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Despite all the political uncertainty and lethargy of the British public in the face of Brexit, the UK startup market growth shows no sign of abating. In fact, the good news for you (and us quite frankly) is that it’s quite the opposite out there.

According to Companies House, there were 182,742 new incorporations between January and March 2019. At the end of March, the UK total register listed 4,202,044 companies, an increase of 168,689 compared to the first quarter of 2018.

In our previous article, ‘What is a Startup’, we discussed just that. And, following on from that, we thought it made sense to give you a top-level overview of the state of the Startup market closest to home, and closest to our hearts, the UK and London Startup scene.

UK = 3rd biggest startup ecosystem globally

By all accounts, the UK’s technology startup market is one of the most buoyant in the world. Despite the implications of Brexit the UK’s tech scene continues to grow year on year.

According to Startup Blink which ranks Startup ecosystems over 1000 around the world, based on the number of, and respective revenue of, London ranks third highest (after San Francisco Bay, US, and New York, US) Check out the full ranking and cool heatmap here.

In the UK alone there were 11,864 software development and programming businesses incorporated in 2018, up from 10,394 companies the year before (Companies House).

London had the highest number of tech startups with 4,752, a 14 per cent increase from 2017 (CityAM).

Tech Nation, the UK’s recognised network for Tech entrepreneurs, 2018 annual report showed that the UK public believe the tech sector growth will continue.

“70% of respondents thought that both the number and the scale of digital tech businesses in their local area would rise. Investors in tech businesses tend to take a more positive view than the tech community as a whole. Seventy-four per cent feel that the number of businesses will rise over the next year, while 76% suggested the scale of digital tech businesses will increase.”

Investors positivity about the buoyancy and attractive investment proposition that startups offer is clear to see in the fact that Tech firms in London alone raised £1.8bn in venture funding and public listings in 2018.

Investment in Fintech, where over 80% of startups receiving venture capital were London based last year is exceptionally high. The UK received five times more investment than its closest counterpart Germany, raking in $3.3bn (£2.6bn) in Fintech investment alone. Despite Brexit uncertainty, international investors don’t seem put off, with over 50% of this investment from abroad, namely from North America and Europe (CityAM).

The Unicorn Capital

With this hefty investment it’s no surprise that the UK is recognized as the tech unicorn capital of Europe. (We talk about Unicorns in our previous blog – any company that is valued at $1 billion or more).

According to investor and consultancy of GP Bullhound, the UK will be home to 25 percent of Unicorns in Europe alone within the coming years. This equates to 6% of Unicorn companies globally, with the US leading the way with 49% (150), followed by China with 26% (84) (CB Insights).

Not only that, but London is producing more unicorn businesses than any other European city, with 17 companies surpassing the $1 billion valuation mark since 2010, over double the amount of other major tech hubs such as Berlin (seven) and Paris (four). London is currently home to 13 unicorn businesses, more than Madrid, Stockholm and Amsterdam combined. (Growth Business).

Unsurprisingly, the UK’s fastest growing sector in terms of investment was artificial intelligence, hitting a record £736m last year at an increase of 47 per cent compared to 2017. London-based online travel firm Culture Trip boosted the figures with a £58.9m round, while chipmaker Graphcore scooped up £153m to become the UK’s most recent unicorn.

Other growth sectors included big data, blockchain and cryptocurrencies, which also saw all-time high investment numbers. (CityAM).

Many of best talent we speak to are tired of being approached with Fintech roles and are seeking opportunities with companies that have more socially-motivated missions. Good news, as we’ve seen ourselves this is an area that is growing, with ‘profit and purpose’ companies raising £1.09 billion in venture capital in 2018. This equates to over 490 firms looking to bring about social change or impact society in a positive way through technology!  

Tech for Social Good - Tech Nation Report 2018

Tech Nation – Tech for Social Good report

Why is London a hub for tech startups?

Now, it would be easy for us to sit here and start talking about how London is the greatest city in the world, blah de blah. But, our subjective opinions aside. Why is London such a hub for tech startups?

World's top tech ecosystems - London - Tech Nation Report 2018

Well, the answer points to the fact that London is widely accepted as Europe’s financial centre. The city offers exceptional access to VC-funding and angel investors and this access makes it hugely appealing to startup founders around the globe.

Not only this, but London is also an epicentre for incubators and accelerators. According to Telefonica in the last three years along, the number of formal Accelerators programs has risen by 110%. If you’re interested in finding out more about the accelerator programs out there, read the definitive guide at Hubble HQ.

Anne Boden, CEO of Starling Bank added: “London has something that Silicon Valley never had: in addition to a thriving tech community and an entrepreneurial culture, it is also a big financial centre. This makes for a compelling combination” (Growth Business).

Another reason for London’s popularity for entrepreneurs, as dry as it sounds, can literally be attributed to its good international trade relations with the rest of the world (and even its central geography). The global connections of London’s entrepreneurs bolster the international market reach of their startups, with 33% of tech company customers based outside the UK… the highest of any market in the world.

London's global reach - London Startup Technology Hub

Source: London and Partners

Access to talent is UK’s startups greatest challenge to date

London and the UK is not alone in the fact that talent remains the single biggest barrier to Startup success and growth.

Although London is home to, or within touching distance of (Oxford and Cambridge) four of the top ten universities in the world (QS world university ranking 2018), one of the main challenges that growing businesses face is attracting the right talent.

Russ Shaw, founder of industry body Tech London Advocates, warned that despite the City’s continued appeal to investors, access to talent will remain the UK’s “greatest challenge to date”.

“This year is the time to put in place long-term strategies that look at digital skills and lifelong learning, in anticipation of the job displacement that is coming,” he added.

May the odds be ever in your favour

Now, it is a bit like the Hunger Games out there, so we can be forgiven for making the reference. The talent market is SO competitive, but not in a way that helps the majority of talent like you, or the progressive startups out there looking to be connected with you.

Current recruitment processes are broken (a topic that our CEO Craig will talk about in a soon to be released blog) - it means that access to talent is as Russ Shaw says, the greatest challenge to tech startups.

But, it doesn’t have to be! That’s why we’re here. To shake things up, apply a common sense approach and help businesses scale, simply. And, to help the odds be in your favour!

If you’re looking for an opportunity to make your way into one of the most exciting tech startups in the world, or already work for one, we’d equally like to hear from you.

Our network is growing and we love speaking to people from all tech, design and product backgrounds, as it not only makes us better at our jobs, but hopefully, one day, we might be able to help you too! So, get in touch.

 

 


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