Two More Things London Needs To Become Fintech Capital of the World
Bitcoin is the most fundamental innovation driving Fintech and I have already opined why London is emerging as the Bitcoin Capital of the world.
However Bitcoin and the Blockchain (and Sidechains) are the bottom of the tech stack. What matters is, who will build multi-$ billion enduring Fintech startups (which may or may not use Blockchain technology as part of their stack)?
Today, the global leaders in most categories are still American. For P2P Lending, think Lending Club and Prosper. For Crowdfunding, think Angel List and Kickstarter. Some great success stories are emerging out of London, but most of the big scores are still from America.
Most of the pieces are already in place for this to change in London – smart regulation, great angel tax incentives, big VCs moving in, some great ventures scaling fast, superb accelerators, a big market in Europe that is actually more unified than America when it comes to Financial Services and a natural place at the cross roads of Asia and America time zone wise, travel wise and culturally. However I see two more things that London needs in order to hit the big time:
1. Lead Angels looking for Unicorns, who create Angel List Syndicates.
2. An IPO market that attracts global investors.
Let me unpick those two points:
Lead Angels looking for Unicorns, who create Angel List Syndicates.
– Lead Angels. Ask any experienced entrepreneur what drives them most crazy about the fund raising process and you are likely to hear something like this:
“I wasted huge amounts of time pitching investors who will only follow another investor, but won’t take the lead.”
– Unicorns = big global winners valued in $ billions. Silicon Valley is a unicorn breeding ground. We are seeing more in Europe (Skype and ARM were the only unicorns we could reference for a long time). However the ambition level of most UK entrepreneurs and investors has been limited to “enough to get a vicarage and a fast car” (quote from Edmund Truell).
– Angel List Syndicates. These are still rare in Europe but they are changing the early stage funding game in Silicon Valley and will soon do so here. For background read yesterday’s post on Crowdfunding and, if you don’t already know Angel List, check it out. The big deal about Angel List is how they incentivize the Lead Investor.
An IPO market that attracts global investors
Today that means NYSE or NASDAQ. There is no reason why it should not be London. If you are an entrepreneur in middle America who succeeds in creating a unicorn, you:
- Raise your Seed round locally,
- Travel to Silicon Valley to raise big private money
- Travel to NY to do your IPO
London can do 1 and 2 locally, but the unicorn still jumps on Virgin Atlantic to go to NY for the IPO. The reason proudly European entrepreneurs go to NY for the IPO is the same reason that Willy Sutton robbed banks – it is where the money is. You need that money and you need the branding event in America.
If a London IPO means you only get UK or other European investors, it is doomed to be a minor exchange. There is no reason why US or Asian investors would not buy stocks on LSE. Hedge Funds and Family Offices (the two fastest moving pools of capital) are quite comfortable investing globally.
Investors don’t care which exchange they buy and sell on, as long as it is reputable and competitive (LSE clearly scores on both points) and the data is easily accessible. Making the data more accessible is the reason why I keep banging the XBRL drum).
