London: leading from the centre?
13 September 2015
This is London, the greatest city in the world. And this is Fintech Week, so you’ll be expecting me to tell you that London is the fintech capital of the world too.
It isn’t, not yet. But it’s working on it. In my view – formed at 30,000 feet as I shuttle over the Atlantic between the two – London’s fintech ecosystem is within one round of IPOs and exits – perhaps within three to five years – from having the sort of self-renewing ecosystem that New York enjoys.
London, of course, sits in the middle of everyone’s day. The City has always thrived from working in New York’s morning and Tokyo’s afternoon. That’s why so many of the main players in retail banking globally locate strategic functions the Square Mile and Canary Wharf. London’s fintech community has a strong market on its doorstep.
So London is particularly strong in enterprise, b2b software, such as trading platforms as well as the more commonly understood facets of fintech, such as alternative finance (crowdfunding with debt and equity) and payment systems. And the entrepreneurial community that sustains the community is large and growing too. A lot more venture-capital is flowing into fintech, not only from Europe but increasingly from the US. Much of my day job is helping connect US money with British enterprise, and vice-versa.
London’s culture is changing, too. Something of the American can-do spirit is wafting in with the red-eye. Launching a start-up is seen as the way to go for the bright graduates who might, even only 10 years ago, have looked at investment banking, law or the accountancy firms as being the only respectable outlets for their talents. Increasingly, the brightest and the best are to be found in Shoreditch lofts, not City towers. There are a huge number of early-stage companies bursting with ideas and innovation. In ambition and energy, London and New York are neck and neck.
Where New York pulls away, though, is at the next stage of a company’s life. Put simply, New York has many more people who’ve been there, done that, made their money and are ready to invest in and guide the next generation. It has more angels, more non-execs, a much deeper and broader pool of expertise and capital on which infant companies can draw.
That’s why London needs to get some more deals away, to float (or sell at a hefty premium) a phalanx of fintech ventures. That’s when the system will replicate itself and grow to maturity.
Even then, both cities may never catch Silicon Valley, the third point of my personal transatlantic triangle. Take bitcoin: the Valley has (from what I’ve seen) at least 10 times more money invested in the technology, and thus a proportionate amount of the global blockchain talent. It’s building the best consumer-facing fintech companies in the world.
London, though, has its own strong, collaborative community. It’s stronger in fintech than any other sector. As Singapore and other locations start to ramp up, it remains a world leader, and the most exciting place to work.
Richard Goold is co-chair of Wragge Lawrence Graham & Co’s Tech Sector team. WLG and Gowlings, a leading Canadian law firm, are joining forces to create new international law firm Gowling WLG in January 2016