than a third of nearly 12,000 UK investors are located in London. The amount of investment available to entrepreneurs is growing from year to year. If in 2018 there were £6.3 billion in the venture capital market, in 2019 it was already over £10 billion, which is a country’s record, by the way. At the same time, 80% of investments are made in late stages (scale-ups), and only 20% are available to entrepreneurs in the early stages.
Another key trend, both in the British investment market in general, and in London in particular, is the activity and increased interest of investors from the USA and Asia. At the same time, there are two dominant sectors on the market — fintech and education, and projects in the gaming industry and SaaS solutions are in third or fourth places.
It should be noted that there are many financing programs in London that are offered by non-venture capitalists. Only one city council in London (London City Hall) offers startups 9 different opportunities: from crowdfunding to a co-investment fund.
Will highlight some of the venture funds in London:
Notion Capital was founded in 2009 and focuses on B2B and SaaS, as well as cloud business solutions. The fund’s successful exits include Star (a cloud service provider) and MessageLabs (protection against viruses and spam in emails, a system for ensuring confidential email storage, network antivirus). The fund specializes in early stage (Seed), but also invests in Series A startups. In October 2019, the company formed its fourth fund in the amount of more than $150 million.
Passion Capital was founded in 2011 and the fund’s mission is to help startups at the early stages. At the same time, among the fund’s investments there are such “giants” of the technological sphere as Skype or Last.fm. In addition to SaaS and cloud solutions, the fund invests in digital media and e-commerce, as well as analytics solutions. The fund’s investments range from £200,000 to £14 million. And the best way to get funding from them is a warm intro!
Octopus Ventures is one of the oldest venture capital funds in Europe. It was founded in the last century — in 1999. In 2017, the company has already invested in over 100 startups in Europe and the UK. The fund’s average investment is about £2.5 million, and the fund has raised more than £5 billion in total. This fund prefers more mature businesses and invests in Series A or Series B. The fund’s portfolio includes Swiftkey, Zoopla and Secret Escapes.
Balderton Capital was founded in 2000 by Benchmark Capital from Silicon Valley, but had become a stand-alone fund by 2007. The main “gig” of the fund is the community of entrepreneurs, which counts over 150 people. Usually, the fund invests between $1 million and $20 million in companies located in Europe but focused on the global market and disruptive technologies. The foundation’s focus is on solutions in the field of software development, mobile applications and fintech, although it is not limited to them only.
Connect Ventures is one of the youngest funds that opened its doors in 2012. It is completely focused on the Seed stage — it accounts for 85% of all fund transactions. More than half of the companies in which the fund invests are located in London — thus, Connect Ventures has earned the title of “London’s top investor” on our list.
Places where you can work on your project are some of the basics of a startup and it doesn’t matter if it’s a coworking space, a hub or an accelerator/incubator. These spaces help to avoid many mistakes by combining the “wisdom of the crowd” and key resources. In practice, this does not always work, however, of course, it increases the chances of project success. Transferring information and expertise can be challenging, especially when the startup ecosystem is going through turbulent times, such as Brexit.
But there is a second, perhaps more important point that allows you to get a huge benefit from such places — the community. A solo business trip can be a daunting endeavor. Working together, learning from the experiences of others, and knowing that you can ask for help creates a sense of community.
London is home to about half of all UK accelerators, which means about a hundred places where entrepreneurs can find support. Note that the main difference between an accelerator and an incubator is that the former often do not offer a job and follow a rigid program, while the latter are more flexible in many areas.
We can highlight a few hubs and accelerators in London as well:
Barclays Accelerator — is a unique program developed for further business development within one of the largest financial conglomerates in the UK and the world with a focus on fintech projects.
Breed Reply uses a unique approach to finance startups and companies at an early stage of development, and it is focused mainly on IoT startups. They help to get you started and drive fast and profitable growth through an active operating investment model.
Campus London is one of the campuses to support the global network of leading technology hubs and accelerators created by Google in 125 countries for entrepreneurs and startups. They connect their community to the best Google resources, implement several programs: immersion programs for women and afro-american founders, as well as a startup school with a series of practical trainings for founders and their teams.
Impact Hub King’s Cross is a non-profit organization which was founded in 2014 and focuses on social inclusion, and implements grant-funded programs to help entrepreneurship in low-income communities. Impact Hub has been recognized by the United Nations as a driving force in helping to drive and expand efforts to achieve the Sustainable Development Goals through entrepreneurial and innovative solutions.
RocketSpace is the leading London coworking accelerator, which is primarily interested in high-tech and fast-growing businesses. Their acceleration program aims to raise investment for startups within 3 months. Also, within the framework of the RocketSpace industry cooperation programs, startups are given the opportunity to access the leading corporations in their field.
In total, there are 155 thousand professionals in London who can be attracted to work on your project, and graduates of dozens of London universities annually replenish their cohort. We’re introducing our TOP-3 London Universities:
In the first place is City University of London, which was founded in 1894 and still remains one of the leading universities in London, especially when it comes to business education. The university is ranked in the 5% of the best higher educational institutions in the world, occupying the 400th position, and also 29th in the world in terms of reputation among business universities, which only adds weight to it.
UCL is taking the second place, this is how University College London has been officially called since 2005, which is one of the oldest universities in London. It was founded in 1826 as a secular alternative to Anglican Oxford and Cambridge. Throughout its existence, it managed to change several names, and at the same time has always remained one of the best places for getting a business education. UCL is part of nearly all of the largest university networks in Europe and has the best student/teacher ratio in the UK at 10:1.
And the top 3 is surely closing the London School of Economics and Political Science (LSE, the London School of Economics and Political Science), which was founded in 1895 by members of the Fabian Society, a socialist philosophical movement. It is part of the University of London and is part of the “golden triangle” along with Oxford and Cambridge universities. The strongest area at the London School of Economics is the political science department. It is worth going there to study for those who plan to devote themselves to the study of politics and public administration — these programs are the best in the whole of Europe.
In our previous article, we wrote about Berlin, London and Paris, which will certainly continue to challenge the palm among European startup capitals. And, most likely, it is London that will retain its leading position in the near future, as it has a certain “margin of safety” against attempts by competitors to challenge its leadership.
In our next article, we’ll take a look at the startup ecosystem in Paris and Cherchez la femme! can turn into Cherchez le succès!