Imagine my surprise this morning when I discovered the great and the good of London’s tech scene are obsessed with unicorns. Assembled at the Shard for the big launch event to mark the start of London Technology Week, everyone was talking about unicorns. Apparently, they are really important. Europe has a growing number of unicorns, but America still has the most. (Behind Narnia and Middle Earth, I presumed). Luckily, before I was able to wade into this debate from a position of near ignorance, I spotted some copies of a handy report littered around the room.
Unicorns, it turns out, are billion dollar tech companies. The phrase was first coined in 2013 by Aileen Lee of Cowboy Ventures, a firm specialising in providing seed-stage investment in tech firms. How many of these companies a region has is a good indicator of the strength of its tech economy and that economy’s ability to produce not just ‘start-ups’ (new tech companies) but ‘scale-ups’ (tech companies capable of significant growth).
In terms of start-ups, London is doing well. Research by Oxford Economics – commissioned to mark the fifth anniversary of the launch of the Tech City Initiative – has found that the number of technology firms in the capital has increased by 12,000 since 2010, an increase of 46% which has created nearly 30,000 new jobs. The London tech cluster now employs around 200,000 people and contributes £18bn a year in Gross Value Added (GVA).
The picture for UK ‘scale-ups’, by contrast, is more mixed. New research by GP Bullhound, a UK consultancy that advises technology firms on deal-making, reveals that whilst the US still has a lead over Europe in terms of both the total number of unicorns and the creation of new unicorns, the UK is playing an increasingly dominant role in creating European unicorns. Of Europe’s 40 unicorns, 17 are located in the UK (and eight of these have achieved their unicorn status in the past year). By contrast, the UK’s nearest rivals – Sweden and Germany – had only 6 and 4 tech companies worth a billion or more respectively. Many of these European unicorns are companies that readers will be familiar with: Skype, Supercell, King, Zoopla, Wonga, Transferwise, Rightmove, Just Eat, ASOS, and Spotify.
Unfortunately, Europe’s unicorns are much smaller than their US equivalents. The total valuation of all 40 European unicorns is an estimated $120bn, which sounds impressive until you learn that Facebook alone is worth $230bn and Apple is worth $737bn. Clearly, Europe needs to produce not just more unicorns but also much larger ones.
Whilst the story of Tech City has so far been told in terms of start-ups, the long-term success of this initiative will be judged as much on how many unicorns the UK produces and whether or not they compare to some of the US unicorns in terms of value. This will be the challenge to policy makers, entrepreneurs and investors during the next chapter of Tech City’s development.
James Ford is a Senior Consultant at PLMR, specialising in transport, environment and digital policy. He was formerly the Adviser to the Digital Chamber of Commerce at the London Chamber of Commerce and an aide to Mayor of London Boris Johnson.