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Silicon Roundup; In A Week That May Have Kickstarted The Fundraising Season, We Ask, Are London’s Entrepreneurs building for the 1%?

London is the most expensive city to live in in the world – are entrepreneurs increasingly catering to the rich and powerful?

Is this the week that London’s tech startup scene finally burst into life in 2016?

After the highs of 2015, when Venture Capital grew 70% year on year to £3.6bn, $2.8bn of which was raised here in London, came the murmurings of discontent. Was it a bubble – could valuations be sustained – can we really trust disruptive tech?

First it was Transferwise and its inability to make profits, then it was the collapse of Powa technologies. All of a sudden Britain’s fastest growing industry, digital, the one many observers feel carries our hopes for a better economic future, began to backpedal – this could be a down-year, enterprises may struggle to retain staff, the talent pool does not run as deep as we thought – rumours that tech was a busted flush were rife.

So Tech City needed a week like this – big fundraisings, a massive exit, the early stage startup community back in business!

But in a week where all the talk has been about the finances of the super-rich thanks to the leaking of the so-called “Panama Papers”, we note a subtle change that may be creeping into the early stage, fast growth community.

Rewind 18-24 months, and every founder you met would tell you that their technology was game changing, their influence “disruptive” and their ambition, to a man, was to “change the world”.

Today, it seems harder to put the same spin on things. Are the founders that are doing all the raising today only building for the 1% – the wealthy elite? Is the only way to attract the VC money these days to pitch to rich?

We take a look at the big funding stories of the week and ask – what’s in it for the ordinary Londoner – is this product going to make my life better – will I want to own one? The answer, in some cases at least, is “only in your wildest dreams”.

As that famous snooper around the homes of the rich and famous Lloyd Grossman used to say, “let’s take a look at the evidence”.

If you can’t afford to holiday on one of these, “Travel Tech” may be of limited use to you

Hotel do-tell – OneFineStay Exits to Accor Hotels for $170m

The London startup that rents upmarket homes as if they were high end serviced apartments has raised a whopping $80.9m since it was first launched in 2009, with Index Ventures its most prominent early investor.

Accor Hotels stepped in this week and acquired the business with an offer of $170m, and a pledge to make a further $70m investment into the company to help it expand internationally.

The business currently operates in 4 cities, London, Paris, New York and LA, but aims to launch in 40 overall.  In total it manages more than 2,600 properties and achieves average margins of up to 50% on its listings.

“The business will continue to be led by the current founders and management team. In many ways, nothing will change in the way we deliver our service,” says co-founder and CEO Greg Marsh.

“We’re really interested in this vertical; private rentals for high-end stays. Our clients are interested in this vertical. And if we follow our clients’ needs then we’re sure we remain relevant for them”, says Accor Hotels deputy CEO Vivek Badrinath.

The only downside for the start-up community is that a company that could have stayed independent has sold out to a large corporate, but it seems the founders are determined to run the business with the same independent disruptive spirit as before.

Would it have been better if they had turned down the cash and fought the good fight a la Airbnb and Uber? Judging by the current backlash by mortgage lenders over the short term lets market, it seems OneFineStay have taken a pragmatic decision.

Verdict; More high end housing opportunities for wealthy part time Londoners. It won’t drive down the price of inner city co-working spaces, that’s for sure. It remains to be seen what difference OneFineStay can make to ordinary Londoners’ lives.

Not so edgy Edge Retreats raise $1m – a victory for its travel journo founder

Haggerston Times has written about Edge Retreats before and it’s a great story for founder Luke McCormick, an Australian entrepreneur and blogger who spent 10 years in London perfecting the art of luxury overseas travel before pitching current investor Forward Partners, winning funding as a solo founder and working tirelessly to promote the brand. As such a further $1m raising, led by VC fund Lean investments, is a just reward which gives McCormick the chance to go on and do great things.

Verdict? In a similar vein to OneFineStay, this is a site for wealthy people. Can it make a difference to ordinary Londoners lives, like say, Giles Dean and James Balfour’s 1 Rebel Gyms project, which aims to inspire us to keep fit, party, and enjoy ourselves, whatever salary we’re on? In a word, no. This is one to satisfy the whims and desires of the 1%.

Green Belt in Origami – Origami Energy’s $13m raise has stellar disruptive credentials, and yet?

An energy company based in Cambridge whose mission is to “monitor, communicate with and control a large distributed network of energy generating, energy using and energy storing assets connected to the electricity grid”.

Origami Energy “intelligently manages capacity and modifies flows of power at physical sites of power generation by providing a marketplace where the supply and demand of electricity is matched more evenly in real time.”

Origami Energy raised $4m in 2014 and used to bring 30 staff on board and successfully trial alpha and beta versions of its technology platform and roll out its first pilot trials. Now, with new funding it is looking at its first commercial deployments.

Octopus Ventures and Cambridge Innovation Capital are sold on the venture and have pumped in a further $13m alongside Fred Olsen and others. But does this scheme place the control of efficient energy distribution in the hands of the many, or the few?

The press release talks about how “additional value can be unlocked for Origami Energy’s partners” – uh-oh, what does one have to do to become a partner, dare one ask?

On the flipside, the press release goes on to say, a “recent ‘Smart Power’ report published by the National Infrastructure Commission estimates that use of smart power measures, such as those provided by Origami Energy, could save UK consumers up to £8 billion per year by 2030.”

Verdict? We’re no energy buffs, but driving efficiencies around energy distribution on the face of it sounds like a forward thinking, promising development, and Origami are creating employment opportunities for top tech talent. But just who will those “partners” be? Perhaps a chunk of the new funding round can be allocated to educating the public about the company’s true aims.

everyone loves a delivery; is this the kind of luxury that disruptive tech can bring us?

Jinn Genie – London delivery firm grabs $7m that lets us order anything, from food to local stores

Finally, a service that rolls out the rockstar treatment to us mere mortals. Jinn is a London based personalised delivery service. Our own personal shoppers picking up and delivering goods to our homes. Samaipata Ventures are leading the round, a VC company founded by founders, who sold a similar delivery business to Rocket Internet last year, with Elderstreet and Bull Ventures also joining the round. Jinn’s delivery times are second to none according to TechCrunch, averaging at just 32 minutes, whilst total orders placed through the app exceed $25m.

The formula behind the startup is tried and tested, and the service runs 24 hours, but where Jinn really excels as a company is by building partnerships with retailers; when customers order from Jinn’s partners they are charged a much lower delivery fee.

Verdict? Yes, its affordable, yes its versatile, but do we need more on-demand delivery services in London. Soon we there will no reason to leave the office / house, whilst the risk of being taken out by a fraught delivery rider grows ever higher. Joking aside its clearly differentiated from a Deliveroo or a JustEat, and it could be a game changer, across all demographics.

Overall: Are London’s “techerati” merely tennis balls to the stars – they play with them for their sport? Can you blame an entrepreneur for tapping the market that pays the best? Will the benefits of these exclusive services trickle down to us, the public? And what happened to changing the world?

Answer, Facebook changed it all by itself – it’s so good it looks to have taken out YouTube with one new product launch, the Live service, and created an entirely new reality, to go alongside its virtual one.

The rest of us are feeding off scraps from Facebook’s table; the way we see it, entrepreneurs have 3 options; pitch to rich, develop for Facebook, or keep on keeping on – there are still entrepreneurs out there going to incredible lengths to improve society, from Health Tech, celebrated by the Dreamstake team this Monday at Google Campus, to the Collective, who are set to launch affordable flats for students in key London areas, to cohorts at the likes of Entrepreneur First, who dream big about disruption, and have the academic credentials to match. Whatever the market, entrepreneurs will always be welcome in London.

 

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