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MBA Entrepreneurs: Record Investment Makes London Europe's Answer To Silicon Valley

A record amount of VC funding for tech start-ups in London has pushed it ahead of the pack in Europe, as MBA students recognize the UK capital's potential.

Mon Oct 6 2014

London truly is becoming Europe’s answer to Silicon Valley.

London’s technology start-ups have received a record $1 billion in funding in the past year, while MBA students have also recognised the capital’s potential and flocked to set-up camp in the UK.

New research by London & Partners which is based on data from CB Insights, a research firm, show that early-stage tech firms in London have raised $1.021 billion from venture capital firms in the first three quarters of 2014 – already surpassing the previous record of $719m raised in 2013 with a quarter still left to go. The data show a 10-fold increase on the amount raised by tech start-ups four years ago in 2010.

The figures will buoy Tech City, the cluster of tech firms in East London hoping to rival the dominance of the Bay Area which has attracted MBA graduates and established links with London’s business schools, and also demonstrate the attractiveness of London to venture capital investors.

A cadre of these entrepreneurs are using British business schools to launch their ventures. At Cranfield School of Management, based near London, 17% of 2013’s MBA cohort started their own businesses.

Other schools such as Cass Business School in London have close ties with Tech City, setting up an incubator called The Hangout for students to grow their fledgling tech businesses.

According to the Startup Genome project website, London is home to more start-ups than anywhere else in Europe, with about 3,000 tech companies established there.

Eileen Burbidge, a partner at Passion Capital, which invests in technology start-ups, said: “In just four short years the amount of venture capital funding going into London’s technology firms has increased more than ten-fold. That’s an astonishing rate of growth, which is testament to the exciting innovation that’s happening in London.”

Busuu, the language learning tech group co-founded by an MBA graduate of IE Business School, Bernhard Niesner, has raised £3.8 million in funding since its launch.

“We moved the company last year from Madrid to London, and to find top talent it’s much easier being in London,” said Bernhard, CEO.

“It’s the best ecosystem at least in Europe and maybe the world for a start-up like ours,” he added. “There is a big talent pool, and a lot of people with similar experience in what we are trying to do.”

As the market grows, companies find it easier to access larger amounts of capital. So far this year three companies – takeaway.com, farfetch.com and Funding Circle – have all successfully completed funding rounds in excess of $50 million in London.

The largest deal completed during the third quarter however was a $65 million funding round by Funding Circle, the peer-to-peer lender, which was backed by Index Ventures, among other VC firms.

While such investment growth is promising, it still lags behind Silicon Valley, which many entrepreneurs believe is the undisputed king of the tech world.

Samir Desai, CEO of Funding Circle, said that since launching in 2010 Funding Circle has secured $123 million in VC investment. But he added that the company expanded into the US to help fill the “small business funding gap which also exists there”.

Overall however, new funds worth $1.5 billion have set up in the UK capital during 2014, with firms including Index Ventures, Google, Santander and Balderton Capital creating new London-based investment vehicles.