How fitting it is that a Britain led by politicians who believe in magical solutions and magic money trees is blowing its own trumpet as a breeder of unicorns.
The UK has produced more so-called tech unicorns – companies valued at more than $1billion but not listed on the stock market – than any country in the world other than the US and China.
This is an impressive achievement and testament to the can-do attitude and enviable attributes of modern-day Britain that tend to get buried under the Brexit bluster.
Over the past 20 years Britain has scaled 72 companies up to unicorn status
Over the past 20 years, Britain’s entrepreneurial souls have scaled 72 companies up to unicorn status in the tech industry, according to government-commissioned Tech Nation report, and 13 of them broke through that benchmark in the past year.
That is comfortably ahead of industrious Germany, with 29, and tech-savvy India and Israel, with 26 and 19, respectively, and France, with 12.
It is also a long way behind the numbers that the twin global superpowers have racked up, with the US boasting 703 and China home to 206.
Nonetheless, considering Britain’s relative size this is a mighty achievement and all the better for the fact that they are not all just from London, which has knocked out 45 unicorns.
In a speech to launch London Tech Week, Prime Minister Theresa May praised gaming in Dundee, ‘Silicon Suburb’ in Edinburgh and clusters in Manchester, Bristol, Bath and elsewhere.
She said: ‘Oxford and Cambridge have outperformed Paris in producing ten unicorns, while Manchester – with five – has produced as many as Barcelona and Madrid combined.’
Big names among the UK’s unicorns include many in the fintech sector, with Revolut, Transferwise and Monzo joining names like Deliveroo and Ovo on the list.
There are also many you won’t have heard of, particularly in the science and biotech arenas, with companies, such as machine learning firm Graphcore and cancer drug specialist Immunocore making the cut.
ig names among the UK’s unicorns include many in fintech, such as digital bank Monzo
Some of the unicorns that Britain has bred will go on to great success, others will fall by the wayside, but the fact the country is third in the global league is good news.
It bodes well for the UK’s future and echoes the excitement that I hear regularly from those who work in or with start-ups and scale-ups, or back them through angel investing, venture capital and smaller company investments.
Amid the backslapping it is worth sounding a cautious note, however.
It’s great that these companies are doing exciting new things, but many of them do not turn a profit nor have meaningful revenues when compared to their lofty valuations.
What has driven them up into $1billion-plus territory is the plentiful supply of money sloshing about in tech and start-up land.
It’s not just London knocking out the unicorns, the report this week showed
Many unicorns and wannabee unicorns are dependent on cash continuing to flow in to keep things going: a funding round delivers the money, they burn through it, and then another funding round sends in some more.
Some of this comes from a decade of super-low interest rates, some investment is driven by Enterprise Investment Scheme tax breaks, and the icing on the cake is some good old-fashioned irrational exuberance.
At some point the easy money will run out and that has implications for investors across the board.
For a read across on that, look at how Neil Woodford’s tumble shows why paying attention on the way up is a wise move.
An aside on the need to exercise some caution was delivered this week by Hamish Baillie, of defensive investment trust Ruffer, who pointed out that ‘free money’ from near zero interest rates has seriously distorted markets.
He said: ‘This is all too apparent in bond markets (you have to pay for the privilege of lending money to the German government at the moment), but we have passed another less obvious milestone; the proportion of US IPOs for loss-making companies has now exceeded the record set in the tech bubble of 1999. Would investors be as keen to commit to these “unicorns” if interest rates were higher?
‘Increasingly we see shades of 1999-2000 in stock markets, not just in these Unicorn IPOs but also in the matching record levels of abhorrence of value compared to profitless growth.’
So, while we should toast the UK’s success and celebrate the magical beasts of the start-up world, be careful where you invest your money.
As we’ve said before: It probably isn’t different this time.