The British start-up scene is flourishing.
Investment in tech firms has increased more than tenfold since 2010. Tax relief from the government, a growing number of venture capital firms, and support from large firms (particularly in financial technology) has fostered many ambitious and successful start-ups.
Institutional factors aside, it’s the lessons Britain has learnt, and can learn, from our friends on the US West Coast that are influencing our biggest successes.
That’s why as an investor, I only support those entrepreneurs that understand these five big lessons from Silicon Valley…
Lesson no. 1: You can’t build Rome in a day
The most successful start-ups are those that concentrate on one solution to one customer problem. We’ve seen this over and over again from Silicon Valley.
Our venture capital (VC) partners across the US, Israel, and the UK, repeatedly tell me that they only invest in start-ups that are completely laser focused. And I wholeheartedly agree.
UK start-up Yieldify is a great example of this. They are relentless in their focus on increasing customer conversion for brands. Online marketers face many different challenges, but rather than trying to solve them all, Yieldify specifically help convert visitors into loyal customers – the one big challenge every marketer wants to solve. This single focus has attracted M&S, L’Occitane en Provence and French Connection as customers.
Trying to be all things to all people does not work. This lack of sharp focus is a mistake I see entrepreneurs make all too often as they get caught up in their energy to get to market. Building out your offering comes later.
Lesson no. 2: Always put your customer first
Silicon Valley has taught us the principles of co-creation, design thinking, early customer testing, and basic feedback mechanisms. When applied, they’re really powerful.
Some of my team were part of the customer testing for Monzo’s Alpha card. They raved about how the British start-up has actively learnt from their customers, using feedback instantly, and continuously, to improve their product on the spot – right there next to them. It’s driven from the top – their CEO and CTO were actively listening, sharing new iterations with their community. By putting their customer first, Monzo set the record for what is said to be the fastest crowdfunding round in UK history: £1m in 96 seconds.
The most successful start-ups involve customers at every stage of product development, making sure they create something that customers actually want – rather than what they think they want! This is a major advantage over large corporates, who are struggling to embrace this fundamental shift, and start-ups are stealing their market share.
Lesson no. 3: Collaborate to accelerate
Second to giving us the world’s tech giants, collaboration is what Silicon Valley is most famous for. Open innovation, co-working spaces and sharing ideas are what the tech capital was built on.
In the UK, we can often be overly protective of our IP and shield our products from others. Silicon Valley strongly believes in ‘paying it forward’ – sharing, helping and collaborating with others, as they know it will come back when they need it most.
Start-ups all over the world have learnt that they cannot succeed without getting on board with the new technologies, open APIs, and ways of working brought to market by their peers.
Successful start-ups understand the need to build, iterate and scale quickly. By using APIs to access capabilities like payments, analytics, and maps, they can focus on their business. And the specialists providing these APIs are becoming very successful businesses themselves. One of our VC partners, Accel, is focusing their investment towards this ‘APX Economy’ (the API-ification of businesses).
But I’m not just talking about start-up to start-up here, or entrepreneur to entrepreneur collaboration. In fact, I’m seeing more and more successful examples of start-ups and large corporates collaborating. Corporates are starting to learn how to innovate and put their customers first, and start-ups are being offered scale and a route to market. Both sides (and most importantly, the customer) really benefit.
Lesson no. 4: Agility and resilience win the race
Silicon Valley has famously taught us to fail fast and often. Businesses of all sizes can get a lot of value from learning to embrace failure.
British insurance content platform Slipcase is a great showcase of this. It started life as a social network for insurance professionals, saw great uptake, peaked early and failed to go anywhere, despite its popularity. They took a step back, refocused on their core strengths and changed into a news and thought-leadership platform for and about insurance and broker organisations. They now work closely with several of the world’s largest firms and media groups.
So we can see it’s not just embracing failure that British start-ups can learn from Silicon Valley, it’s turning that fast failure into learning that’s important to innovating at speed.
The most successful start-ups are super resilient and are able to ‘pivot’, rebuilding until they get it right for their customers so that they can really disrupt an industry.
Lesson no. 5: To be the best, you need the best
Like Silicon Valley, our proximity to top universities means we can enjoy access to some of the world’s best talent pools.
Start-ups have taken advantage of this with initiatives like the fast-track visa scheme; designed to attract world-class tech talent.
But it’s not just geography and government programmes that attract top talent to start-ups. They need to learn from Silicon Valley that it takes more than funky furniture and equity options to get the best: it requires a marriage of mindsets.
Successful start-up founders understand the importance of communicating their vision openly and honestly to those they are trying to attract and retain. It’s often a person’s alignment with what the company is trying to change in the world that seals the deal.
Take Citymapper for instance, it’s building the ultimate transport app and everybody knows it. It’s a lesson in culture that corporates could learn a lot from.
As an investor, and as a customer, I’m looking forward to seeing what the British start-up scene will offer us next.
Will large corporations finally catch up, and accept they need to learn the same lessons from Silicon Valley if they want to survive?
Or will today’s start-ups become the big companies of tomorrow?
Stephen Newton is founder and managing partner of Elixirr.