Deep Dive: London a Top Hub for Startups

Transcription

1 Deep Dive: London a Top Hub for Startups London is the top European startup hub and one of the world s best places for startups to grow. The city provides young companies with: 1) Market reach and an environment conducive to growth: London offers startups access to a large domestic market as well as international markets, and the ability to grow faster than companies based elsewhere. 2) Access to capital, a strong nondigital infrastructure, an entrepreneurial culture and a skilled workforce: As a financial hub, London offers startups greater opportunity to raise funds. The city also has a strong transportation system, a favorable business environment, a history of startup successes and a large pool of highly skilled workers. Deborah Weinswig Managing Director, Fung Global Retail & Technology deborahweinswig@fung1937.com US: HK: CN:

2 Table of Contents Executive Summary... 3 Introduction... 4 London: A Leading Startup Hub... 4 How London Compares with Other Startup Hubs... 6 London Ranks Sixth in the 2015 Global Startup Ecosystem Ranking... 7 London Leads the European Digital City Index Retail-Focused Accelerators in London JLAB TrueStart London-Based Accelerators and Incubators Key Takeaways

3 Startups in London attract more investment and generate greater revenue than startups in other European cities. Executive Summary In this report, we provide an overview of the startup ecosystem in London, which is the top European startup hub and one of the world s best places for startups to grow. Startups in London attract more investment and generate greater revenue than those in other European cities. For example, in 2014, London-based startups attracted 5.19 billion more in investment and generated almost five times more revenue than Berlin-based startups, according to Startup Hubs Europe, a platform that tracks and analyzes information on startups across Europe. The strong presence of a number of industries in London makes the city a favorable environment for startups. Startups in London have access to funding, thanks to the city s large financial sector; access to networking opportunities, thanks to a vibrant creative industry; and access to expertise and a highly skilled workforce, thanks to London s world-class universities. Moreover, the city has a business-friendly regulatory environment conducive to startups growth. In this report, we examine how London compares with other startup clusters in Europe and across the globe. We consider two rankings, Startup Compass s 2015 Global Startup Ecosystem Ranking and Nesta s European Digital City Index London ranks sixth and first, respectively, in these two companies rankings. The city excels on the following indicators: Market reach and performance: According to Startup Compass, London offers startups access to a large domestic market as well as international markets, and the ability to grow faster than companies based elsewhere. Access to capital, nondigital infrastructure, entrepreneurial culture and skills: According to Nesta, London also offers access to capital, a strong nondigital infrastructure (including excellent airport and train connectivity), an entrepreneurial culture (a favorable business environment and a track record of successful startups) and a highly skilled workforce. Source: Shutterstock 3

4 London is a leading startup hub globally and the top European city for startup development. Introduction London is a leading startup hub globally and the top European city for startup development. Young companies benefit from the city s strong industries, world-class educational institutions and business-friendly regulatory environment. This report provides an overview of London as a startup ecosystem, and examines how the city compares with other startup clusters in Europe and across the globe. We consider two rankings, Startup Compass s 2015 Global Startup Ecosystem Ranking and Nesta s European Digital City Index Finally, the report profiles two London-based startup accelerators that focus on retail and technology, as well as some of the startups that have graduated from their programs, and provides comprehensive lists of the main startup accelerators and incubators in London. Source: Shutterstock In 2014, London-based startups attracted 5.19 billion more in investment and generated almost five times more revenue than Berlin-based startups. London: A Leading Startup Hub London is the top European startup hot spot and one of the world s best places for startups to grow. Compared with Berlin, the second-largest European startup hub, London comes out ahead on a number of metrics, including startups ability to attract investment and generate revenue. In 2014, London-based startups attracted 5.19 billion more in investment and generated almost five times more revenue than Berlin-based startups, according to the European Commission s Startup Hubs Europe project despite London having not even twice the number of startups as Berlin. 4

5 Figure 1. Startup Environment in London vs. Berlin: Key Figures, 2014 Indicator London Berlin Total Investment 8.32 billion 3.13 billion Employee Count 1.49 million 666,187 Revenue 207 billion 45.5 billion Number of Companies 276, ,112 Source: Startup Hubs Europe London has a distinct advantage compared with other startup hubs, the strong presence of a number of industries, including finance, media, creative, marketing, government and technology. These strong sectors unleash synergies that make London conducive to startups, and the city s business-friendly regulatory environment also benefits young companies. Financial sector: The presence of a substantial financial sector is a major competitive advantage for London-based startups, as it has encouraged the growth of the venture capital (VC) industry (London s VC sector is the largest in Europe), as well as the growth of the fintech sector and the crowdfunding of startups. Creative industry and world-class universities: Two other factors that make London a top startup hub are the presence of a vibrant creative industry in the so-called Silicon Roundabout area and the presence of a number of world-class universities, including University College London, Imperial College London, King s College London and the London School of Economics. London s favorable regulatory environment has also contributed to its success as a startup hub. Source: Shutterstock Favorable regulatory environment: London s favorable regulatory environment has also contributed to its success as a startup hub. The UK has a business-oriented government that aims to create an environment conducive to startups. In 2011, the government launched a strategy to offer business advice and support to entrepreneurs looking to start and 5

6 grow their businesses. Since 2012, the government has made 250 million ( 295 million) in startup loans available. Moreover, in 2014, the Coalition for a Digital Economy a nonprofit organization of tech startups published The Startup Manifesto, which makes recommendations that encourage the government s startup-friendly policy initiatives. Business-friendly environment: Generally speaking, however, it is the business-friendly environment of the UK that encourages the development of startups. The table below ranks the economies in the Organisation for Economic Co-operation and Development (OECD) in which it is easier to set up a business, according to the World Bank. This indicator shows that the UK fares better than many other markets with strong startup ecosystems, including Israel, the US and Germany. Figure 2. Selected OECD Economies: Ease of Starting a Business Economy Starting a Business New Zealand 1 Canada 2 Australia 3 Ireland 4 South Korea 5 Estonia 6 Sweden 7 UK 8 Israel 17 US 19 Germany 32 Source: World Bank The main drawback of the London startup ecosystem is the high cost of operating in the city. The main drawback of the London startup ecosystem is the high cost of operating in the city, as housing, office rental and salaries for highly skilled positions tend to be higher in London than in many other cities. Despite the uncertainty created by the Brexit referendum, London s attractiveness as a tech hub has been recently reinforced by postreferendum announcements from Facebook, Google, Amazon, IBM and Apple, all of which have said that they plan to expand their office presence in London over the next few years. How London Compares with Other Startup Hubs In order to better understand what characteristics make London a top startup ecosystem, we considered two indexes, one global and one regional, that rank startup hubs according to specific indicators: the 2015 Global Startup Ecosystem Ranking and the European Digital City Index

7 Source: Shutterstock London Ranks Sixth in the 2015 Global Startup Ecosystem Ranking London is the sixth-best startup ecosystem globally, according to the 2015 Global Startup Ecosystem Ranking. London is the sixth-best ecosystem for startups globally, according to the 2015 Global Startup Ecosystem Ranking compiled by Startup Compass, a San Francisco based company that provides solutions for automated management reports and benchmarks for small and medium-sized online merchants. The index ranks startup hubs on five components: 1) Performance of the funding invested in the startups 2) VC funding and the time it takes to raise capital 3) Talent availability 4) Market reach 5) Startup experience, such as mentorship by veteran startup founders The components are based on insights collated from different sources, including surveys and interviews with startups and entrepreneurs. The index does not cover China, South Korea or Japan. In terms of specific indicators, London performs particularly well on market reach and performance. Market reach: Startups in London have good access to foreign customers and to a large domestic market. In the 2015 Global Startup Ecosystem Ranking, London ranks fourth globally in both local and global market reach. Top target markets for startups in London are the UK, the US and China. Performance: Startups in London also enjoy faster growth compared with startups in other ecosystems, and London ranks highest on Startup Compass s Growth Index among the world s top six startup hubs. 7

8 Figure Global Startup Ecosystem Ranking: London Ranking for Each Indicator Indicator Ranking Market Reach 3/20 Performance 5/20 Talent 7/20 Funding 10/20 Startup Experience 13/20 Ranking is out of 20, with 1/20 the best result and 20/20 the worst result. Source: Startup Compass Figure Global Startup Ecosystem Ranking: Growth Index, Top Six Startup Hubs London Tel Aviv Boston Silicon Valley New York City Los Angeles The Growth Index is calculated based on annual growth in the number of startups, growth in VC investment and the two-year moving average growth of the annual sum of exit valuation; the average scores across these indicators are then converted into a 10-point index. Source: Startup Compass London Leads the European Digital City Index 2016 London is the top European city for digital entrepreneurship, according to the European Digital City Index The European Digital City Index 2016, compiled by nonprofit organization Nesta, ranks 60 European cities based on how well they support digital entrepreneurs. The rankings are based on indicators such as availability of financing and skilled workers, and quality of supporting infrastructure and networks. In 2016, London ranked at the top. Access to funding, a buzzing entrepreneurial culture and a skilled workforce are some of the factors that make London the best European city for startups. The city performs particularly well in terms of access to capital, entrepreneurial culture, workforce skills and nondigital infrastructure. 8

9 Access to capital: London is the highest-ranking city in Europe in terms of availability of late-stage funding, crowdfunding and angel funding. Entrepreneurial culture: The city has been home to a number of highly successful digital companies, and the business environment is characterized by a culture of trust and a willingness to take business risks. Startups in London that are looking to hire have access to a significant pool of university graduates with strong skills. Skills: Startups in London that are looking to hire have access to a significant pool of university graduates with strong skills. English-language literacy is high among the workforce and many people in the area work in the information and communication technology sector. Nondigital infrastructure: London s excellent airport and train connectivity contributes to its high score on this indicator. Figure 5. European Digital City Index 2016: London Ranking for Each Indicator Indicator Ranking Access to Capital 1/60 Entrepreneurial Culture 1/60 Skills 2/60 Nondigital Infrastructure 4/60 Market 5/60 Mentoring 5/60 Knowledge Spillovers 5/60 Digital Infrastructure 42/60 Business Environment 45/60 Lifestyle 54/60 Ranking is out of 60, with 1/60 the best result and 60/60 the worst result. Source: Nesta 9

10 Figure 6. Notable London Startups, by Capital Raised (EUR Mil.) Deliveroo Farfetch Borro Wonga Shazam TransferWise Made.com 68.1 Source: European Digital Forum/Nesta Fung Global Retail & Technology collaborates with retail and technology accelerators in London in order to monitor the innovative solutions developed by participants in their startup programs. Retail-Focused Accelerators in London Fung Global Retail & Technology collaborates with retail and technology accelerators in London, including JLAB and TrueStart, in order to monitor the innovative solutions developed by participants in their startup programs. Below, we profile these two retail-focused accelerators and some of the recent graduates of their programs. Source: Shutterstock 10

11 JLAB is a retail-focused accelerator founded in 2014 by British retailer John Lewis. JLAB JLAB is a retail-focused accelerator founded in 2014 by British retailer John Lewis. The JLAB program is designed to fast-track the growth of startup companies in the retail space. Figure 7. JLAB Source: JLAB.co.uk Each year, JLAB accepts five startups to participate in a 12-week program. The startups receive support in the form of: Product validation from John Lewis s experts and from consumers Mentorship from John Lewis s senior leaders Investment from the JLAB Micro-Fund Access to a network of external mentors with retail expertise Free office space in John Lewis s London headquarters A first-class education program based on the Disciplined Entrepreneurship method from the Massachusetts Institute of Technology (MIT) Each JLAB startup is eligible for an investment of up to 100,000 ( 117,077) from a micro-fund attached to the program in exchange for equity in the company. The startups that participated in the JLAB 2016 program included DigitalBridge, Ding Labs, Link Big, Robotical and Wedding Planner, which we detail below. 11

12 DigitalBridge: DigitalBridge offers a platform that allows a user to take a photo of a room with their phone or tablet that can then be used to visualize how the room might be redecorated. The solution automatically recognizes walls, floors, ceilings, objects and lighting conditions in the room, allowing the user to see how it might look with different wallpaper, carpet, paint, artwork, furniture and fixtures. Figure 8. DigitalBridge Source: DigitalBridge.eu Ding Labs: Ding Labs offers a smart doorbell that enables a homeowner to talk with the person at the door from wherever the homeowner is in the world. The doorbell is made up of two parts, a subtle doorbell button that sits near the door and a doorbell chime that sits in the home. The chime alerts the homeowner both at home and by phone, allowing him or her to talk with the person at the front door from a remote location. Figure 9. Ding Labs Source: DingProducts.com 12

13 Link Big enables companies on Instagram to sell products directly from their profile. Link Big: Link Big enables companies on Instagram to sell products directly from their Instagram profile. Link Big s smart link leads the company s followers on Instagram to the transactional website that sells the specific product they are advertising in a particular post, thereby driving traffic and sales. Figure 10. Link Big Source: Link-Big.com Robotical is the manufacturer of Marty, a fully programmable, wifi-enabled, walking robot that features expressive eyes with moving eyebrows. Robotical: Robotical is the manufacturer of Marty, a fully programmable, wifi-enabled, walking robot that features expressive eyes with moving eyebrows. Marty is designed to be an engaging way to learn about all aspects of robotics, including programming, mechanical engineering, electronics and sensors. The robot parts can be 3D-printed, and users will be encouraged to modify the designs and share what they make with each other through the Robotical App Store. Figure 11. Robotical Source: Robotical 13

14 Wedding Planner: Wedding Planner is an online wedding-planning platform that helps couples organize their wedding by providing free planning tools alongside integrated supplier recommendations and inspirational ideas. Through the portal, users can view suppliers prices and availability, along with reviews and smart recommendations. Figure 12. Wedding Planner Source: WeddingPlanner.co.uk TrueStart is an accelerator that focuses on startups that create retail, e-commerce and in-store technologies. TrueStart TrueStart is an accelerator that focuses on startups that create retail, e- commerce and in-store technologies. The accelerator is a subsidiary of True Capital, a private equity and VC firm specializing in seed-stage startups. Figure 13. TrueStart Source: TrueStart.co.uk Participating startups in TrueStart s program receive support in the form of: Seed funding Access to the team s global retail and consumer networks Mentorship Legal and accounting services Office space 14

15 The TrueStart program runs twice a year, and investments range from 0 to 50,000 ( 58,538). In exchange for a 25,000 ( 29,269) investment, TrueStart asks for a 4.5% equity stake in a startup. In exchange for a 50,000 investment, it asks for a 9% stake. The accelerator also runs a yearround seed program through which it invests up to 750,000 ( 878,076) in various companies. Examples of startups currently participating in the TrueStart program include Blockverify and Quikkly. Blockverify uses blockchain technology to track products throughout the supply chain. Blockverify: Blockverify uses blockchain technology to track products throughout the supply chain. The technology assigns a unique code to a product, which can be tracked on a register and monitored at all stages, from production to the end consumer. This enables the identification of diverted products, stolen merchandise, fraudulent transactions and counterfeit goods. Blockverify is used to manage the supply chain of highvalue items, including pharmaceuticals, luxury goods, diamonds and electronics. Figure 14. Blockverify Source: Blockverify.io 15

16 Quikkly: Quikkly makes a smartphone-scannable barcode called Quikkly Tag that enables shoppers to land directly on the transactional web page for the specific product associated with the barcode. Quikkly Tag can be displayed in-store in close proximity to an item or on a billboard ad. Figure 15. Quikkly Source: QuikklyTags.com Other startups participating in the TrueStart program include Induo. Other startups participating in the TrueStart program include Induo, which we profiled in our report Profiling Induo, Offering Water-Repellent Cotton. Figure 16: Induo Source: Induo Accelerators and incubators offer different types of support to startups. London-Based Accelerators and Incubators JLAB and TrueStart are two examples of retail-focused accelerators based in London. Below, we provide a list of other London accelerators and then a list of London incubators. Accelerators and incubators offer different types of support to startups, which we describe in more depth in our report Accelerators & Incubators in London. 16

17 December 23, 2016 Figure 17. London Accelerators Name URL Brief Description Accelerator London Metropolitan University s accelerator, focused on information and communication technology and digital media Allianz X Builds insurance technology companies and helps them grow AngelsCube Investment-led accelerator helping founders build successful businesses Barclays Accelerator Fintech-focused accelerator BBC Worldwide Labs The BBC s worldwide digital media startup accelerator Bethnal Green Ventures An accelerator program that invests in and supports new ideas to help build solutions to social and environmental problems Capital One Growth Labs uk/ Helps fintech startups get access to Capital One s expertise and capabilities to develop and test their innovations Climate-KIC Accelerator The only EU acceleration program focused on climate impact by cleantech commercialization Collider Dedicated to marketing and advertising startups CyLon Europe s first cybersecurity accelerator Edtech UK Accelerator focused on the UK s edtech sector Emerge Education Edtech-focused accelerator for startups aiming to improve educational outcomes worldwide Entrepreneur First Supports engineers and computer scientists who are building world-class tech companies from scratch Fintech Innovation Lab: London on.co.uk Launched in 2012, the first fintech accelerator in London; focused on banking and insurance technology companies Innovation Lab BMW Group Financial Services startup accelerator Innovation Warehouse g/accelerator/ Community for entrepreneurs involved in highgrowth and high-impact startup businesses Innovify Ventures A program for tech startups to secure seed and angel funding L Marks Helps big businesses join the startup revolution and tap into the disruption happening in their industry Level39 evel39 Europe s largest accelerator for finance and retail technology startups 17

18 Name URL Brief Description MassChallenge UK uk Connects high-impact, early-stage startups with mentors, partners and investors, while providing free support during a three-month accelerator period Oxygen Accelerator One of Europe s most well-established tech accelerators Red Bull Amplifier A novel accelerator program for music startups Rise London Works in partnership with Barclays to offer startups an exclusive place to develop, collaborate, scale and innovate together Seedcamp Europe s leading pre-seed and seed-stage acceleration fund StartupBootcamp FinTech London Techstars London The Accelerator from the Young Foundation ccelerator/fintech-london/ /london-program/#1 g/ An accelerator focused on financial innovation The Techstars global ecosystem empowers entrepreneurs to bring new technologies to market Enables social ventures to scale up their impact in a sustainable manner The Bakery Where brands meet tech startups to get innovative technology to market more quickly The Sandpit A business builder for startups focused on marketing technology Wayra Telefónica s startup accelerator; helps the best entrepreneurs grow and build successful businesses Wells Fargo Startup Accelerator A hands-on program designed to advance startups that create solutions for enterprise customers inside and outside the financial industry Winton Labs Accelerator program for data-science startups Source: Tech.London 18

19 December 23, 2016 Figure 18. London Incubators Name URL Brief Description Breed Reply Advanced incubator for startups focused on the Internet of Things (IoT) in sectors such as fitness and wellness, healthcare, smart homes, manufacturing, transportation, and energy Cogniance Product-development partner to venturebacked startups, corporate innovation labs and VC firms EcoMachines Ventures Incubator focused on energy and industrial high-tech companies Healthbox An incubator focussed on healthcare innovation. Impact Hub An innovation lab, business iincubator and social enterprise community center. Launch22 Launch22 Pprovides on-demand mentoring, low-cost workspace and access to finance to early-stage entrepreneurs. London BioScience Innovation Centre London BioScience Innovation Centre is Aa hub providing laboratory and office facilities for biotech startups based in Central London. London City Incubator Helps early-stage, high-growth startup businesses prepare for investment. MeWwe360º Incubator A business incubator and venture fund for entrepreneurs in the creative industries. Project42 London-based hardware incubator. Red Bull Amplifier A novel accelerator programmeprogram for music startups. Sussex Innovation Centreroydon University of Sussex incubator focussed on supporting digital, tech and creative startups in Croydon. The Imperial Incubator echnology-transfer/incubator/ Imperial College London s startup incubator. Source: Tech.London 19

20 London is a leading startup hub globally and the top European center for startup development. London has excellent airport and train connectivity, and a strong track record of successful startup. Key Takeaways London is a leading startup hub globally and the top European center for startup development. The city ranks sixth in Startup Compass s 2015 Global Startup Ecosystem Ranking and first in Nesta s European Digital City Index Startups in London attract more investment and generate greater revenue than startups based in other European cities do. The main factors that make London a leading startup hub include: The strong presence of a number of industries: In particular, the city s large financial and creative sectors help startups access funding and networking opportunities. The presence of world-class universities and a favorable regulatory environment: Startups in London benefit from the skills and knowhow provided by top universities and their graduates, as well as from London s (and the UK s) business-friendly regulations. Access to markets and factors that encourage performance: London startups have better access to a large domestic market and to international markets than startups in many other cities do, and how they show faster growth compared with companies based elsewhere. Excellent nondigital infrastructure and an entrepreneurial culture: London has excellent airport and train connectivity, and a strong track record of successful startups, as identified by the European Digital City Index The index also identifies access to capital and skills as two favorable factors that make London a leading startup hub. Source: Shutterstock 20

21 Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: Hong Kong: China: John Mercer Senior Analyst Filippo Battaini Research Associate Hong Kong: 8th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: London: Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0) New York: 1359 Broadway, 9th Floor New York, NY Tel: FungGlobalRetailTech.com 21