London’s race to the fintech frontier puts it in pole position for attracting start-ups

The City of London is keen to attract the next wave of fintech start-ups (Shutterstock / ZGPhotography)
The City of London is keen to attract the next wave of fintech start-ups (Shutterstock / ZGPhotography)

London’s reputation as a financial centre has been under siege this year, with a dearth of company flotations and challenges from Paris and Amsterdam to its crown as Europe’s main venue for international business.

But a survey into an important niche in the market has revealed that the capital retains its ability to shine in the competitive and fast-growing world of start-up companies, especially with fintech firms. It shows that London is the region’s most successful place for employees of so called ‘unicorn’ companies -- privately-held or recently floated firms with a valuation of over $1 billion -- to establish new start-ups.

It comes as a promising insight into an area known globally for is high growth potential, just as politicians from Westminster to City hall are looking for ways to attract cutting edge businesses. Attracting young, innovative firms will help fight the looming recession and open the way for a fast recovery.

But International competition, especially in fintech, is fierce.  The survey -- undertaken by US-based global venture fund Accel and Dealroom, the specialist data provider on start-ups -- offers hopes that the City’s ambition to extend its credentials as a major market centre to the new financial frontier are well placed.

According to the findings, 27 London-founded unicorns produced the most new ventures at 168, with most of them also established in the capital, at 69%. Paris had 125 start-up from founders of 22 unicorns, although a greater proportion of them were set up in French capital, at 75%. In Berlin, 24 local unicorns generated 138 even newer ventures, with 70% of them staying there.

The survey also covered Israel alongside Europe. In Tel Aviv, 27 unicorns created 108 fledgling firms.

Most of the activity comes in fintech , an innovative area that also plays to London’s traditional strengths. The survey listed London names among  the top “founder factories” producing another wave of start ups.  Wise, the money transfer company, had 11; Revolut, the banking services app which offers fee-free currency exchange, produced 10; although Stockholm’s Klarna, the payment app, came top with 15.

Harry Nelis, Partner at Accel, said: “There’s now a wealth of strong founders and operators building innovative companies that have experienced the start-up journey before and have the knowledge to create global success stories.”

Competition to attract and retain the top talent will be intense, with governments keen to fight their way out of the wider economic downturn with help from high-growth and dynamic companies.

The chief executive and co-founder of GoCardless, Hiroki Takeuchi, told the Standard that “many alumni” from the Islington-based payment services provider had gone on to “start their own companies, taking the experience they gained and learning from all the mistakes we made in the early days.”

He added: “It’s great to see these figures and it’s a validation of the maturing tech ecosystem in London ... But I wouldn’t necessarily say this is unique to London -- it’d be interesting to see how we compare to, say, San Francisco.”

Politicians in Westminster and City Hall have struggled to boost London’s wider tech scene in line with their ambitions. Attempts to turn Old Street’s famed Silicon Roundabout cluster of cutting-edge firms into a bigger part of the capital’s economy, and toward the scale of Silcon Valley in the US, have had only patchy success.

Nonetheless, the capital has its established fintech success stories. Among them, Revolut and Wise, scored most highly in Accel’s study, generating 23 and 19 more start-ups respectively.

And there are moves to open the way for more to follow. The City of London is setting up the private-sector led Centre for Finance, Innovation and Technology, or CFIT.  which aims to “identify opportunities” and address “barriers to growth”. It already has £5.5 million in seed funding and a “playbook” outlining how it will “support the creation of high-income tech-based employment nationwide, it will enable firms to achieve global scale”.