At the start of May TechHub CEO and co-founder Elizabeth Varley claimed that UK start-ups are entering “a golden age”. Despite lavishing praise on the whole of the UK, she was particularly enthused by London: describing it as “Europe’s leading place for technology innovation”.
This is far from the first time the UK’s capital has been hailed as the next Silicon Valley or Europe’s Palo Alto. But in truth the funding has never really been in place to make this a reality. Until recently big exits were little more than a pipe dream and actions had failed to speak louder than words.
But recently there have been signs that this is about to change. A combination of VC, angel and alternative financiers have started to view Silicon Roundabout – along with subsequent hubs in Kentish Town and further afield – less as a curiosity and more of a real investment opportunity.
So is London’s tech scene finally about to receive the funding it needs to succeed? Here are a few reasons why we believe it is.
1 London is the fintech capital of the world
Financial technology, or fintech, undoubtedly lacks the glamour of a Twitter or the social kudos of an Air B&B. But in 2015 everyone agrees on one thing – it generates a lot of money. And thankfully for London it is the first place any investor will look if it’s looking to dip its toe into the blossoming sector.
Programmes such as the Barclays Accelerator programme, specifically for fintech companies, show that the great and the good of mainstream banking are starting to take the technology and its financial potential seriously. The scheme has been so successful that it is now being taken across the Atlantic and tested in New York.
One start-up that has made the same journey from The City to Wall Street is TransfwerWise. It is undoubtedly the darling of the fintech scene in London and has to date raised $91 million in three main funding rounds. If you were to bet on the first London tech start-up to exit for well over $1 billion there would certainly be worse horses to back.
2 Silicon Valley VCs are starting to cast their net wider
One backer that for a while looked likely to back TransferWise, and officially valued the company at $1 billion, is world-famous Californian venture capital firm Sequioa Capital.
With a name as American as apple pie it’s no surprise that since its foundation in 1972 the firm has traditionally looked to plant mainly domestic acorns. But in the past few years the firm has become interested in providing growth funding overseas. Growth stage funding can equal anything up to $100 million; but there are opportunities available for younger start-ups who aren’t there yet.
And Sequioa is far from the only big VC firm to have its head turned by the capital. Figures from Mayor of London office’s London & Partners show total investment in digital start-ups in the capital received $682 million of funding from venture capitalists in the first quarter of 2015. This is up 66% on the same period in 2014 and represents a record three months for investment.
And even before 2015 US investors were starting to back London’s digital start-ups. Of the total $1.4 billion raised by the sector in 2014 a little over half ($795m) came from US investors. So the traditionally domestically-focused US venture capitalists may be looking to branch out after all. And it looks like London is raising its head just at the right time to catch their eye.
3 London is still a magnet for talent
While many are talking about a talent drain to the East or the ever-present pull of the US, report after report shows that London is still the number one place for attracting talent from all over the world.
A combination of cultural pull and the unique position of being geographically and linguistically aligned with Europe and the US respectively means people are still desperate to live and work in the city. And it’s this diversity that makes London’s tech scene so attractive and robust.
I can’t think of a better example than music recognition software app Shazam. Possibly the biggest success story to come out of the city thus far, just looking at the names of the company’s four founders shows the wide range of global talent that is drawn to the city. Chris Barton, Philip Inghelbrecht, Dhiraj Mukherjee and Avery Wang made the $1 billion company what it is today.
So as long as London continues to attract the best talent from across the world it will always be in a strong position to win funding. Rising house prices aside, there is little to suggest this will stop any time soon.
4 The Mayor is a tech enthusiast
London Mayor Boris Johnson is a vocal supporter of the city’s tech scene. He may have just been elected as a Westminster MP but his tenure as London’s figurehead has not yet run its course. On a recent publicity trip to the US Johnson, using typically flamboyant language, described London’s digital scene as “going absolutely gangbusters” in 2015.
The words may be archaic but behind them is genuine political support for tech start-ups in London. The Mayor’s office has set up Tech City UK and launched the Technology is GREAT campaign to stoke international interest in the city.
And there are signs that it is starting to work. Johnson’s mission to the US saw him meet some of the biggest names in the US media and investment community – including Adriana Huffington. London may not have the financial backing of a Silicon Valley yet – but out American cousins might just be starting to pay more attention to their “noisy neighbours”.
Further reading: Andy Murray takes up tech advisory role at Seedrs