LONDON // What do you do when you realise that you have accidentally become a management consultant? Matt Clifford and Alice Bentinck found themselves in this position and were not prepared to stick with it.
“We had become accidental management consultants because the culture of careers and ambitions in London is around financial services in the City. We wanted to change that,” says Mr Clifford.
So they started Entrepreneur First (EF) four years ago, flinging themselves into the vibrant but ultra-competitive start-up scene in London.
Their creation is one of a new breed of companies in the capital that gives the initial hand-up to entrepreneurs with start-up ideas that might just next be the next big thing.
Nearly 40,000 tech companies are now headquartered in London, and the UK capital is becoming something of a force to be recognised in the global digital world.
Tech firms in the capital secured almost US$1.4 billion in venture capital financing in 2014, double the figure for 2013 and 10 times that in 2010, according to figures published by TechCityUK, a publicly funded body that promotes the capital’s tech scene.
A recent report ranked London second in the world for supporting innovation and entrepreneurship, behind New York and ahead of Helsinki.
Recently, a lot of attention has focused on the “accelerators”, the companies that collect money from so-called angel investors and find the ideas and people to invest it in, in return for a small stake.
Mr Clifford calls EF, the accelerator he and Ms Bentinck founded “the missing institution in the eco-system”.
“It’s the place that people come to find their co-founder, to work on the most ambitious idea they have,” he says.
What makes EF different from other accelerators is that it tries to find individuals with the right talents and determination to become tech entrepreneurs, rather than trying to find the right ideas.
“We take individuals and try to grow them. We scour Europe for the top talent and our selection is purely based on talent,” Mr Clifford says.
Successful entrepreneurs will join an EF programme for six months and receive a monthly wage of £1,100 (Dh6,137) for the first three months, followed by a £10,000 investment in the company in return for an 8 per cent stake. About 30 per cent of entrepreneurs entering the programme drop out without creating a company.
“People thought that it [choosing the individuals, rather than the idea] was a stupid way to fund this but we have built nearly 50 companies, with a combined value of $250 million and raised nearly $60m of external funding,” Mr Clifford says.
But for EF’s founders, Mr Clifford and Ms Bentinck, there is only one company that they aim to compete with – Silicon Valley’s Y Combinator.
Y Combinator, which has had success in investing in tech start-ups such as in Airbnb, Dropbox and Reddit at early stages, is the one that EF aims to emulate – or beat.
One big impediment to achieving this, however, is the UK government’s increasing crack-down on immigration from non-European countries, which the tech world is fighting against. Other European countries have similar problems when it comes to accepting great entrepreneurs with great ideas from locations outside the continent.
Talking to people in London, it is easy to fall into the trap of thinking that the British capital is the most vibrant European start-up scene.
“London can’t win over an entire continent or country alone, but on a per capita based start-up scene, London certainly competes strongly with San Francisco and beats Berlin and all other European cities,” says Reshma Sohoni, 38 and a US national who is a partner and co-founder of Seedcamp.
Seedcamp was started in 2007 and is now tech establishment. It refuses to call itself an accelerator saying that it offers much more support to start-ups than a traditional accelerator, although its role has always been to invest in first-time entrepreneurs. Last year it launched a €20m (Dh82.3m) fund and the firm is considered the first-round backer of choice for the most ambitions start-ups across Europe.
Ms Sohoni points out that London has an advantage in that it is an old city.
“Many industries that are being shaken up by tech are present here, including advertising, fashion, finance, real estate and entertainment. London has long been a base for all these sectors.
“The time zone is also a huge benefit and there is a large amount of capital here. Not an amount that can compete with the US and Silicon Valley, but enough to be a huge draw for start-ups across Europe. London can often be seen as a gateway to the US for SMEs as they scale and look at new markets.”
Seedcamp’s success has been in sectors like fintech – tech for the financial services industry – and proptech (the real estate sector) where Europe has established and mature industries that are looking for solutions from technology.
Transferwise, a peer-to-peer money transfer site, is one of Seedcamp’s most successful companies. It joined four years ago and is now valued at more than $1bn.
However, Ms Sohoni has concerns about the huge number of accelerators chasing ideas in London now, saying she believes too many are badly undifferentiated in a crowded space.
Aiming to avoid that risk, Oxygen Accelerator bills itself as one of Europe’s most established accelerators, having invested in 46 start-ups since it began in Birmingham in 2009.
Oxygen has recently moved to London and Anthony Catt, 26, the managing director, is keen to make sure that he differentiates himself from the crowd by finding new ideas and entrepreneurs from as wide a base as possible.
Increasingly, governments (both British and foreign) are talking to the likes of Oxygen about taking some of the start-ups they have identified and bringing them to scale, with investment from public funds.
Mr Catt says the intersection of public and private investment in start-ups is an area he expects to grow sharply.
He has also been involved with @techrefugees, a tech community response to the European migrant crisis.
So what of the other European cities? Berlin is a magnet for worldwide entrepreneurs and has been hyped a lot, even though it produces 88 per cent fewer start-ups than Silicon Valley.
One company dominates the start-up scene in Berlin and is also setting the pace across the continent. Rocket Internet, which specialises in cloning business models to untapped markets, was created by three brothers – Oliver, Marc and Alexander Samwer – and had a €6.5bn initial public offering in October 2014, one of the largest in Europe. Their start-up factory is now trying to find the hottest ideas in Asia and promises a new online business every three months.
Rocket Internet is also active in the Middle East having launched a joint venture called the Middle East Internet Group (Meig) in 2013 with MTN, the South African telecoms group. Meig has launched a number of ventures – the e-commerce store Wadi.com, the beauty booking service Vaniday.com and the online marketplace Kaymu.com – as part of plans to expand in the region.
Meanwhile, the Paris start-up scene is a lot more focused on business-to-business enterprises. However, the French entrepreneur landscape is considered to be less international than those of other European cities and also dogged by a complex tax system that discourages wealth and entrepreneurship.
When it comes to tax advantages and encouraging entrepreneurship, the UK’s Conservative government is firmly backing TechCity and its UK-wide push for the digital economy.
But it is still the availability of capital and the tech community here in London, rather than government support, that is the reason so many entrepreneurs want to go there to try to make it.
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