London’s race to the fintech frontier puts it in pole position to attract start-ups
London’s reputation as a financial center has been under siege this year, with a lack of company listings and challenges from Paris and Amsterdam to the crown as Europe’s most important arena for international business.
But an examination of an important niche in the market has revealed that the capital retains its ability to shine in the competitive and fast-growing world of start-ups, especially with fintech firms. It shows that London is the region’s most successful place for employees of so-called ‘unicorn’ companies – privately held or newly owned firms valued at more than $1 billion – to set up new start-ups.
It comes as a promising insight into an area known globally for its high growth potential, just as politicians from Westminster to City Hall look for ways to attract cutting-edge businesses. Attracting young, innovative firms will help fight the looming recession and pave the way for a rapid recovery.
But international competition, especially in fintech, is fierce. The survey – carried out by US-based global venture fund Accel and Dealroom, the specialist start-up data provider – gives hope that the city’s ambitions to extend its credentials as a major market center to the new financial frontier are well placed.
According to the findings, 27 London-based unicorns produced the most new ventures at 168, with most of them also established in the capital, at 69%. Paris had 125 startups from the founders of 22 unicorns, although a greater proportion of them were set up in the French capital, at 75%. In Berlin, 24 local unicorns generated 138 even newer businesses, with 70% of them living there.
The survey also covered Israel along with Europe. In Tel Aviv, 27 unicorns created 108 new firms.
Most of the activity comes in fintech, an innovative area that also plays on London’s traditional strengths. The survey listed the London names among the top “founder factories” producing a new wave of start-ups. Wise, the money transfer company, had 11; Revolut, the banking app that offers fee-free currency exchange, produced 10; although Stockholm’s Klarna, the payment app, came out on top with 15.
Harry Nelis, partner at Accel, said: “There is now a wealth of strong founders and operators building innovative companies who have experienced the start-up journey before and have the knowledge to create global success stories.”
Competition to attract and retain top talent will be intense, with governments eager to fight their way out of the wider economic downturn with the help of high-growth and dynamic companies.
GoCardless CEO and co-founder Hiroki Takeuchi told the Standard that “many alumni” of the Islington-based payment service provider had started their own companies, taking the experience they gained and learning from all the mistakes we made in the early days.”
He added: “It’s great to see these numbers and it’s a validation of the mature tech ecosystem in London… But I wouldn’t necessarily say this is unique to London – it would be interesting to see how we compare us with, say, San Francisco.”
Politicians in Westminster and City Hall have struggled to boost London’s wider tech scene in line with their ambitions. Attempts to turn Old Street’s famous Silicon Roundabout cluster of cutting-edge firms into a larger part of the capital’s economy, and towards the scale of Silicon Valley in the US, have met with only patchy success.
Nevertheless, the capital has its established fintech success stories. Among them, Revolut and Wise scored the highest in Accel’s study, generating 23 and 19 more startups respectively.
And there are moves to pave the way for more to follow. The City of London is establishing the private sector-led Center for Finance, Innovation and Technology, or CFIT. which aims to “identify opportunities” and address “barriers to growth”. It already has £5.5m in seed funding and a “playbook” detailing how it will “support the creation of high-income technology-based employment across the country, it will enable businesses to achieve global scale”.
