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Introduction to the Ecosystem
The London startup ecosystem has grown by leaps and bounds in the last few years. Dopplr, TweetDeck, Fotango, Songkick were some of the first successes of the city and currently, it houses over 1000 startups.
London provides startups an opportunity to tap into markets that have already been saturated in the U.S. and expand globally. The government has also taken a keen interest in developing London’s startup ecosystem with the establishment of Tech City in East London. In StartupBlink’s 2019 report, London is ranked 1st in the United Kingdom and 3rd globally.
Ryan Fowler of Tech City News lists the following unique advantages that the city of London offers to startups: “London has great access to Europe and the US providing an excellent springboard for firms looking to move into either market. It also has access to leading talent and the legal framework in London ensures that startups have the protection they need when they get started.”
Startups that made news
- TransferWise (@TransferWise): With funding from Index Ventures, Seedfund, SV Angel, and a couple more investors, TransferWise is believed to be disrupting Europe. Its aim is to cut out banks, by enabling customers to send money abroad more affordable. Its founder Taavet Hinrikus was one of the first ten employees of Skype, and is well-experienced in building a successful startup.
- RolePoint (@RolePoint): The startup helps companies match relevant jobs with potential candidates in the social networks of its current employees. It is backed by stellar investors such as Yuri Milner and Eric Schmidt’s Innovation Endeavors. By using RolePoint’s technology companies are known to have saved $250,000 in recruiters’ fees.
- GoCardless (@GoCardless): GoCardless helps businesses accept direct debit payments online, without any hassles. It is made for merchants who cannot or don’t wish to receive credit card payments. It lets businesses establish direct debits, automatic bill pay and recurring payments. It is backed by Passion Capital, ACE & Company and Accel Partners.
- DueDil (@duedil): This startup offers the public an easier way for looking at a private company’s financial statements. It aggregates information from through public sources, Companies House and the Ministry of Justice. It is backed by Passion Capital, Shakil Khan, Oak Investment Partners and other angel investors.
- Citymapper (@Citymapper): An app that beats HopStop, Apple and Google Maps when it comes to functionality, CityMapper has impressed many Londoners, Parisians and New Yorkers. When requested for directions, it provides a list of options and includes the time and calories burned if you walk it up, and also a price estimate if you take a cab. It also provides up-to-date weather information, specific to each neighborhood.
- Geckoboard (@geckoboard): It is a real-time data visualization app that provides businesses with all the important data that they need to monitor their business’ vital signs. It showcases their web analytics, sales figures, etc. in one place, with indicators that matter.
- Editd (@EDITD): Dubbed as a “Bloomberg for fashion” by its founders Geoff Watts and Julia Fowler, Editd delivers “live” market data for subscribers of the fashion industry, by trawling the web for sales figures and consumer opinions. It measures 300,000 opinions and two million products per day.
Why London’s startup scene is booming
A number of factors have led to the growth of London’s startup ecosystem, including government intervention and growth of funding.
Tech City
The government spent more than $76 million to build London’s Tech City, which Prime Minister David Cameron believes will rival Silicon Valley. The Tech City houses a number of co-working spaces, classrooms and workshops for startups.
However, Ryan doesn’t see any similarity between Silicon Valley and Tech City, saying that they are “completely different places and sectors” and that London should focus on being all that it can.
Google set up a Campus in Tech City in 2011 and has been leading the organization of hackathons, workshops, mentoring sessions and speaker series for startups.
Startup Visa
The government of UK has instituted the “startup visa” aimed at founders who wish to set up a base in the UK. It makes it easier for startup founders to set up shop in London and expand further into UK and Europe. The government also has favorable policies for angel investors and startup investments.
Funding Options
When asked if it is easier for startups to acquire funding, Ryan agrees, stating that VC input and crowdfunding has increased greatly. Those startups looking to get funded have a host of options to choose from.
A new generation of high net-worth individuals looking to invest in the next Instagram or Spotify is supporting startup founders. These individuals have set up venture funds and are on the lookout for innovative ideas. There are also a number of active seed firms in the city such as Passion Capital, #1 Seed and Connect Ventures.
The city also has a good number of accelerators that provide startups the necessary guidance and mentorship to grow sustainably.
Those startups not looking to take the traditional route of venture capital can raise capital through services such as Crowdcube, that help startups get funded online. A U.K. startup Escape the City has raised $1 million through Crowdcube.
Co-working Spaces
London also has a healthy distribution of co-working spaces that makes it easier for startups and professionals to collaborate and build on new ideas. The spaces not only provide an opportunity to work but also network and brainstorm.
Drawbacks of the city
The high living and running costs are one of the city’s drawbacks and this is a sentiment that Ryan echoes. He goes on to say that unless you are in the fintech business, there are stronger ecosystems in UK to set up shop.
Another disadvantage is that a prestigious university education is still favored and matters to some venture capitalists. Moreover, a lot of good talents such as star engineers are known to choose established companies such as Google or Facebook to work for, rather than help struggling startups. A lot of startups also have a hard time communicating with developers and getting them excited about their business ideas.
Also, a recent Guardian audit of Tech city showed that 10% of companies in Tech City are actually dealing in technology, while 53% are design or PR agencies and 37% are either pubs, cafes, fashion boutiques or charities.
Major participants of the Ecosystem
Investment Firms & Accelerators
- Seedcamp (@seedcamp): An accelerator as well as investor, Seedcamp accepts scalable technologies and helps them grow into a fully functional product. They invest up to $250,000 in exchange for a maximum of 10% equity. The companies they have funded so far include eMoov, Wordy and Gaming Live TV.
- Index Ventures (@IndexVentures): It has offices in London and San Francisco, and is an early stage and growth fund. It provides each of its partners collective experience and expertise. They have worked with some highly successful companies including Dropbox, Etsy, SoundCloud, Flipboard, Just Eat, and many more.
- Passion Capital (@passioncapital): Passion Capital has backed 42 companies in the past four years. Their portfolio includes companies such as DueDil, Gocardless, Gosquared, Lulu, Wirewax, Swipe and Urban Massage. Their average first seed investment check is around 193,000 pounds, and the value of all their companies so far is 407 million pounds.
- EC1 Capital (@EC1Capital): EC1 Capital is focused on tech entrepreneurs who are disrupting large markets. They invest in startups at various stages from seed to Series A rounds. They have a wide network in London’s entrepreneur and investment community. Their portfolio includes Twizoo, Weswap, Loyalty Lion, Reep Rewards and Lifecake.
- London Business Angels (@LondonBAngels): One of the leading angel investment networks in London, London Business Angels has helped over 200 companies raise over 50 million pounds in the last 15 years. It is a widespread network that caters to the needs of investors, entrepreneurs and startups looking forgrowth.
- TechStars (@techstars): The program launched in the UK in 2013, and has thrity-two alumni companies from London so far. Some of them include Rated, Good Audience and Shortcut.
- Ignite (@ignite100): It is an angel-backed accelerator in Europe, that offers £17,000 per team in return for 8% equity. They also provide a coworking space and organize meetups and events that entrepreneurs can benefit from.
- 500 Startups (@500Startups): Establishing its first European presence, 500 Startups will launch its three-month program in London’s WeWork on 1st September, 2015. Companies will be selected on the basis of recommendations of their own network of founders.
Events & Communities
- Digital Shoreditch (@DigiShoreditch): A crowd sourced conference founded in 2011; it aims to provide an environment of sharing and connections. Since being founded, the number of participants has grown from 300 to 14000.
- TechHub (@TechHub): A London-based community and workspace for tech entrepreneurs, TechHub also frequently hosts events such as Creative Meetup, Demo Night, Founders’ Secrets, TechHub Meetup and Bootstrap Business Club.
- Google Campus (@CampusLondon): Google’s footprint in Tech City, Google Campus hosts several events almost every day. The events are attended in large numbers by early stage startup founders and those looking to set up their own business.
Co-working Spaces
- Huckletree (@huckletree): It is a workspace driven by innovation and community-building. It encourages collaboration and has designed workspaces to suit different working styles. It is an ideal working space for startups, workshops and anyone working in the tech industry.
- Google Campus (@CampusLondon): Located in the heart of the Tech City, Google Campus’ café is one of the busiest co-working spaces in London with over 40,000 registered users. The Campus not only offers free wifi, but also access to some cool Google events, networking opportunities and mentoring sessions.
- Rainmaking Loft (@RainmakingLoft): It is an international workspace with 180 members across 35 countries. It is a co-working space as well as hosts events and workshops for Tech City. It also encourages collaboration among members through informal meet-ups and social events.
- WeWork (@WeWorkLDN): It is a major coworking space in London with five locations. Some of their perks include a better rate from service providers such as Shopify, 99designs and Amazon Web Services.
Special Mentions:
Ryan Fowler, Editor, Tech City News (@RyanFowlerTCN)
Zubin Chagpar, Venture Capital Business Development, Amazon Web Services (@phylosopher)
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