Research has shown that a whopping one-in-three European tech startups that began operations in the last two decades call Britain home.
Researchers at Mckinsey’s latest deep-dive report disseminated the winning formula required to survive in the Darwinian world of new tech business. And, it turns out, British tech firms are coming out on top.
Their research on the top 1,000 European tech startups showed that successful companies follow one of a small number of distinct paths to successful scaling, built around a core strategic approach: “network, scale, product, or deep tech.”
One in three “product”-based startups, which depend on innovative software to attract users, took more than a decade to reach the milestone.
The report found that British companies dominated when it came to areas such as fintech, which accounted for a quarter of Britain’s top companies compared to less than a fifth across Europe, and artificial intelligence, 3% of startups compared to just 1% across the continent.
It was less well represented in business software, at 13% compared to 19% for Europe.
In Scotland specifically, the news follows a press release back in May in which the Scottish Government outlined its current three unicorns – companies valued over $1 billion – BrewDog, FanDuel, Skyscanner.
Arguably more excitingly though, the press release pointed out its four futurecorns by way of Roslin Technologies and NuCana BioMed (Edinburgh), Interactive Investor (Glasgow) and Amphista Therapeutics (Motherwell).
Some other fascinating insights from the report include what Mckinsey deems to be the requirements to reach unicorn status.
For starters, most companies they evaluated reached unicorn status within 10 years of founding, with network and deep tech companies having a propensity to reach this milestone faster.
Secondly, to reach that magic billion-dollar valuation, the old adage of you’ve got to spend money to make money has never been truer. Most of the unicorn companies evaluated required, “€100 million to €200 million in funding, implying a valuation of five to ten times the capital raised.”
Lastly, a company’s revenue relative to its investment is key. The report stated: “Scale players achieved approximately €200 million in revenue, implying a revenue multiple of four to six times their funding, followed by network and product plays, with approximately €50 million to €90 million in revenue at multiples of ten to 20 times funding.”