Tech unicorns are so-named to reflect the rarity of their mythical namesake. But a goal to make the UK a “scaleup powerhouse” by making the country home to half of all unicorns in Europe by 2030 shows that it is the government which is in fantasyland.
The focus on unicorns – a privately held startup valued at $1bn or more – feels sorely misplaced.
It is purely a vanity measure. Hitting a certain valuation doesn’t necessarily equate to a company spreading wealth or social mobility across different parts of the country.
It also doesn’t mean the company is on track for future success – plenty of unicorns fail. In the UK, we’ve seen events startup Hopin’s valuation plummet from $7.8bn to key assets being sold for up to £39m. Telehealth startup Babylon, once valued at nearly $2bn, went bankrupt last year.
So much of a startup’s valuation is dependent on factors outside of its core operational success. Valuation methods can often be opaque. And, as we saw last year with numerous downrounds, valuations are at the mercy of macroeconomic forces like rising interest rates.
Instead, can we not just resolve to set a long-term policy direction of helping to create IP-rich companies throughout the UK that are profitable and have financially sustainable growth?
In a speech this week outlining the unicorn target, Michelle Donelan, the tech secretary, said the UK has “the right ingredients to become a scaleup superpower if we tap into our unlocked potential”.
She went on to deliver a perfect storm of quango-inspired tech buzzword bingo, all with a view to making the UK a “scaleup powerhouse”. What does that mean?
I think the UK public sector has a fetish with categorisation terms and semantics as a way of deflecting people’s focus from a lack of substance or progress.
I can’t take another “turbocharge”, “supercharge”, “unleash potential”, “unlock”, “growth strategy”, “framework”, “powerhouse”, “engine”. The list goes on.
These words are being so liberally garnished on public sector policy communication that they are losing all meaning. We need a QI-style klaxon that goes off every time a politician says something like “the UK will be the next Silicon Valley”.
Actions speak louder than words. Are you going to put in place hundreds of billions of pounds worth of public sector investment, decades of public-private partnership and consistent, non-partisan political governance into your selected geography? No? Then it probably isn’t going to yield Silicon Valley-style results.
Language aside, let’s take a look at the other scaleup announcements.
A scaleup forum and a pilot programme for 20 successfully chosen scaleups? It sounds like a pivot back to the type of sector support Tech Nation previously provided, which the government unceremoniously defunded around a year ago.
Dragons Den-style pitches? Is that seriously the best we can do? What spad or quango figurehead approved this?
And how can the government seriously suggest this as a solution towards growing our tech economy but make no mention at all of the absolute dumpster fire that is the situation for spinouts trying to emerge from our universities?
When it comes to the economy, I really do put political dogma aside. I want whoever is leading on things that affect our sector to do well.
I will give credit where credit is due – I think directing pension funds towards allocating capital into VC and other early-stage, risk-on financial instruments is a good move.
Yet all the bravado about being a superpower in a tech subsector like AI or crypto ignores deeper structural problems.
The main problems facing startups in the UK right now are education, tax, immigration, regulation, housing and transport-related. These are all exacerbated by sudden swings and changes in direction every couple of years to mask the inertia, overregulation and stagnation that permeates an increasing number of our civic institutions.
And the continued fiscal centralisation and physical infrastructure spending bias towards London (see HS2 funding being re-routed to ‘Network North’, which includes £235m to improve roads in London) is a strangle on regional tech growth.
I have spent the past nine years of my life working intensively with ambitious entrepreneurs. They are some of the best representatives of modern British society developing bold solutions to big problems. The scaleup measures outlined this week will do little to help them.
Jonny Clark is an angel investor and startup co-founder.