It could be argued that this year has been the most significant ever for the technology industry. New companies, such as Whatsapp and Snapchat, saw their valuations skyrocket into the billions as they racked up customers by the truckload.
Yet it's also been a very turbulent year, with the Snowden revelations threatening to stop the new kids on the block in their tracks if they’re not careful about how they handle people’s data.
While Silicon Valley continues to spawn some of the most successful (and often controversial) technology companies on the planet, a number of countries in Europe are starting to produce their own billion dollar tech firms, or “unicorns” as they’ve come to be known.
The UK has seen a tremendous uplift in the number of fast-growing tech startups listing themselves as public companies, with no less than 31 tech firms listing on the London Stock Exchange in 2014. London is leading the charge as the main UK tech hub but other cities appear to be going great guns, including Cambridge, Oxford, Edinburgh, Bristol and Manchester.
A number of initiatives (not all successful) have been set up by both the public and private sector to support these startups on their mission.
On the government side of things, the Tech City UK quango, funded with £2 million of taxpayer’s money and chaired by high-flying Joanna Shields, has been trying to champion and support UK startups on the international stage through initiatives such as the Future Fifty campaign.
However, the scheme has received mixed reviews from its first cohort, with companies like enterprise collaboration firm Huddle saying it was “of little to no use”. On a more alarming note, a survey across 105 MPs found that half of them had never even heard of Tech City UK.
Elsewhere, David Cameron announced at the end of 2012 that he was going to give Old Street’s “Silicon Roundabout” area – home to 15,000 startups and arguably the epicentre of the UK tech scene – a long overdue makeover and a new civic space with the help of a £50 million investment. Sadly, to the disappointment of tech startups, this money was pulled in July and the regeneration efforts have been left largely to Transport for London.
Beyond throwing money at companies and projects, there are other ways that government can help startups. Cutting red tape is around immigration is one.
A lack of talent has been cited as one of the main factors holding back UK technology companies from scaling into the firms they dream of becoming. In a bid to overcome this, the government endorsed Tech City UK with 200 'Tier 1 Exceptional Talent visas' that it could give out to world-leading developers and entrepreneurs. The Home Office gave Tech City UK the endorsement powers in April but the agency is yet to reveal how many visas it has given out, suggesting the number could be relatively low.
Meanwhile, in a bid to get more students into technology-focused careers, the government also launched its Year of Code initiative, which was headed up by Lottie Dexter, who somewhat ironically, couldn’t code. This minor issue was picked up on by Jeremy Paxman on BBC Newsnight, leading to her resignation just four months after taking on the role.
Then there’s the new £52 million Digital Catapult, which opened in London this year with a remit of helping startups overcome some of the challenges they’re having, as well as addressing some of the wider issues the technology industry as a whole is facing, from securing technologies built around the internet of things to making sure startups aren’t breaching copyright laws. The Catapult said it engaged with 1,500 startups in its first two weeks.
There are several other means by which the government is aiming to support startups, from giving EIS and SEIS tax incentives to investors, to direct funding grants through Innovate UK (formerly known as the Technology Strategy Board).
But there's still a large community of people that want the government to do more. A group of 150 startups and VCs told the government exactly what they want through a report published by the Coalition for a Digital Economy (Codec).
The report - backed by the likes of King, TransferWise, SwiftKey, Shazam, Funding Circle, Index Ventures, Balderton Capital, Passion Capital, Techstars London, Seedcamp and Accel Partners - highlighted everything from reducing startup taxes and improving broadband to making it easier for talented individuals to come to the UK and creating a legal framework for Bitcoin.
While government has influenced policy and legislation, it's typically been the private sector that has bankrolled many of this year's fast growing startups, which serial entrepreneur and investor Sherry Coutu calls scale-ups.
In particular, the wealthy venture capital industry now appears to be investing more money than ever in UK tech startups, albeit in return for a potentially lucrative equity stake that they expect to increase in value as the company they’re backing grows.
UK fintech companies alone received a whopping £300 million from venture capitalists in the first half of the year.
Several new funds were raised in the UK in 2014 and a number of other international funds said they were going to start making investments in UK companies.
For example, two big name venture capital houses, Index Ventures and Balderton Capital, raised their seventh and fifth funds respectively, coming in at £328 million and £195 million. The former will be spent across US and European tech companies over the next few years, while the latter will be spent exclusively on European firms over the same time period. Meanwhile, Singapore’s Infocomm is a prime example of an overseas fund looking to invest some of its £124 million fund in UK firms.
But it's not just venture capital firms that are making investments in UK tech companies.
Google said it wants to invest some of its $100 million European startup fund in UK companies through its venture capital arm, Google Ventures. The six investors - Tom Hulme, Avid Larizdeh, Bill Maris, Peter Read, Eze Vidra and MG Sielger - are based out of London.
The banks are also starting to realise that they too should be working with startups on new fintech products and services. For example, Santander announced a £58 million fintech fund in August to invest in emerging fintech companies, such as the ones coming out of Canary Wharf’s Level39 fintech accelerator.
There have also been a number of large buyouts, with artificial intelligence experts DeepMind being snapped up by Google, and companies like Bristol-based chip manufacturer XMOS selling a chunk of its business to Chinese telecoms behemoth, Huawei.
One of the issues for the UK is that many of the entrepreneurs that found these startups get absorbed by the Silicon Valley giants post-acquisition. For example, Summly founder Nick D’Aloisio was given a job at Yahoo after he sold his content aggregation app to the company for £30 million. The 19-year-old was crowned Techworld’s young entrepreneur of the year and he’s now taking some time out to finish his education at Oxford University.
Startups often get involved with accelerators and incubators before they reach the stage where they're ready to take on investment from venture capitalists or be bought out by a larger company.
A survey released this week showed that there are now more startup programmes offered through these accelerators and incubators in the UK than anywhere else in Europe. The surge in accelerators and incubators correlates with the strong growth that Britain’s tech sector has seen this year.
The rise comes off the back of the success that Silicon Valley's Y-Combinator has seen after it backed companies like Airbnb and Dropbox in their early days.
Even the corporates are getting involved now, with John Lewis, Barclays and Red Bull all making serious entries into the market this year.
While the general consensus is that these accelerators and incubators are a good platform for growing a business in its early days, some argue that they're not worth handing over equity for.
So what lies ahead? It's been a big year for UK tech but a lot of the groundwork is now in place to ensure that 2015 is even bigger.
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