Two of the biggest startup funding stories of the week illustrate the size of the gulf that still exists between London and The Silicon Valley when it comes to creating tech giants.
Many prominent London based techies, entrepreneurs, startup founders and investors have made no secret of the fact they have The Valley’s position as the number one global tech hub in their sights.
When Joanna Shields left her position as Head of Google EMEA to chair Tech City in 2012 after being head-hunted by David Cameron, she declared:
“The seeds have been sown in East London for a dynamic and successful cluster: we have the infrastructure, the technology and the talent, now we need to accelerate the growth.
“There is no reason why we can’t make London the number one location for tech in the world.”
This week, one of London’s most celebrated disruptive tech startups, Transferwise, which had raised a total of $91m in funding by the end of 2015, announced a $26m “top up” funding round led by investment management company Baillie Gifford and backed by a number of existing investors.
According to sources close to the company the round means Transferwise has officially joined the “Unicorn Club”, with a valuation of $1.1bn – something which most observers believed had happened months, if not years ago.
Taking nothing away from Transferwise’s achievement, the company, which is loss-making, is neither fully headquartered in London (most of its staff are based in Tallinn, Estonia, where both company founders, Taavet Hinrickius and Kristo Kaarman, hail from), nor a major player in its sector – money transfer – its revenues of $5m per annum are dwarfed by the likes of Western Union, who generate revenues of around $750m per annum, and have some 600,000 stores and kiosks worldwide.
Now let’s turn our attention to another big fundraise that happened this week. This time in California.
Snapchat, the social messaging app which is much more than just a disappearing messaging app, completed a raise of $1.8bn this week, at an estimated valuation of $17.5bn.
Yes, you read that right; $1.8bn at a valuation of $17.5bn.
According to a leaked pitch deck, the company achieved revenues of $57m in its first year attempting to monetise – until 2015 there was no monetisation strategy. Company projections for 2016 are forecast by the company to be between $250-350m, and somewhere between $500m-$1bn in 2017.
So let’s put things into perspective; London’s flagship startup company, Transferwise, in its flagship sector, FinTech, in which it claims to be the world leader, is worth $1.1bn.
Silicon Valley’s second or third most popular social media app, in one of 5 sectors, SaaS (Salesforce), Transport (Uber), Smartphones (Apple), Semi-conductors (Oracle), and social media (Facebook, Twitter, Snapchat) at which it could rightfully claim to be the world’s biggest and best, (we may as well add the sharing economy, Airbnb) is worth $17.5bn.
According to Crunchbase, that’s more than twice the size of Europe’s largest “Unicorn”, Spotify, and five times the size of its next biggest, Delivery Hero. Oh, and 8 times the size of the UK’s biggest, SkyScanner, which is based in Glasgow, not London. Since POWA technologies went bust, London’s biggest “Unicorn”, is…you guessed it, .Transferwise.
According to a recent Spectator article, Facebook is worth twice the combined valuation of all of Europe’s Unicorns put together, and Uber, at its current valuation, is worth more than London’s 17 Unicorns combined. And at least one of London’s Unicorns, Wonga, is a payday lender. Hardly what “Digital Dave” Cameron envisaged when he threw his, and his parties weight behind Tech City 6 years ago.
But let’s end the London tech bashing there. Admittedly, those who claimed or continue to claim that London can seriously rival The Valley as an incubator of the world’s largest tech companies are well wide of the mark. This much we know, and don’t believe anybody who tells you otherwise.
Indeed, given how first Facebook, and now Snapchat have won over the hearts and minds of successive generations of young adults, slowly introducing more sophisticated functions as its users mature, becoming friend and guide, trusted source of information, created for and by its most active users, London would do well simply to listen, learn, and use.
If you can’t beat them, join them. And try to make them pay taxes, as Europe has done.
The real value add that London brings today, is individuality and diversity.
Russ Shaw, an American in London, founder of Tech London Advocates sounded a more realistic note in September last year when he said:
“Now, London will not be replacing Silicon Valley in the short term, but the optimism of our technology community is goo dnews for thecapital. In the growing global demand for digital skills and talent, a reputation for diversity must be nurtured. For years we have struggled to find ways of competing with San Francisco’s digital dominance. Maybe the answer has been here all along.”
London needn’t worry about becoming the world’s biggest and best tech hub – it’s not going to happen – what it should be doing is making sure it is nurturing the world’ most talented people, wherever they come from, however they get here. This has always been what has set London apart.
It’s well known that Silicon Valley has diversity issues – there are too few women at the top of the largest, or indeed any organisations. Too many rich, white males in leadership roles, from too few universities. Too many rich techies driving up rents in San Francisco.
Why worry about being biggest, when London can be the world’s most influential and forward thinking. In a connected, globalised, world, pitting one city or region against another in a forced pissing contest is completely counter-productive. Leave that to the sports teams.
Let tech continue changing the world we live in, making it fairer, safer and celebrating its diversity. Its where the real power lies.