Newfound had the pleasure of hosting a roundtable discussion on the UK market entry journey for tech ventures. This event is part of our work with Toronto Finance International and London & Partners in supporting 6 amazing fintech ventures on their UK market visit. The room was brightly filled with delegate companies, experts, advisers and Canadian founders who have done it before. The event was hosted at Rise, a fintech co-working space powered by Barclays.
The discussion nicely covered important topics that we believe form a basis of what companies need to know before they expand into the UK. Whether you are looking to expand now or later in the future, our key takeaways will help you plan and expand successfully.
7 TOP TIPS FROM THE EXPERTS
- Get commercial from day 1.
- Look local as soon as you can and show your long-term commitment to the UK market.
- Do your homework and plan ahead — do not assume the 2 markets are the same.
- Don’t always look to big corporates for help. The UK has a rich startup ecosystem — for any challenges in setting up in the UK, you can find homegrown startups or small specialists solving those problems in a quicker and less expensive way.
- The UK is a relationship-building market, understanding cultural differences and getting plugged into the right ecosystem will help your business to land and expand successfully.
- As important as the size of the market is, the size of the problem you are solving is also a crucial factor. Different markets have different problems — think about how your product can be elevated to solve your customer’s challenges in a meaningful way.
- London is not the only place to be. Scotland and Northern Ireland have amazing talent and resources with incentives from the government for businesses who are looking to set up and operate in those ecosystem.
"Easy to start but harder to scale."
FUNDING - SHOULD I RAISE MONEY IN THE UK OR FROM HOME?
In general, the UK investment scene makes it relatively easy to start your business but harder to scale. There is a vibrant angel investment market for seed rounds thanks to SEIS and EIS tax relief schemes by the government:
- SEIS — up to £150K in investment.
- EIS — up to £5m in investment in 1 year or £12m in your company’s lifetime.
Series A & B, however, are generally underfunded though there are ways to work around. For example, seeking Silicon Valley investors who have expressed increasing interest in the UK or finding specialised investor e.g. female founder investors can give you a higher chance of securing investment.
It is also important to consider the time it takes to close the deal. This can be anywhere between 6–24 months, depending on various different investors.
"The breadth and depth of UK talent is immeasurable."
WHAT DOES THE TALENT SCENE LOOK LIKE IN THE UK?
The UK is home to 4 of the world’s top 10 universities with amazing tech talent spreading across London, Oxford, Cambridge, Edinburgh and Belfast
If you’re looking for specific expertise:
- AI: University of Oxford, University of Cambridge and Imperial College London
- Cybersecurity: Northern Ireland — Queen’s University Belfast
One thing to note, the UK hiring market can get very competitive, especially as big firms are willing to offer salaries higher than the market rate in order to attract and keep top talents.
However, this is changing. Compared to the outdated technology adopted by traditional banks, the rise of fintechs invariably attracts top young talents due to its innovative nature. Candidates are now focusing more on the company and their role rather than how much they are earning.
WHERE SHOULD MY OFFICE BE?
- There are currently more than 700 co-working spaces across the UK, with different space focusing on different tech verticals.
- Another advantage of setting up in a co-working space is the close proximity to other businesses in the ecosystem. Having access to like-minded individuals and start-ups will be a great way to forge connections and find partnerships in your early stage of expansion.
- The general rule is to be close to your clients and somewhere easy for your team to commute.
HOW TO GET A UK BANK ACCOUNT?
- Setting up a business bank account in the UK can take up to 6 months (with traditional banks) due to rigorous AML and KYC regulations.
- Alternatively, there are neo-banks such as Starling, TransferWise and other digital banking services that can get you set-up in a shorter amount of time.
- Depending on what the business needs that bank account to do, neobanks can be a more convenient option. For simple local transactions and payroll purposes, neobanks are great. But if the account is for more complex banking such as multi-currency remittances then not all neobanks have the capabilities to support this.
Top tip: Find an adviser or agency that operates in your space and has partnerships with banks in order to speed up the process.
HOW CAN I REGISTER MY COMPANY?
- Getting a company registration is an online activity that takes 20 minutes to complete and costs £50.
- You can either use local, boutique providers to get this done or do it yourself. Bigger companies can overcharge you for such a simple process.
- Explore the type of company that best suits your business needs before registering. Do you want just a subsidiary or an actual set-up?
"Get commercial even before landing in the UK."
COMMERCIAL - WHEN SHOULD I START THINKING ABOUT MY COMMERCIAL STRATEGY?
Identify potential customers, get an understanding of what they need, form relationships and discover how you can turn a proof of concept into an enterprise deal. It is better to have customers/leads and deal flow before spending capital on setting up in new markets.
Split your sale process into 2 parts:
- Pre-sales — all about the products and how it will fit with the target’s current needs.
- Sales — process and management of the sales cycle.
There is a distinct difference between these two streams and it should be kept that way to avoid confusion in the process.
UNDERSTANDING UK BUSINESS CULTURE IS CRUCIAL
- UK culture is more receptive to softer sale.
- Sales cycle varies from one type of business to another e.g. can take up to 18 months with global banks but much faster with SaaS driven mid-stage enterprises.
- Business responses are typically slow — plan ahead by taking into account the time it usually takes before you can get a response.
With Brexit and political uncertainties, businesses coming into the UK need to get insights on what would be the difference between doing business today and next year.
However, if your business is regulated, London is a great base for your global expansion.
- Get familiar with the regulations and form data privacy strategy as soon as you can.
While there are definitely more topics to cover, we believe this list gives a well-rounded summary of what it would be like for a tech company to enter the UK market. The journey may look daunting at first but with the right plan, local insights, team, and network, the UK will surely serve as a great international market for your global expansion.