We visited London with Aaltoes in August 2022 to learn about the leading fintech hub of the world and build connections with locals for the future. Our agenda consisted mostly of meeting organizations in the fintech space and some of the world’s biggest VCs that have their offices in London but included also a few other organizations. Here’s a brief overview of our schedule:
Key characteristics of the London startup scene
London is often referred to as the financial capital of Europe and in addition to the financial district in London City, the metropolis is littered with fintech startups adding to this image. As one of the most multicultural cities in Europe, startups don’t have a hard time attracting talent making London-based startups, especially in the early stages, quite attractive investments as the earlier you are, the more your core team gets evaluated by investors.
As we learned throughout our visits, The London scene isn’t characterized by fintech alone but is also known as Europe’s top hub for VC funding. The government has done its’ fair share in boosting this by launching support initiatives aimed to incentivize investors toward more investments, especially at the seed stage. The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) were commonly referred to throughout our trip as large reasons as to why the scene is very active in raising capital. The schemes allow for an investor to receive half of their investment back in tax refunds from the state. This practically means that the state is doubling every investment made into eligible companies, thus providing startups more funding with less equity given. On a conceptual level, the system is genius as it shifts the grant decision to professionals instead of governmental institutions not as familiar with early-stage investing.
Consisting of talented teams and having a solid support structure in place, London based startups raise funding at much better valuations than those in many other European hubs. As the scene is very vibrant and the local language favors Americans, the city is sometimes labeled as Europe’s gate to the United States. The differences in the fundraising landscape were already visible during our short visit as we encountered multiple, quite young teams building with solid financial backing. This is definitely something to keep in mind while looking at potential international hubs to expand to early on.
A week of meetings
Our first day consisted of meeting two interesting VC’s, NEA, one of the world’s oldest venture investors and Isomer Capital, a fund diversifying their investments between startups and other venture funds. Our discussions with both investors revolved around the key differences between the US and Europe. With both funds being active in either area, they would characterize European founders as much more practical and focused on the task at hand, while American founders would paint incredible ten-year visions. This trend had however started to change, at least in London with founders becoming less risk-averse allowing for more wild-sounding startup ideas to see the light of day and radically change our societies. Chris Wade, partner of Isomer Capital went on to add that Europeans are much more cost effective as opposed to Americans, thus shedding some light into why London based startups are raising supreme money compared to the rest of Europe. Being the most common first touchpoint to Europe for American investors, startups in London could potentially reap the benefits of both worlds, perception of cost effectiveness and high amounts of funding from US investors.
During Tuesday, we met up with 3 more VCs, Accel, Balderton Capital and 01Ventures as well as Meta and some local ES’s. This time we dove deeper into the specifics of the London startup-scene, especially with the VC-companies.
London isn’t only the financial capital of Europe but could very well be considered the talent capital as well. Most of this talent being foreign, the city carries a unique, global diversity in its population, making it increasingly easy for startups to hire as they’ve grown with a multinational team from the get go. Besides benefitting from the overall increasing trend in European investment activity, the city is made even more attractive for investors due to this amount of top-tier talent available for London-based companies to hire and the diverse founder base running these companies. There was however one area, where all that talent hadn’t yet brought happiness — deep tech. London universities had for a while followed the common, Europe-wide trend of demanding massive amounts of equity from R2B projects making them essentially uninvestable for any private companies as said by Chris Haley from 01Ventures.
Besides looking into the London scene from the viewpoint of VCs, we also got introduced to world-class tech company culture with Meta. Though we visited only their “second best” location in London, we were greeted to a massive facility that had everything necessary to live a comfortable upper-middle class lifestyle without ever needing to leave your office. Former Aalto-alumni, Benjamin Robson offered us a tour through different hobby areas such as a fully soundproof music room, allowing employees to have creative breaks in the midst of their working days. The company had also taken care of distractions that take away from fully focusing on your work, such as moving around for coffee and meal breaks by having internal cafeterias and a restaurant for their workforce to use freely. To ensure a good overall mood the company also provided premises and budgets for each team to have recurring teambuilding sessions after workdays. Organizing most of their recruiting through a bootcamp format and hosting internal hackathons to encourage innovation in a fun way, there were many elements that those who end up running globally successful, large companies would be wise to copy.
Our final meet for the day turned out to be quite a meet & greet as we had organized an ES meetup with 4 local Entrepreneurship Societies at yet another VC office, Playfair Capital who were kind enough to sponsor the meetup. As the agenda of this meeting was to network with people from LSE, UCL, Imperial College and King’s College, everyone of us got their own unique experiences. There was one common learning: organizing meetups or attending networking events are fantastic ways to get a quick grasp on a country’s startup scene as well as open up discussions with many new people. The networking culture among local students didn’t, apart from fancier outfits, drastically differ from ours, thus making it even easier to attend these events.
On Wednesday we met up with Detech, a Finnish startup located in London, a local university professor and another VC in SFC Capital. The main differences of running a startup in London as a Finn weren’t too surprising; An English speaking city full of diverse talent makes hiring easy for foreign companies as well, and relying on Finnish networks in the area has helped at least Detech with progressing. Based on this, starting a company in London wouldn’t drastically differ from starting one in Finland.
A more drastic difference arose in the afternoon as SFC, the VC company we met, is mostly focused on seed stage and were able to give us a deeper look into the government initiated incentivization system, SEIS. In addition to doubling the investment size into early stage companies, the scheme proves to be great in reducing risk as all failed investments through it can be deducted from the investors income tax. On the flipside, there are restrictions as to how much an individual can utilize the scheme. This cap is currently set at around 400 investments and has existed since 2013. This provides a look into the activity of the scene as some local investors have already capped out their SEIS-eligibility in under 10 years.
Thursday was our only day without a VC meeting as we got to know a couple local startups, the Founders Factory accelerator program and some more local students. While we learned a lot of practical stuff, the day didn’t provide too much new insights on the local scene apart from a fun datapoint from Kaiku, a startup building a database of other startups for investors. They estimated that 75% of all UK startups are located within the M25 ringroad surrounding London, showing how concentrated the ecosystem is on a national level.
Friday was our final day with meetings and it took us deep into the world of fintech. Large financial institutions extend themselves to startups in the city in many ways and we got a glimpse of one, visiting Barclays-owned Rise. Hosting hundreds of startups, the office complex is quite unique as it focuses solely on fintech. With support from founders in the domain and internal events, the space seems to offer a great foundation for building in fintech. This did come with a cost however as getting just a private desk could set you back about 600£ a month according to the prices we were given. Although this price seems crazy in the Finnish market, it would still turn out to be quite average in London, giving a bit of perspective to the high valuations for startups. All in all, it seems like the larger funding rounds are not as wild when you consider the higher rents and salaries in the city. Taking this into account, it may be wisest to keep your startup headquartered somewhere else and keep London as a potential destination to visit when it comes time to extend your runway.
Learning to live like a startup-scene local
Though in the startup world formalities are usually categorized for the corporates, it may be good for newcomers, looking to blend in, to pack a few more formal sets of clothing. In comparison to most other scenes the London startup-style would qualify as business-casual.
In case you want to appear like you know the city with more than just your outfit, based on our meetings, pubs are quite a good common ground meeting place to suggest. In addition to pubs, multiple of our visits took place in coworking spaces, which in London, carried a quite high-end or even luxurious profile. These subscription based workspaces offered founders everything they could hope for and then some, with some of their internal decorating resembling that of a museum or palace. This goes quite well alongside the otherwise also quite formal culture in the area and is a big difference to for example the startup culture in the nordics or even Silicon Valley.
In case you are not that into a high-end atmosphere, worry not as London offers more laid-back options as well with various internet cafes that were in quite heavy use for us between our scheduled meetings. We weren’t the only ones using these spaces either, alongside the expected tea-enthusiasts, you could find a bunch of people working remotely in different cafeterias. The internet cafes are in fact so prominent in the country that there are some chains literally known as easy to access remote workspaces, such as Pret a Manger, which has locations all around London offering not only coffee but quite decent takeaway food as well. In comparison to the office and co-work pricings of the city, these may offer the best place for a newcomer to get their start in the “financial capital” of Europe with the cost of a coffee cup.
Written by Niklas Hamberg, edited by Lilya Lagerbohm.
