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UK start-ups: on fertile ground?

Written by Josh Russell on Friday, 17 August 2012. Posted in Disruption, Analysis

The UK is often pitched against the US when it comes to entrepreneurship: California has Silicon Valley, London has Silicon Roundabout.

UK start-ups: on fertile ground?

Our tech start-ups are certainly flourishing. But in this challenging economic climate is any sector a safer bet than another? 

Starting an enterprise can be fraught with difficulties. Ensuring a project won’t fall on barren soil requires incredible foresight, but sometimes it’s difficult to predict: a sector that may bear fruit one year may yield little the next. Is there any way to tell what may be fertile ground for growing a business?

One approach is to echo the words of Deep Throat from All the President’s Men: “Follow the money”. Recently, a study by the think tank Demos showed over 3,000 firms employed an incredible 48,000 people in East London’s Silicon Roundabout cluster alone. It’s unsurprising then that technology is grabbing the attention of investors. In fact, many of the Venture Capital (VC) firms, such as Octopus Investments and Eden Ventures, cater exclusively to technological enterprise. So is it a case of those who can, tech? “Tech gets a lot of hype because of the potential returns available,” explains Raj Ramandi, CEO of tech-focused seed firm #1Seed. As the technology sector’s ability to move rapidly can result in fast and efficient growth, it can lead to quick returns. However, competition is fierce. “The likelihood of [investors] picking the winners is very low,” says Ramandi. “Get it right, wow! Get it wrong, often.”

The high-risk strategy isn’t for everyone – a lot of firms look to build a broad portfolio. Companies in as diverse areas as online gambling, such as Betfair, or fashion-designmeets- social-networking, like LOOKK, have received VC funding. Kevin Dixie, managing director of Fuelmywebsite, explains why VCs don’t like to put all their eggs in one basket. “The type of business [VCs] are looking for will vary ... they will invest if that business has traction, proof of concept and will bring them a return.”

Another group of investors are attracting nearly as much attention as the businessesthey invest in: crowdfunders. Crowdfunding is peer-to-peer lending – instead of putting cash in the bank where it’ll earn little interest they can invest in small businesses. They’re a fussy bunch too; crowdfunders can have more discerning tastes than VCs. And if they like an idea, it’s likely to be a hit with punters. As Emma Jones, founder of Enterprise Nation, remarks: “I think it’s much more the populist ideas that are doing incredibly well.” Escape the City, the site for those looking to ‘do something different’ raised £600,000 with Crowdcube. Meanwhile, the Nifty MiniDrive achieved a staggering 2,950% of its £7,000 goal on Kickstarter, securing over £200,000. The lay of the entrepreneurial land can also be gauged by looking at awards. Given the success of SME awards such as the Smarta 100, Growing Business Awards and the Business Magazine SME of the Year, such accolades are a key indicator of a successful enterprise. But can your choice of industry limit access toprizes? Jones thinks not. “One of the great things about the smallbusiness landscape at the moment is that there are awards and programmes that are blossoming for every kind of sector,” she says. No matter the industry, it will have an award to suit. “Things like Tech City and TechStars are brilliant for the tech community, but then likewise the kind of artisan and crafting community is being well met by the School for Creative Startups and Country Living’s Kitchen Table Talent Award.”

A glance at even the non-industry-specific SME awards confirms this. Browsing through last year’s Smarta 100 list reveals just how variegated the enterprises were. The winner, Naked Wines, is a cross between a wine retailer and social network. Another shortlisted venture, Blottr, is a crowd-sourced journalism resource. The message is clear, whether you’re a concert-tracking site like Songkick or a creative recruitment agency like Concept Cupboard, the key is standing out. And this cuts right to the heart of the matter. If choice of industry is a secondary concern, then more important is setting oneself apart. In Dixie’s words: “Don’t follow, lead.” Jones also praises the value of finding a niche, mentioning some of the key highlights from her business-forming workshop StartUp Saturday: yoga for businesspeople and a website targeted at scuba divers. “The thing that’s special about these ideas is that they’re very focused on what they offer to whom: they fill a niche gap in the market,” she says. Ultimately this is what it comes down to. Where you plant your seeds is important, but it is still a secondary concern; more vital is growing something that stands proud of its rivals. As Ramandi concludes: “With any business, the key is in the execution of strategy. Having an idea or thinking about the next big thing is important, but making it happen is the crucial part.”

 

Start-ups that sizzle

Greg Marsh, CEO and co-founder of onefinestay



Styling itself as the ‘world’s first unhotel’, onefinestay aims to bring an entirely new slant to city accommodation. CEO and co-founder Greg Marsh describes their unique service: “Our guests get to live like a local by staying in distinctive private homes in London and New York ... [giving] guests the chance to ... really get under the skin of a city.”

The idea for the business germinated on Marsh’s return from a trip to Pisa; realising his flat had lain empty while he was away and witnessing whole streets where the residents had done the same cemented onefinestay in his mind. “It dawned on me that there could hardly be a better way for visitors to the city to live like a local than by staying in a real home,” he says.

The company’s growth over the last three years is testament to its hold on the market. In 2010, the team had six hosts – now there are over 500. “Early on we attracted investment from some of the foremost players in the travel and hospitality industry,” Marsh explains. Securing an initial investment of $3.7m from Index Ventures, the company went on to net a further $12m from Canaan Partners. “We’ve ... focused on being highly innovative,” explains Marsh. “Setting onefinestay apart from both traditional hotels and other new accommodation options alike.”

 

Anthony Ganjou, CEO and founder of CURB

When using an out-of-home media company you want to know what it is that makes its advertising stand out. CURB has taken this to its logical extreme. Anthony Ganjou, the company’s founder and CEO, sums up its approach: “It might sound crazy, but we hate advertising and everything we do is designed to be the opposite of a piece of traditional media communication.”

CURB’s media certainly stands out. Gigantic ‘rake ads’ have graced our beaches with colossal O2 slogans. ‘Clean ads’ pressure-washed onto discoloured pavings slabs advertise Waitrose and Wired. It uses the sun’s rays to burn branding into wood. Stamp brands and logos into fresh snow. Create effective displays out of living moss. “CURB as a brand is fundamentally about innovation, creativity and sustainability, finding new ways to inspire people with communication,” Ganjou explains. “We choose to use nature because it is hands down the most powerful engagement tool available to the human race today. Our brains are hardwired to respond and emotionally react to nature, so as a means to stand out ... there is nothing more powerful.”

And this is clearly having a huge impact. Not only is the firm a member of the Cream 100 Top Innovators, but last year its first project in Canada was voted third best advert in North America by Forbes, and Entrepreneur ranked it as the best execution of the year.

“It’s the kind of stuff that people will enjoy and want to share.” says Ganjou. “We capture the imagination because what we deliver is something fundamentally different.” 

About the Author

Josh Russell

Josh Russell

As editor, Russell is the man in charge of properly apostrophising our publication and ensuring Oxford commas are mercilessly excised. Our digital doyen, he’s also a Photoshop Pro, a dab hand with InDesign and the man to go to if you need a four-hour soliloquy about the UK's best silicon startups.

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