Four fintech lessons from Silicon Valley to London
I had an eye-opening trip to San Francisco last week, as part of a UKTI mission to showcase the Best of British in fintech. While there, we were fortunate enough to meet with some of the most influential organisations on the West Coast, to educate them on the burgeoning fintech market here in the UK and learn about innovation and best practice from our US counterparts.
Our reputation
The first thing that struck me was that the UK is not perceived as a fintech innovator. Contrary to the excitement and buzz we feel over here in London, the vast majority of those I met saw our industry as followers rather than leaders.
Yet although Silicon Valley has an extremely advanced ecosystem geared towards breeding innovative and disruptive companies, I don’t believe the rest of the world follows their lead all the time. And I’m pleased to report that we may have made a dent in these perceptions, with some of the businesses that we have helped raise capital for through my investment platform, VentureFounders, catching their eye.
Indeed, equity crowdfunding – a major source of funding to support innovation – was pioneered here in the UK. As our own startup market continues to gain momentum, it is important that we now establish the UK as a global leader in innovation and disruption in order to help our businesses thrive in overseas markets.
Is the bubble deflating?
I wouldn’t say that the bubble is about to burst on the startup funding scene in the US, but some of the heat has certainly come out of the market, causing it to deflate a little – and valuations are on a downward trajectory. VCs are still investing, but seem to be more cautious with their spending. This will likely impact the London market, albeit on a smaller scale, as we’ve never hit the dizzying heights of US tech valuations.
A Funding Culture
Although the VCs may be slowing down on their investment spree, when they back a company, they really do back it all the way. A recent report by EY for the Treasury highlighted that, although the UK and Californian fintech markets are a similar size, California attracted £3.6bn of investment in 2015, compared to just £542m in the UK. The general culture in the Valley is that, if an investor believes in your idea, they will give you all the resources needed to get it off the ground.
Not only are there significantly more VCs operating on the West Coast than here in London, but startups and high-growth businesses are also supported by banks and other institutions specifically geared to their needs. The UK, in comparison, has a highly fragmented funding culture. We could learn a lot from our American cousins in this regard.
Giving back
Once an entrepreneur has been successful in Silicon Valley, they don’t forget their roots. A lot of the large investors backing this new wave of innovation are successful entrepreneurs who not only invest capital, but also give businesses their time and expertise. I was amazed by the opportunities offered to some of the companies in the incubator programmes and some of the skill sets and expertise within the VC community.
There are many things Silicon Valley does well to support entrepreneurs, but it is the overall attitude and the belief that good businesses should have everything they need that really drives the market forwards. The UK is making steps towards such a culture. We still, however, have a long way to go before we can rival the very unique ecosystem nurturing startups in San Francisco.