Last month CB Insights announced that the investment in US FinTech firms from venture capital, private equity and angels is on course to top $2.5 billion this year. According to the research, since 2008, just over $9 billion has been invested in Fintech firms across 1314 deals with the figures continuing to increase. Astoundingly, in the first half of 2013, more money was invested, in more deals, than in the whole of 2008. And of the five sub-sectors covered in the report, payments specialists have secured the most funding. In 2008 they accounted for 53% of all deals and a massive 70% of all dollars invested.
This got me thinking about what is happening on the other side of the pond.
In the UK, London is the centre of technology innovation with Tech City/ Silicon Roundabout at its heart. In 2008, there were around 15 media and high-tech companies in the Silicon Roundabout. The government got in involved in 2010 when David Cameron announced plans to help accelerate the growth of the hub with the UK Government's Tech City initiative. At the time there were 85 start-up companies in the area. By 2011, approximately 200 firms were occupying the area and today there are more than 500.
According to research from Ascendant the total investment in UK tech start-ups in 2012 reached nearly £1bn. This is nothing to be sniffed at and is a great achievement given the modest beginnings of the community back in 2008. However, the total value investment in all UK tech start-up investments in 2012 represents just over half of what U.S FinTech companies secured in 2013.
There are numerous reasons for the contrast such as cost of premises, wage expectations, living costs, etc . But I wonder whether there is another reason that hasn't been addressed.
London is the leading financial centre in the world. In a survey of 2,300 finance professionals by think-tank Z/Yen, London was judged the most competitive financial centre in the world, followed in the ranking by New York, Hong Kong and Singapore. The expertise and experience in London along with the infrastructure around the square mile makes it perfect for financial services innovation. However, quick audit of Tech City Insider, a directory of companies within London's TechCity, reveals that there are approx. 50 FinTech companies in a list of more than 500.
So only 10% of the companies in Tech City are financial services focussed. That doesn't sound like enough to me given the London's status as a financial centre. It raises the question as to whether the Government should be focusing on financial technology start-ups and working out how to create an environment in which these companies can thrive.
When David Cameron announced the Tech City initiative it was his intention to turn London into "a world-leading technology city to rival Silicon Valley." Rather than trying to emulate a rather unique macro-economic environment on the other side of the world I can't help think it would have made more sense to look closer to home.