Some days you can’t get anywhere in Covent Garden or Fitzrovia because of American tourists, but the US accents in the bars and restaurants near the tourist hotspots are not always those of travellers. US tech companies and investors are settling in London, and especially those two enclaves.
Andreessen Horowitz announced three weeks ago that it would be opening its first office outside of the US, in London, later this year. The veteran investor Sriram Krishnan will lead the team.
Martin Bryant is the founder of PreSeed Now, a London-based tech newsletter. He said that Andreessen Horowitz doing more deals in the UK will attract more international attention for UK start ups. He added that boosting Britain’s reputation among the technorati was beneficial in a post Brexit world.
But that was only the beginning. OpenAI, the creator of chatGPT, announced two weeks later that it would open its first international office for Rishi sunak in London. This was due to Britain’s rich culture and exceptional talent pools. OpenAI has joined Stability AI led by Emad Moreaque, another UK-based AI firm.
Sunak’s welcoming tax regime, which includes seed enterprise investment schemes as well as a 50% tax reduction on investments of up to £200,000 per year and benefits for high-value tech companies, is part of the reason why tech businesses are attracted to London. He also showed his support by putting binary code “LTW” in place of the “10” at the entrance to 10 Downing Street for London Tech Week, which took place mid-June. Sunak developed a passion for tech while he was studying an MBA at Stanford University, California. His wife, who is also a classmate, was not the only person he fell in love with in the US.
The UK has another advantage over France: it does not require employers to pay “social charges” on top of income tax. This makes Britain more attractive. The capital of England has also been a popular IT destination for a long time. “It continues to lead Europe’s tech sector, and the interest from US venture capital companies and big tech firms in opening an office here underscores that,” Davor Hebel said, managing partner at VC company Eight Roads Ventures Europe. London’s recent growth has been impressive.
Manjari Chandran Ramesh, a partner with Amadeus Capital Partners (another VC firm), said that the US firms’ move to London was not surprising. “More capital and wider networks will always be needed to scale up, so this is a positive.”
Lloyd Price, CEO of Hive Health a London-based cybersecurity company, said that London has become a hub in the US for venture capital investments. In 2021, American venture capitalists invested PS10,6 billion into London-based start-ups – more than in any previous year. Price said that this trend will likely continue as US VCs turn to London for investment opportunities in the future.
Transatlantic transplants Luciana Lixandru, a VC at Sequoia Capital who invested in the grocery delivery app Getir, and Sarah Cannon, an investment manager with Coatue Management who backed Slack have both played a role in establishing UK sites for American investors. London is a popular place for US investors because of the strong tech network that includes Deliveroo Revolut, and Wise. Price said that these companies have created an ecosystem that is attractive to talent and investment around the globe.
London’s companies are valued lower in general than those of the US. This is partly due to the smaller British tech market and the differences in the regulatory environment. Price said that US VCs could get a better return on their investment by investing in London-based start-ups. The City is also a useful gateway to the European market; a blockbuster €105 million (£90 million) funding round in June for the French artificial-intelligence start-up Mistral was led by Lightspeed Ventures, which has its European headquarters just outside Covent Garden. By setting up a London office, American venture capitalists can gain greater access to the market and identify investment opportunities.
Price says that the open regulatory environment of the UK also makes it easy to grow a startup. This means that there are many opportunities to invest and help firms succeed.
“With investors having access to global insight and talent, as well as a supportive political climate and deep pools on their doorstep, the UK tech industry will only grow in stature,” stated Chris Bischoff. He is the managing director of General Catalyst’s Europe and US private equity firm.
London was criticised for decades as a city that is great to start a business, but not so good to make money. It is now. Investors have been convinced by high-profile sales and floats of London-based companies that they will get a return on their money. The listing of Wise , a fintech startup, on the London Stock Exchange for £8 billion in 2021 has helped investors realize the potential of the UK even though other companies such as Arm have chosen to list instead in the US.
London & Partners’ data shows that London-based startups raised $22.4 billion in VC funds by 2022. This is an 800% increase from 2014.
The majority of this money comes from US-based funds, which used to be focused on Silicon Valley. All of this means that there are more Americans, and more American technology figures, coming to the UK. According to Knight Frank, they have bought more prime property in central London than any other nation in the last 12 months.
Nick Clegg is one of them. He’s now an executive with Meta, the parent firm of Facebook and Instagram. Nick Clegg recently returned to Britain. Clegg, who was born in the Buckinghamshire village Chalfont St Giles but left politics in 2018, moved to the US.
Adam Mosseri is returning to London after spending several years in London, possibly to help launch Threads, the new app from Instagram.
Some of the biggest American tech players joke on LinkedIn about their children’s accents. This includes Alex Ferrara from Bessemer Ventures. This is good news for London’s technology sector, whose leaders and shakers could soon be speaking with a Californian accent.