UK outperforms US in creating unicorns from early stage VC investment

https://www.cityam.com/uk-outperforms-us-in-creating-unicorns-from-early-stage-vc-investment/

by mmarian • 9 months ago

77 39 9 months ago

According to the article in the past decade the UK produced 57 unicorns, and the US produced 762. I wouldn't really call that outperforming.

daanbread• 9 months ago

They pretty clearly state their metric for performance is "unicorns per $1bn" (3.08 vs 1.22).

They're suggesting dollars invested in UK startups are more likely to create a unicorn than those same dollars put into us startups, hence higher performance.

jimnotgym• 9 months ago

Presumably because VCs in the UK are so much more risk averse? They only invest in 'sure things', potentially missing out on other opportunities.

conductr2• 9 months ago

If they are able to scale at that ratio it will be noteworthy. It is quite unlikely though.

wakawaka28• 9 months ago

That might be a case of selection bias. The only reason to put up with UK regulations and other issues is if you have a compelling reason to do so (compared to similar opportunities).

cjbgkagh2• 9 months ago

Quite typically the highest return investments are picked first; as such there is a diseconomy of scale, it should be of no surprise that the ROI decreases as investment scales. Perhaps instead of thinking of it as a sign of efficiency it should be thought of as an underdeveloped market with the UK foolishly leaving money on the table.

aiauthoritydev• 9 months ago

Thats a dumb metric. It is like saying conditioned on a doctor saw you, how many people were saved. You gotta count folks who died because they did not see the doctor too.

Some of the unicorns could be simply rent seekers making money by colluding with government people. Investors saw them sure shot and hence invested. That model is neither scalable not healthy.

dv_dt• 9 months ago

I wonder if the study adjusted for purchasing power in SV vs well, everywhere else - maybe London is on par

impossiblefork• 9 months ago

Yes. If the UK matched the US per capita it'd be ~285 unicorns, so it's actually performing at 37%.

kazinator• 9 months ago

But a per capita figure is diluted by how big of a tech sector that country/region has relative to the rest of its economy. The more people work outside of that sector, the lower is any per-capita figure from tech. Fewer lines of code written per capita, fewer bugs per capita, ...

The figure per invested dollar is much better: how many unicorns emerge per billion of investment money.

Those who chase unicorns are mainly investors (plus people who want to join startups that become unicorns). That figure is directly relevant to them.

BrenBarn• 9 months ago

I don't really see this as a positive thing.

anon291• 9 months ago

The main difference between the US and the UK is that American startups are building platforms for the world, whereas UK ones often consume those platforms. The platform holder holds the strategic keys. The efficiency of the market system is irrelevant to simple dominance. This is the same issue with other startup hubs, like Singapore, Bangalore, etc.

MadDemon• 9 months ago

Do you have something to back up this claim?

tjwebbnorfolk• 9 months ago

UK is desperate to have something going for it right now. Just let them have this one.

Xss3• 9 months ago

2 british blokes in a shed doing what an entire team of corporate engineers cant is an incredibly strong part of British culture. They strive to be scrappy. They dont like making a show of things. They dont like to ask for more.

Essentially they draw a hell of a lot of national pride from this 'doing more with less' attribute. It came about out of necessity during ww2.

Is it really surprising that this culture produces companies that manage to do more with less? No.

Germany has a strong safety and reliable robust engineering culture of ensuring things are always done perfectly to spec. Is it surprising their companies have a reputation for making reliable machines? No.

Does British scrappiness and pride in their modesty mean they're somehow better than other cultures that prefer to go all out about things? No.

Sometimes you just cannot do something with 2 brits in a shed taking pride in their modesty and NEED that american exceptionalism and balls to the wall with everything attitude to get things done.

Thats one reason that i believe america produces more unicorns at a faster rate relative to population than the UK, Americans believe in themselves harder and go big or go home more often with less reservations.

As an investor it shouldn't make you consider the UK any less risky, as Brits may go modest and go home just as often as any American company can goes big then home.

matt-p• 9 months ago

I'm a brit.

There's more than an element of truth to this, we do not always dream big enough or take enough risk. We are efficient and frugal sometimes to a fault.

However it's not the whole story, there are actually people who want to swing for the fences, but who cannot and ultimately end up either scaling back, failing, or moving to the US. There isn't good access to early-stage funding here, and there is no real ecosystem either.

We have absolutely obscene amounts of untapped potential, it's infuriating.

neilv• 9 months ago

Essentially they draw a hell of a lot of national pride from this 'doing more with less' attribute. It came about out of necessity during ww2.

Two of my best success stories are along those lines, and I thought might hit favorable "10x" and "startup agility and resourcefulness" notes.

But in the US, I think the stories often land with the unspoken reaction of, "strange flex, bro: if that company were better, it would have raised more, and had rapid growth of headcount, on the way to a successful exit."

This might be a good application of LLM to large text corpus: label instances of US startup people of the past 2 decades (i.e., ZIRP, followed by crypto and AI gold rushes) speaking of how much they raised, and also label instances of them speaking of how scrappy they were with limited resources. Compare.

fidotron• 9 months ago

Yep, as a brit abroad I tend to think the brits end up on the side of excessive tightfistedness too often for their own good. Their approach also does not scale up well, since they optimize at too small a size.

One big upside of UK business culture that I don't see much of anywhere else is once your proverbial two guys in a shed are making something useful then people do come out of the woodwork to help. The US seems to do that through investments, but the UK it's often customers deliberately paying more than they might strictly have to. I think everyone that has seen success of this form has stories of customers showing up and writing cheques bigger than the amounts asked for.

JCM9• 9 months ago

The article is a case study in playing with statistics to give the message you want. A different, and simpler, way of saying the same headline is that it’s much harder for ideas to get investment in the UK.

While the “unicorns per dollar invested” stat looks good the “good ideas killed off because someone didn’t invest” stat looks really bad.

The US market doesn’t pride itself purely on unicorns created, but on the fact that it’s a vibrant ecosystem that invests in ideas even if they might not become a unicorn. That fact seems lost on the meaning of the headline.

Retric• 9 months ago

If you’re investing, this is a solid argument you should consider a UK VC over a US one.

Same data, different perspective and probably more the angle they were going for. Obviously ROI is ultimately what matters but risk tolerance is a thing.

Capricorn2481• 9 months ago

The US market doesn’t pride itself purely on unicorns created, but on the fact that it’s a vibrant ecosystem that invests in ideas even if they might not become a unicorn. That fact seems lost on the meaning of the headline

That just seems like spin on what is essentially burning cash. I don't think it's a morally superior posture to invest in things that fail. I assure you VC's are turning down plenty of things because they don't seem like unicorns.

I mean Sequoia invested with SBF while he was playing league of legends in his pitch meeting. We're not dealing with geniuses here.

flir• 9 months ago

UK's financiers have always been risk averse.

bmitc• 9 months ago

but on the fact that it’s a vibrant ecosystem that invests in ideas even if they might not become a unicorn

Most venture capitalism in the U.S. is basically snake oil. Companies with tenous ideas at best get pumped and pumped until they're dumped and the VCs move on to the next grift. Most recently, it was self-driving cars, then blockchains and cryptocurrencies, and now AI. I'm sure they'll move onto something next soon.

lotsofpulp• 9 months ago

There exist self driving cars being made by Alphabet and Amazon, publicly listed companies, not VCs.

The snake oil self driving cars are peddled by Tesla, not VC.

michaelteter• 9 months ago

Does "unicorn" really mean anything beyond "can play investment game"?

It seems like the tech version of the quarterly earnings per share game that has ruined Wall Street and publicly traded companies for the last 25 years.

arjie• 9 months ago

There's this class of article which is just X is the most Y. One of the things I like to amuse myself with is to pick a random city X and type in "top city for" and see if there's an article for it.

e.g. Fremont was the top US city for startups

https://www.mercurynews.com/2012/10/09/fremont-ranked-top-u-...

Appleton, WI is the fifth best place to live in America

https://www.nbc26.com/appleton/study-finds-appleton-is-the-f...

rvz• 9 months ago

fake news.

SunshineTheCat• 9 months ago

Boasting a stat like who has the most VC backed "unicorns" is like ranking cities in a state by how many lottery winners it has. Let's see a chart comparing the number of top "bootstrapped" businesses and I have a funny feeling the result will be much, much different.

throwawayffffas• 9 months ago

This metric is actively harmful focusing on "efficiency" stifles innovation and risk taking putting a cap on the overall growth potential.

The desired outcome from a wider economy perspective is to have more unicorns not efficiently created ones.

UK outperforms US in creating unicorns from early stage VC investment

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