Report savours economic recipe behind UK's ‘unicorn’ firms

Recruiter sets out factors that have nurtured Britain’s crop of billion-dollar tech firms, with more waiting in the wings

Conditions that have bestowed the UK with a thriving investment culture for so-called ‘unicorn’ firms have been set out in a new report.

Published on 16 May by recruitment specialists Forward Role, the report points out that, among European countries, Britain has cultivated the largest number of unicorns, defined as businesses…

• founded in the year 2000 or after;
• working primarily in a digital format; and
• likely to fetch $1bn or more if they were put on the market right now.

So far, Europe has generated 40 firms of this type, with almost half of them (17) based in the UK. Out of the 13 European firms that have joined the club in the past year, seven of them were British – including online payments company Skrill and fashion outlet Farfetch.

This suggests that vital factors have conspired to create a special recipe for unicorns in the UK. With a series of unicorns-to-be, also known as ‘foals’, on the horizon – such as The Hut Group, Missguided, Parcel2Go and Zuto – the report outlines the main elements that have helped those future giants attract investment:

1. Tech City UK In 2010, the London technology cluster that began as an informal group of firms working in and around Old Street’s ‘Silicon Roundabout’ was relaunched as a bona-fide start-up accelerator. Unicorns that have stemmed from the initiative include Just Eat, Zoopla, Rightmove and ASOS.
2. Age of founders Many UK unicorns were started by people aged between 35 and 40, indicating that a bedrock of lengthy career experience garnered in other firms is an entrepreneurial advantage.
3. Excellence in niche markets By using the web to target discreet segments of major business sectors – particularly in retail and delivery – UK unicorns have developed expertise in specialist areas, becoming trusted brands.

There are signs that a quite different set of circumstances will spur the unicorns of tomorrow – which will change the way they are distributed across the UK. While Tech City has pegged investors’ attention to the capital, emerging regional hub the Northern Powerhouse will set the tone for the future.

As the report notes, the BBC’s recent move to Salford has spawned a local tech cluster comprised of firms aiming to partner up with the broadcaster to deliver innovative media solutions.

While Manchester start-ups have captured the media and digital markets, Liverpool has become renowned for creative firms, Hull for energy development, Sheffield for advanced manufacturing and Leeds for law. “Each region and city has its own speciality,” the report says, “and while many may see this as an increased amount of competition, it merely provides more openings to find your perfect niche.”

In parallel, the development of major rail projects HS2 and HS3 will stimulate growing firms by providing a food chain of personnel. Quoted in the report, Parcel2Go co-founder Richard Adams-Mercer says: “Improved transportation will be fundamental to the Northern Powerhouse plan, and key to any budding business.

“The improvement of commuter journeys between the key northern cities of Liverpool, Leeds and Sheffield into Manchester will give start-ups much better access to talent pools across the region.”

Manish Madhvani – managing partner of investment strategists GP Bullhound – adds: “The UK has raced ahead as the undisputed home of unicorns in Europe, with London producing the vast majority of Britain’s billion-dollar tech companies.

“Growth is accelerating because we have created an environment capable of sustaining high levels of investment across a range of tech sectors.”

Read the full report here.

For further insights on the topic from GP Bullhound, click here.