Over the past decade, thousands of fast-growth startups have flourished in Britain. Now the founders of the UK’s biggest startups are telling that story in their own words
A decade ago, in the days before founders were the new rock stars, when co-working meant making a cappuccino last an entire morning in Starbucks and west London advertising execs found far-flung Shoreditch genuinely edgy, London’s digital entrepreneurs were less a community than a curiosity. Yes, a run of internet companies – from Skype to Betfair, from Lastminute to MoneySupermarket – had broken through. But these were outliers.
Since 2008, according to data compiled byDealroom.co, the UK has created 60 unicorns (tech companies valued at $1bn or more) – 35 per cent of the 169 created across Europe and Israel. In the past three years, the UK has created more unicorns (25) than France, Germany, the Netherlands and Sweden combined (19). And London has produced 23 unicorns with a combined value of $132bn, compared with Berlin’s eight, worth $32bn. Here, WIRED speaks to the founders, operators and investors who created the world’s third most significant tech ecosystem.
I. “An epochal moment”
In 2009, eBay sold a 65 per cent stake in Skype – most of whose management, product, marketing and business development was based in London – for $1.9 billion (£1.2 billion, at historic exchange rates). The acquisition was led by the private equity firm Silver Lake Partners, alongside Silicon Valley VC Andreessen Horowitz, the Canadian Pension Plan Investment Board and Skype co-founder Niklas Zennström’s own fledgling London-based VC firm Atomico. Skype was founded seven years earlier by Zennström, a Swede, and Janus Friis, from Denmark, and had been acquired by eBay in 2005. The acquisition wasn’t a success for either party.
Niklas Zennström, co-founder of Skype, and CEO and founding partner at Atomico: “We sold Skype to eBay in 2005, and a few years in, I guess eBay wanted to be more focused on e-commerce and payments and my interpretation of their view was that [Skype] wasn’t a great strategic fit anymore. I certainly still believed in the bigger vision. Until we’d sold the company, we always had this vision that Skype would be a really big company, a long-term category winner. So we were quite keen to see how we could get involved with it again. And, of course, we were also emotionally attached to the company. We thought there was something to fight for. We tried to form a consortium and get funding from buyout funds, but that wasn’t very successful. And then Silver Lake managed to put together a really compelling offer. They were smart enough to go to Andreessen Horowitz to get them on board. And so we decided to join up with them.”
Saul Klein, co-founder of early stage VC firm LocalGlobe and former VP of marketing and e-commerce at Skype: “For me the fact that Skype was an agglomeration of Estonia, Sweden, Denmark and London – we had our office in Soho – meant there was this idea that the European tech and internet scene was born then. What was interesting about [the 2009 acquisition] was that even though eBay had acquired this asset for $2.6 billion, the fact that a consortium was able to spin it out of eBay and then say ‘actually there’s something even bigger here potentially’ – that was an epochal moment.”
Zennström: “When we came in together with Silver Lake and Andreessen Horowitz, I think we turbo-charged the company. We took it from a small subsidiary to a company with a very active board, who wanted to focus on growth. In that way the transaction had significance, because maybe if it hadn’t happened, then it could have been that Skype would have been a much more anonymous company.”
Brent Hoberman, co-founder of Lastminute, Founders Forum, Founders Factory and Firstminute Capital: “Alumni networks are really important – what Skype did was they attracted great talent, and that talent has gone on to do lots of critical things in tech and in London. If you look for example at TransferWise, [its co-founder] Taavet Hinrikus was at Skype – those sorts of stories, and there are many, were really important.”
Reshma Sohoni, co-founder of Seedcamp and early investor in TransferWise: “We used to do videos of our ‘Seedcamp Week’ events, and we did a whole one on Skype talent that was leaving and becoming operators in the next generation of businesses or entrepreneurs in their own right. You really felt there was serious talent coming out of Skype.”
Taavet Hinrikus, chairman and co-founder TransferWise, and first employee at Skype: “Skype showed there can be new, not previously imagined, ways of solving old problems. Who in 1990 would have thought you could bring the price of international calls down to zero? Sometimes you have to start with a totally new technology, rather than building on old infrastructure, to make a 10x better experience. When we started Skype, computers didn’t come with microphones and internet speeds were barely fast enough to support voice calls. We were putting trust in a new world of tech. Seeing that process through helped us figure out the potential for TransferWise today.”
II. “Suddenly it became acceptable to start founding companies”
Skype went on to become much bigger and was eventually acquired by Microsoft for $8.5 billion in 2011. Meanwhile, the so-called Skype Mafia of alumni added accelerant to London’s technology scene, akin to the PayPal Mafia’s influence on the Valley. However, back in 2009, London’s ecosystem was, for the most part, still nascent.
Saul Klein, then a general partner at Index Ventures: “When everyone was dancing on the grave of the internet after the bubble, Index had gone long on the consumer internet and invested in Skype, LOVEFiLM, King and ASOS – at the time all of these were contrarian investments. But what became apparent, every year, was that, if in the early 2000s, you’d see one or two of these entrepreneurs a year, by the end of the decade, you’d see one or two a month.”
Zennström: “By 2009, we already started to see founders who were building companies with bigger ambitions, but I would say that it was still very early days. What we didn’t have was a lot of experience around.”
Marsh: “It felt like what we were trying to do was turn over a lot of stones to find that steely blue-eyed triple-A entrepreneur.”
Sohoni: “You just had founders throwing darts randomly at the dartboard.”
III. “We had to have a golf umbrella over our servers”
It wasn’t just high-quality entrepreneurs who were thin on the ground ten years ago. Long before co-working spaces were a thing, one of the big challenges for any bootstrapped startup was how to find affordable office space and swerve the special hell of starting a business in a co-founder’s kitchen.
Jess Butcher, co-founder of Blippar and startup Tick: “We didn’t really have any support back then. There simply weren’t events, accelerators, networks. And it felt quite lonely. We weren’t tapped into a network of lots of other startups, there was no way for us really to find out what other businesses were up and coming at around that time.”
Sarah Wood, co-founder and chair of Unruly: “Before WeWork or Second Home or any of the amazing spaces you see now, there was the Truman Brewery on Brick Lane, which was a fantastic rambling space that had very flexible rental arrangements. But even that was too expensive for us. So I leafleted the pigeonholes for all the offices to see if anyone had any space. Wonderfully, someone responded.”
Butcher: “We were pitching to an outdoor agency when we saw that they had a spare meeting room. So we kind of bartered and managed to wangle ourselves the space, which had enough desk room for about seven or eight people. I think we grew to 23 in that space.”
Wood: “When we started, we had to buy actual servers, put them in a cupboard, and the roof was leaking so we had to have a golf umbrella over them.”
Andrew Mullinger, co-founder of Funding Circle: “We didn’t want to work from home anymore so we decided to get an easyOffice. It was on Hanover Square, but it was a broom cupboard and it didn’t have any daylight. There’s a picture of us in it, and we’re literally banging elbows. And as it happened, next door to us were the guys setting up onefinestay. Greg [Marsh] and [co-founder] Tim Davey were like super top-secret about everything and wouldn’t tell us what they were doing. But the room had these little thin walls and you could hear everything anyway.”
Marsh: “We could only fit three desks in our room by putting them at an angle. But it was central, and I liked to put ‘Hanover Square, Mayfair’ on our letterhead at that point when we were trying to sound posh, writing to our first set of onefinestay homeowners.”
IV. Mr Cameron Goes to Shoreditch
In April 2010, luxury Swiss conglomerate Richmont bought a majority stake in west London-based luxury e-tailor NET-A-APORTER, securing their position with £225 million, and keeping its founder, Natalie Massenet on as executive chair. The deal proved UK tech firms, if cultivated, could attract major international investment. In November that year, Prime Minister David Cameron visited the Truman Brewery in east London and gave a speech on his plans for Tech City, the name given to the area’s tech cluster.
While the PM’s visit provoked a mild backlash from some Silicon Roundabout veterans, it also led to a raft of widely praised policy initiatives. The spark for Cameron’s visit had been created a couple of years earlier by Matt Biddulph, then CTO at Dopplr. In 2008, Biddulph was based in Moo Studios, which overlooked Old Street roundabout, near many of London’s early internet startups – and he coined the term “Silicon Roundabout”. Biddulph mentioned it to a Financial Times journalist, who showed interest, so he “cobbled together” a map of the 15 companies he knew of in the area.
Wood: “The defining moment – and I’m not just saying this – was the WIRED article on Silicon Roundabout [published in January 2010, compiled by researcher Georgina Voss, detailing 85 firms in the vicinity]. I remember sitting in my kitchen reading it and nearly falling out of my chair. As soon as I opened up the map, I was looking at it, going: ‘Where’s Unruly? Why aren’t we on it?’ And then I found us right on the eastern front. The map hardly went far east enough for us, but it just did.”
Matt Webb, then co-founder and CEO of design consultancy BERG: “BERG [which was on the map] had a small amount of early success, and I got called from No 10 [Downing Street]. They were like: ‘We’re doing a trade mission to India. You can’t tell anyone about it. We want to make sure there’s a couple of small businesses there, because so far it’s all the big folks.’ And I remember I wasn’t going to go. But then I had a conversation with my girlfriend, now my wife, and my cousin, and they were like: ‘Matt, every time you have more than one beer inside you, you start complaining about lack of government support for small businesses. Here’s your chance to go and say something near people who can actually do something about it’. So I was like, I will go. What I’ll do is I’ll think of one thing I want to talk about and I’ll just say it to every person I meet. That [thing] was there’s something going on in east London.”
Rohan Silva, senior adviser to David Cameron and now co-founder of Second Home: “It was the first big trip we’d done with the prime minister – summer 2010. One of the startup founders we ended up taking was Matt Webb. On the last night, the whole delegation was getting pissed, and he came up and said: ‘By the way, you know there’s something really interesting going on in east London around tech?’ And I said: ‘I didn’t actually’.”
Webb: “The bit I remember was talking with Rohan and I think he’d brought in [then cabinet minister] David Willetts at that point. And I was describing what was happening, and my evidence for what was going on in east London was the WIRED map. Then, on the plane on the way back from India – it’s this chartered 747, but it feels a bit like a kind of a flying cocktail party – and that is where I think things were beginning to click for Rohan about what he wanted to do.”
Silva: “So Matt said go and check it out. And so I went and saw Richard Moross at Moo, Glenn Shoosmith at BookingBug and Ian Hogarth at SongKick, and I was really just blown away by that feeling of energy. In talking to them it was clear there were a few issues. One was that no one knew this cluster existed and that mattered to them because they were struggling to be taken seriously by investors. The second thing was that the scene was quite disparate and there wasn’t a place for everyone to come together. And third, there was a whole set of policy gripes that were real, like a chronic shortage of startup capital, it was impossible to get access to government contracts, share options were taxed to smithereens and so on… So in the runup to the Autumn Statement, I said to the Prime Minister: ‘By the way, I think there’s a good way of kind of banging the drum for this stuff which is to support a cluster in east London around Silicon Roundabout’ – and I included the Olympic Park, just to kind of get him excited. And he was like ‘Sure’. And I said: ‘By the way, if we do some of this stuff, we can go to east London and announce it properly there.’”
Silva: “Nothing we ever did for the Prime Minister scared the security guys as much as the speech at the Truman Brewery.”
Wood: “When all the bigwigs poured out of the Truman Brewery, I was stood next to the door handing out business cards and the team were stood in front of them with their cushions. Half the people thought we’d sponsored the event, and the other half, including David Cameron’s security detail, thought we were picketing it.”
Silva: “We were still fighting to get through the changes on angel investment and government procurement, so I’d had Glenn Shoosmith and Steve Hardman get up and basically heckle the prime minister. And it was all so that afterwards, in the car on the way back, I could say to him: ‘They had a good point, didn’t they?’”
Wood: “That was the first moment the area was under the spotlight from a political perspective. After that, you could see bigger businesses starting to take an interest in the area, the smaller startups starting to scale up – there was us, Moo, Mind Candy, and dozens of scaling business – and the sense of community grew from there.”
Richard Moross, founder and CEO of Moo: “Shining a light on an industry that may have been perceived as risky, or niche, was very helpful. Legitimising it as a career choice for people who would otherwise have gone into banking or something else is great. Being able to give early employees equity was very helpful.”
Wood: “In a sense, our decision to ‘picket’ the event, and make our presence felt was a statement – there are people here already! There are digital natives already working in Shoreditch and have been since the 1990s.”
Divinia Knowles, former president, CFO and COO at Mind Candy, now an executive coach and startup adviser: “There was a startup community before [No 10] got involved and I still to this day question whether – and, retrospectively, I know they’ve done some good stuff – the startup community would have just grown there itself, because people were aware that Shoreditch was quite an interesting place to be based and it’s close to the City, and all the rest of it. And the rent there was very reasonable at the time, whereas now it’s a joke. So I just remember being incredibly sceptical about what they were going to do and whether it wouldn’t sort of make it all a bit uncool.”
Martha Lane Fox, co-founder of Lastminute, board director at Twitter, founder of Doteveryone.org.uk: “It’s galling for the people who were at it, actually building stuff, but I’d take the win. Sometimes what government’s good at is helping build momentum. You can see the danger now of having no real technical leadership at the top of the political class.”
V. “Amazon is a really, really tough negotiator”
In 2011, Amazon, already a major shareholder, acquired LOVEFiLM, one of London tech’s crown jewels, for $317 million (“close to” £200 million). Against a backdrop of the inexorable rise of Netflix in the US, LOVEFiLM had begun to pivot from a DVD subscription business into a digital operation. But it would need far deeper pockets to stay the course …
Saul Klein, founder of Video Island, and later co-founder at LOVEFiLM: “By the time LOVEFiLM was acquired by Amazon, it was an agglomeration of five or six different businesses. We were all very aware of Netflix, when we started these businesses and we all knew that ultimately if [early market leader] Blockbuster didn’t end up figuring out how to go online, then Netflix likely would.”
Klein: “Once all of these little companies like Video Island, ScreenSelect and LOVEFiLM had all got together, then the question was: ‘How do you compete with Netflix or Amazon?’ In those days, Netflix was not in the UK or Europe. There was a big investment that everyone was going to have to make migrating from DVDs to streaming. To support that investment – and it became clear that over time that you were going to have to compete with original content too – you’re staring at a pretty scary long-term balance sheet as an independent private company.”
Calver: “We put the foot to the floor, raised more money and then really accelerated growth. At that stage we’d had an approach from Amazon.”
Klein: “We ended up acquiring Amazon’s business in Germany and the UK, and as a result they became a shareholder in LOVEFiLM, which was on one level amazing because we had Amazon on the board, but ultimately it made staying independent or going public quite challenging because Amazon owned a decent share of the business.”
Dharmash Mistry, investor and board member at LOVEFiLM, now at Lakestar Ventures: “It got to a certain point where it looked like to scale this business was going to require significantly more money. So we were working through whether a) we should sell the business to one of the big players, or b) we should IPO it. Amazon clearly had their own objective and decided that they didn’t want LOVEFiLM to IPO.”
Calver: “As we really began to accelerate our digital capabilities and our digital content library, then naturally we became more and more attractive [for Amazon]. It gelled well with what Amazon were trying to do.”
Mistry: “What Amazon did – and Amazon is a really, really tough negotiator – was they hired an army of lawyers, and they worked through every clause in every way that could stop us IPO-ing. And they found a loophole, where all shareholders above 20% would have to approve the change of articles needed to IPO. So they started buying secondary shares off all the small shareholders at really inflated prices to make sure they got over the threshold comfortably. And ultimately Amazon got enough of the shares to block the listing.”
VI. “If you’re a VC, a local kebab shop is not your idea of a sexy industry”
By the time Deliveroo was founded in 2013, there was a feeling among some investors that with the success of Just Eat, which went on to IPO a year later, the “food tech” market was saturated. Yet Just Eat had initially been turned down by multiple VCs. As it turned out, not only was food tech anything but done, but London – with its density of restaurants and hard-working professionals – was to emerge as a global hub in the space. In 2017 – a mere four years after it was launched – Deliveroo raised a Series F investment round of $480 million, valuing the company at $2 billion (£1.48 billion).
David Buttress, co-founder and ex-CEO of Just Eat: “Food tech, as it’s now called, has become a sexy thing, but when we started Just Eat back in 2006, I can tell you barely a venture capitalist would have heard of it and probably wouldn’t want to have even met us because what we really were was an online platform for local takeaway restaurants. It was probably, at the time, the most unsexy business in the world, because if you’re a VC, a local kebab shop is not your idea of a sexy industry to be involved in.”
Rory Stirling, who invested in London-based meal-kit startup Gousto: “The biggest regret for me – and I’m sure a lot of other people in VC – was Deliveroo, who I met in 2013. Just Eat was [on the path to] IPO, and everyone thought that market was done. No one could understand why you’d want to build your own network of delivery bikes and logistics, when you’ve got a beautiful online business like Just Eat that doesn’t need to do any of that. Everyone thought [Deliveroo] was for posh high-disposable-income people in Kensington and Chelsea, because that’s where Deliveroo started.”
Hoberman: “I think the first people to do food delivery-tech in London, was probably us at Lastminute.com. We did it in 2001. I bought a little company called Urbanbite, because I believed it would be much more convenient – once narrowband shifted to broadband – because there was no way people would pick up their phones and order food. It was sold after I left [Lastminute.com], foolishly, as it would have been pretty profitable.”
Stirling: “I still remember Will very clearly coming into the office. He had an air of confidence that what he was doing just made a ton of sense, and he didn’t really understand why other people didn’t understand that.”
VII. “I just got a cold email in my Gmail inbox saying: Larry would like to see you”
In 2014, DeepMind was acquired by Google for $500 million. It was a landmark moment as it firmly established the UK, with its world class universities, as a centre of gravity for artificial intelligence. That acquisition proved to be the first and most high-profile of a Silicon Valley shopping spree of UK-based AI companies that included SwiftKey (acquired by Microsoft), Evi (Amazon), Vocal IQ (Apple) and Magic Pony (Twitter). Three years after Google swooped for DeepMind, another London AI outfit, Improbable, raised half a billion dollars from SoftBank.
Silva: “I met [DeepMind’s] Demis in New York in September 2013. I’d never heard of him or DeepMind. I was just blown away by him. And we became friends. He was just starting to think about two big challenges. He loved the research side of the company, but he knew he had to build a revenue-generating business. The second challenge was: ‘How do we start to talk a bit more about what we’re doing without scaring people about Terminators and Skynets?’ We used to meet pretty regularly to just talk this stuff through. We then also talked about fundraising – and Demis made it clear he’d never had any joy with any British investors.”
Demis Hassabis, co-founder and CEO of DeepMind: “I just knew from my own background – I’d done a bit of VC fundraising before – what UK and European VCs were like. I felt UK VCs were looking for a 10x return in three to five years. Whereas I’d heard this rumour of this golden land where basically people go for a 100x return, but they don’t mind if it takes ten years or 15 years. So that’s why I ended up going to Peter Thiel, and then, later, Elon Musk. They were people who had made their own money through tech themselves, and were saying the right things about long-term bets and big outsized bets.”
Silva: “Then, suddenly, Demis just went dark on me. I sent him a few emails and nothing. I heard nothing at all. And then in mid-January, Demis sent me a message: ‘Sorry, I’ve been quiet, I’ve got some big news.’”
So that’s what attracted me to Google. Interestingly we were under the radar, but somehow Larry [Page] found out about us through a mutual friend. I just got a cold email out of the blue in my Gmail inbox saying: ‘Larry would like to see you. Can you come to the US?’ You don’t really turn down an invite like that. That was early 2013, but it took a year for us to discuss it. It was never a question about money, it was about what the thing would look like afterwards in terms of independence and control over the research programme. The reason I sold is because I wanted to accelerate the research programme – and that was the best way of doing that.”
Zennström: “DeepMind had great importance because it demonstrated that we had significant deep tech and AI competence here in the UK and in London. This is a really new era. I would say that those two companies and the validations they’ve had – the acquisition of DeepMind and the investment that Improbable got – are really validations of that deep tech trend – and that unleashed, just like Skype did maybe in the early days, a lot of entrepreneurs who are much more scientists who build real tech companies.”
VIII. “We still haven’t built companies of the scale you see in Silicon Valley”
In 2015, Funding Circle – one of the superstars of London’s booming fintech scene – raised $150 million in a rapid expansion round led by Yuri Milner’s DST Global, backers of Facebook, Airbnb and WhatsApp. Three years later the peer-to-peer loans marketplace for small businesses, which was hatched in a pub by three friends in the aftermath of the financial crisis, went public at a value of $2 billion (£1.5 billion). Here two of its co-founders recall how they got started.
Samir Desai, co-founder and CEO of Funding Circle: “The idea was quite simple: small businesses are under-served by banks. It’s quite a small part of what they do. But it’s a quite big problem for society because small businesses create jobs and they can’t get access to funding. And I just thought: could you bring all these disaffected parties together? The biggest bit was understanding the regulatory situation.”
Desai: “Then we had a decision to make – whether to quit our jobs or not. [Co-founder] James [Meekings] quit his job the next day, then Andrew and I arranged to quit the day after that at exactly the same time. And then we were off.”
Mullinger: “The first investor to commit was Samir’s old boss, Alan Morgan. He’s a bit of a godfather of fintech. Because he’d been mentoring us and giving us feedback, we didn’t want to ask him the question [straightaway]… But after many glasses of wine at the Slug and Lettuce, we said: ‘OK, but are you going to invest?’ You’re kind of a bit worried at that point, because obviously if he’d said no, you’d be like ‘Oh shit’.”
Alan Morgan, partner at MMC Ventures and angel investor: “I’m interested to hear they were on tenterhooks [that night]. They gave the impression of being quite jolly and expecting things to happen constructively.”
Desai: “To this day, I don’t know whether Alan just felt sorry for us.”
Mullinger: “Then we ended up getting introduced, via email, to John Moulton, the famous private equity guy. So we were like ‘Wow!’, and sent him the teaser, and he said ‘I’m interested’. We sent him the deck. Then he comes back: ‘Will do £100k. If you want more, I’ll have to come and do a proper look. John.’ We’d never met him [at the time]. So he’d invested £100k based on our business plan. The celebration was huge.”
[in total] and we put in about 10 per cent of it ourselves. I think people liked that.”
Mullinger: “By the time everything [was ready], the date that was best to launch was Friday 13th. But Samir’s a little bit superstitious – if you ever go to his desk, he’s always got little Buddhas around. So he was like: ‘There’s no way I’m launching this business on Friday 13th.’ So we ended up launching it technically the minute before – so the website went live at 11:59pm on Thursday 12th. I’d gone to bed. Then I woke up early, at half five or six, and looked at my phone – it was just full of things from Samir. At 12:45am our website had gone down.”
Desai: “I ended up staying up most of the night trying to fix it all, and eventually did, but not until midday the next day.”
IX. “Being number three in the biggest story of the 21st century is a good place for a small country to be in”
In 2017 and 2018, a succession of London-headquartered tech companies raised investment “mega-rounds” in excess of quarter of a billion dollars each, including TransferWise ($280 million), FarFetch ($397 million) and Deliveroo ($480 million). Farfetch’s investment came from China’s e-commerce giant JD.com, in a strategic partnership deal designed to drive the luxury fashion platform’s growth in the country. In September 2018, Farfetch floated on the New York Stock Exchange, valuing the company at $5.8 billion (£4.45 billion).
José Neves, founder and CEO of Farfetch: “By 2017-18, it was clear that Europe a) was able to create world class startups; b) was a very interesting market on its own; and c) was able to create global leaders. And that meant investors felt comfortable with [the idea] that they weren’t back when Farfetch started in 2008. It was then unthinkable that a London company started by me – a Portuguese entrepreneur – could venture outside of Europe, let alone go to China and IPO in the US.”
Sohoni: “We don’t necessarily have the ingredients here to build a Google search engine/ad business, or a Facebook social media business, but we do in verticals like financial services, health, fashion, and property. And those are standalone trillion-dollar markets.”
Neves: “I raised my first round of funding in 2010, and what has changed since then is access to American investors. It was very tough until recently to be taken seriously by an American investor – there was this perception that great tech businesses were only born in Silicon Valley. That’s changed.”
Klein: “My hope is that in ten years we’ll still be the number-three tech startup ecosystem in the world. I don’t see how we’d be number one because I don’t think the US and China are beatable. But being number three in the biggest story of the 21st century is a good place for a small country to be in.”
James Silver is author of Upscale: What it Takes to Scale a Startup. By the People Who’ve Done it
This article was first published on Wired.co.uk on Wednesday 24th April 2019.