Unicorns are known as rare, elusive creatures, but in the tech world of London, they are becoming increasingly common.
During London Technology Week in June, a study by investment bank GP Bullhound found that nearly half of Europe’s ‘unicorn’ tech companies are based in London.
A ‘unicorn’ is defined as a tech company that has been valued at over a billion dollars. They used to be named due to their rare nature, but the nickname may need a rethink over the next few years.
Out of the 40 identified in Europe, 17 were started in the UK, with 8 founded in the last 12 months, indicating that the technology sector is experiencing unprecedented and explosive growth being driven largely by the software, ecommerce and market place sectors.
Some of these success stories include retail giant ASOS, takeaway app JustEat, loan provider Wonga and the online estate agents RightMove and Zoopla.
The average valuation of the 40 European unicorns is just short of $3 billion.
The UK is soaring ahead of other European countries when it comes to tech unicorns, whith Sweden and Russia coming in joint second with five unicorns each.
This news confirms London’s European dominance over the tech sector, with more businesses choosing London to house their European presence and areas such as Silicon Fen in Cambridge and Tech City, based around the Old Street roundabout in central London, getting huge boosts of investment. Between 2013 and 2014, the value of global fintech investment rose by over 200%.
More tech startups are choosing to be based in London over any European city, with more than 1,000 tech startups establishing themselves in London between 2005 and 2014.
Why has the UK been such a great place for tech companies to start and grow?
Tax reliefs such as the R&D Tax Credit scheme, for companies that invest in research and development, has given innovative tech companies an incentive to stay based in the UK. This is further helped by The Patent Box Regime, which offers tax reliefs on the profits made on patented inventions.
From an investor’s point of view there are a number of generous tax incentives in the UK, making investment in potential ‘unicorns’ even more attractive. Schemes include the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs), all of which offer various tax reliefs to investors who wish to invest in small businesses.
As tech start up grow in terms of innovation, more money is being generated and invested, making the United Kingdom the perfect environment for fast growing tech businesses.
How we can help
We help fast-growing technology companies to manage their finances in a tax-efficient manner and to also capitalise upon government schemes such as the R&D Tax Credits scheme and the Patent Box regime. Partner John Moore specialises in helping technology companies to take advantage of these schemes. In the last two years alone he has helped his clients claim over £45 million in R&D tax credits. To speak to John about how he can help your business, you can call him on 0207 292 8850 or email John.Moore@kinglybrookesllp.co.uk.