London “has New York’s urban diversity, LA’s concentration of media, film, TV and creative industries and Washington DC’s proximity of government, all in one place” according to Joanna Shields, CEO of the government’s Tech City initiative. At one point though, London was not considered a world leader for startups. In fact, there wasn’t even a competent regulatory framework in place. However due to the success of startups in London, now there is a special team at the Financial Conduct Authority that deals with startups, several VC’s ready to invest and numerous hubs. London is without a doubt the leading startup hub in Europe and the third-largest in the world.
Since 2008, the UK has created 60 unicorns (tech companies valued at $1bn or more) – which is 35 percent of the 169 established across Europe and Israel. The majority of those unicorns were founded in London, which shows how far the UK has come. In the past three years, the UK has created 25 unicorns which is more than France, Germany, the Netherlands, and Sweden combined (19). London produced 23 of the 25 unicorns with a combined value of $132bn, compared with Berlin’s eight, worth $32bn.
What has boosted this startup ecosystem? Firstly, Generous tax incentives for investors. With the EIS scheme, investors can get up to 30% of their investment back in income tax relief and can also defer up to 50% Capital Gains Tax until after the EIS investment matures. Similarly, the SEIS scheme also provides investment tax reliefs.
London based startups benefit from an ecosystem that has been rapidly developing over the past 15 years. For example, you won’t find any shortage of hubs from which to work, plus there are a plethora of opportunities to network and grow your business with fellow entrepreneurs. Some of the best include Pi Labs, Techstars, and Startupbootcamp. Likewise, you will never be short of co-working space for startups to work from. Some of the best are the Google campus and Uncommon.
Another huge benefit of being in London is the range of VCs, who specialize in different industries and have a history of investing in startups at all stages. For example Index Ventures, established in 1996 have a focus on fintech, gaming, and e-commerce. They have raised $7.25 billion and have invested in companies that have revolutionized the way we do things on a daily basis, some of the best examples are Deliveroo, Dropbox, Skype, Revolut and Transferwise. Other notable VC mentions include Passion Capital, which has a focus on mobile and digital media and are investors in Monzo. Likewise, London based DN Capital invests in early-stage to growth equity and has made 23 exits and three IPOs. Perhaps its most notable successful exit is the music recognition app Shazam. In terms of sectors, Fintech, biotech, and health tech continue to drive a significant amount of VC investment.
The good news for budding entrepreneurs is that capital in London doesn’t have any signs of drying up. VC’s are ready to invest, and the capital available for funding rivals that of Silicon Valley. The reason is clear - VC’s see the potential. London now has more fintech unicorns (18) than San Francisco (15). UK tech companies raised more than £6.7 billion in 2016, which is a 131% increase in the two years prior. The amount of money raised is only predicted to increase with time. Investors are more willing to invest, both at seed level and in later rounds as the city gets a stronger hold on the startup world. More than £1.19 billion ($1.56 billion) of VC money was invested in the first three months of this year in the UK, across 161 deals. This was more than both Germany (£1 billion) and France (£760 million). Some major funding rounds raised in London recently include startups such as Farfetch, Improbable, Deliveroo, Truphone and Monzo. Perhaps your startup will be on this list if you decide to set up in London!
Ready to get immersed and build your business in the London startup scene? Then eLab is here to help! Check out our Programs page to find the best solution for your business needs.