London’s startup community is thriving off of the full scale of investors’ tolerance for risk

Thursday 17 March 2022 6:15 am

Commuters walk across London Bridge towards the City of London (Photo by Dan Kitwood / Getty Images)

Last month London celebrated yet another fintech triumph. PrimaryBid, a young company that provides retail investors with fair access to public markets, secured an impressive $ 190m of venture funding. The size of this Series C financing round, and the involvement of internationally renowned investors provided yet more validation that world-beating start-ups are increasingly being created in Europe. Or, in the case of fintech, right here in London.

Whatever your impression of tech start-ups and venture capital, there is much to celebrate in the case of PrimaryBid. Here is another London start-up receiving backing from international investors in order to address a global opportunity. Stories like this further cement our city’s status as a hotbed for technology with a uniquely global outlook. Such dominance was borne out in a recent KPMG report, which found that UK investment in fintechs grew sevenfold last year, with London attracting more funding than the rest of Europe, the Middle East and Africa (EMEA) combined.

There are many factors that put London first place among Europe’s tech ecosystems. Talent has always been readily available here, with several of the world’s leading universities in close proximity. And the government’s Seed Enterprise Investment Scheme, introduced in 2012 to provide world-leading tax breaks to investors backing early-stage startup businesses, kickstarted an unprecedented wave of innovation. Over the last decade, a community of founders, executives and engineers formed who experienced exponential growth and success. Those same winners are now recycling back into the ecosystem; joining, helping, and investing in the next generation of start-ups. London’s flywheel is unlikely to slow down any time soon.

It is therefore no coincidence that top Silicon Valley venture investors, seeing the number of European unicorns (tech companies valued at over $ 1bn) jump fivefold in the last few years, are setting up shop over here. The same also applies to the large investment funds that have turned their attention from public markets to Europe’s private start-ups.

Both groups are certainly welcome. But it’s not just these kinds of investors that build and sustain a world-leading start-up ecosystem. Most of these players are seeking to deploy multi-billion funds into de-risked growth-stage financing rounds; into late-stage companies such as Monzo, Revolut, and Checkout, which have achieved scale. Though helpful, these are not the make or break moments for disruptive tech businesses; it’s earlier fundraising rounds that remain hardest for start-ups. That’s where European VCs and angel investors with local knowledge have an edge, and can take informed risks that lead to outsized investment returns fueling lift-off within the ecosystem.

The good news is that all these pieces are coming together nicely. Risk and reward are aligning for investors at every stage. Early investors brave enough to back businesses still in their infancy are regularly reaping the benefits with bigger firms entering at later rounds and increasingly offering exits to those early investors. While later-stage investors have a healthy pipeline of opportunities here in the UK and Europe, so they can deploy funds and scale up our best start-ups into world-beaters.

Suffice to say, the London start-up ecosystem is in better shape than ever and long may it continue. We can look forward to plenty more success stories like PrimaryBid in the coming months and years.

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