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Uh-Oh – We’re In Trouble!

Has someone come along and burst our start-up bubble? Reports have surfaced that one of Britain’s most valuable (as much as £1.8bn) and celebrated startup “unicorns”, Powa Technologies is about to enter administration, putting 300 jobs at risk – Deloitte have been appointed to try to sell the business as a going concern.

Meanwhile across the US, Europe and Asia, post IPO valuations are dwindling; Fitbit shares dropped 15% in after-hours trading on Monday after the company reported weaker than expected fourth quarter results.

VC fundraising is expected to fall this year as the investment “cycle” enters a downturn after a record breaking 2015; all of a sudden London, home to nearly half (17) of Europe’s much-vaunted unicorns, looks vulnerable.

Talk of a bubble has been circulating for some time and questions have been asked about the wisdom of trying to copy a model – the supercharged growth of Silicon Valley – that London’s unsophisticated by comparison tech infrastructure, jobs market and economy was perhaps just not ready for.

So what now for the likes of JustEat, Zoopla, Transferwise, Funding Circle, Shazam, Markit et al? And how about SkyScanner in Glasgow, Fanduel, or Pokerstars – all based elsewhere in the UK.

The good news is it’s not time to hit the panic button just yet – within the friendly, collaborative, aspirational world of start-ups the vast majority of founders and leaders believe that it is ok to fail. The trouble is, higher up the food chain, in the world of the publicly listed companies, shareholders are less patient.

Perhaps it was naïve to believe that in the business world nice guys could buck the trend and finish on top. Could it be time for startup founders and CEOs to roll up their sleeves and start baring their teeth, and show they have a nasty side? We are taught at business schools across the land that the capitalist way is to create a company that generates profits for shareholders. Changing the world is far down the list of priorities in the dog-eat-dog world of big business – staying alive is what counts.

Time for startups to wake up and smell the coffee?

So is it time for startups to get serious? As far back as June last year we were told that “scaling up” was the new starting up – that the ability of early stage companies to deliver rapid growth in revenues and staff numbers and achieve global recognition would be central to maintaining Britain’s tech fuelled economic growth – who has the guts and the tenacity to drag their company through the dark times and come through that sternest of examinations – the stock market listing.

And what does this mean for the humble meet-up, hackathon or co-working space? Will incubators and accelerators continue to flourish – can tech start-ups survive months of bad press and and being scrutinised under the microscope?

Time will tell but here are some reasons for optimism; in a round led by Goldman Sachs, London based Qubit has raised $40m to fund the expansion of its big data analytics platform. VC Isomer Capital has announced the launch of a €150m fund to boost European start-ups and says it will work with the likes of Hoxton Ventures, White Star Capital and Entrepreneur First. A South Yorkshire firm Metalysis has completed a £20m funding round.

And today social meet-up start-up Sup announces the release of a new and improved version of its app. Hipsters Hackers & Hustlers Speed Pitching and GaP->GaS (Got a Problem – > Get a Solution events are back in the calendar starting next month. Tech City Tours launches this Friday with visits to selected exclusive co-working spaces.

We could go on. And on. And on. But you probably have a company to build. There may be trouble at the top, but for any founder worth their salt that simply spells opportunity. After the fools gold rush, it’s time for the Angels to step in. Rumours of the demise of the start-up Eco-system have. Even greatly exaggerated!

 

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