London is triumphing over its reputation as the weird cousin of US tech successes
Next year will mark twenty-five years since the dot.com boom that took place between 1998 and 2001. It was a time of huge creativity. Capital, talent and enthusiasm flowed into new ideas and young start-ups. What can London in 2023 learn from those heady days?
We were there in 1998 with the lofty ambition of becoming “the world’s most trusted service” – from a spare bedroom near Oxford Street. We met internet investors, and our first customers, at “First Tuesday” networking events. We hired from blue-chips like McKinsey and Mars, recruiting bright managers keen to take 50 per cent pay cuts to join the promising London start-up scene. The zeitgeist was exhilarating and not a little crazy. I remember in early 2000, Boo.com, the innovative but heavily loss-making e-commerce platform, justifying their eye-watering valuation on a multiple of their cash burn-rate. The argument ran that because Boo were using up a lot of capital, they must be commensurately valuable.
Perhaps unsurprisingly by mid-2001, the party was over, the money had left and most internet companies, Boo included, had gone bust. Many would-be entrepreneurs returned, bowed, to the relative safety of established firms, the City and the professions.
It’s now worth looking back and considering why the boom and bust worked out better in the USA than here.
In the USA there is a positive legacy. The founders of Amazon, Paypal and Tesla, and Google were all business babies of the dot.com boom. They founded some of the world’s ten most valuable companies and are just a few of the tech leaders in the USA who established themselves during the dot.com years.
China can also claim similar successes. Li Qiangdong set up the e-commerce giant JD.com in 1998. Jack Ma launched Alibaba, China’s E-bay, in 1999. Robin Li created Baidu, China’s Google, in 2000.
In contrast, the UK looks like it has little to show for that vibrant scene 25 years ago. It’s true that Ocado, set up in 2000, is valued at a respectable £5.6bn and Lastminute.com founders (est. 1998), Brent Hoberman and Martha Lane-Fox, are still both active in the UK tech scene. But London hasn’t enjoyed a comparative legacy.
That’s for two reasons, people-based and capital-based – both of which we have fixed, or are fixing, for the future success of “UK PLC”.
Firstly, the American entrepreneurs learned from their peers, helping them survive the dot.com bust. Formidable groups of entrepreneurs and former founders in California and New York would meet to share experiences, advice and contacts. This is now common-place in London but barely existed in 2001. Helm (formerly The Supper Club) has been supporting scale-up founders to learn from each other since 2003 and Brent Hoberman’s Founders Forum started shortly afterwards with a tech focus, inspired by the lack of effective support when he ran Lastminute.com.
Secondly, capital for loss-making growth companies in the UK disappeared entirely in 2001, but capital flow continued in the USA, albeit at reduced levels, because they had a robust investment eco-system. That allowed companies like Amazon to struggle through to colossal success; it enabled entrepreneurs to exit their companies with some value and self-belief rather than going under, enabling them to consider going again. In the UK we have this investment challenge partially fixed – there is a lot more cash available for early stage companies today. Alliott Cole of Octopus Ventures says investor confidence is encouraged by the 17 venture-backed UK businesses who exited with valuations of over £1bn. And a Beauhurst report states that there are a further 44 privately-held unicorns with a UK HQ. Success is solving the capital issue.
So as Londoners gear up for 2023, it’s great to see that, unlike twenty five years ago, we now have the right people, ingredients and the capital opportunities to create and grow great technology-led businesses from this city.