Can London fintech really shoot the stars out?

In the first of my monthly columns on fintech trends, the US is at the forefront of my mind.

Why? Well, for a number of reasons, one is that I’m writing this piece on a flight to NYC – on my way to finalise negotiations on a fintech deal. While there, I will be catching up with some of the fintech investors and companies that we work with.

The Tech Axis

The world is getting smaller; tech helps that, and the world of certain niches within the overall tech ecosystem reduces its size even further.

If you have ever heard me talk on this topic, you will also have heard me talk about the Tech Axis – starting at San Francisco, through NYC, on to London and then Berlin.

The fintech world is, of course, much more complex than this (as any amazing fintech company in Boulder, Paris or Hong Kong will tell me – I look forward to the emails…), but the point is that the world of fintech is still quite compact and bijou (albeit expanding rapidly).

The hype and ‘heat’ around the NYC fintech ecosystem is certainly greater than in London and the amount of investment going into NYC fintech startups is significantly larger than like-for-like London startups.

I would say that the Bay Area (San Francisco, in particular) is also now waking up to fintech in a very big way; companies there are raising even larger rounds than their NYC counterparts/competitors.

Where the VCs live

Why is this?  One key issue is the location of the most successful VCs. The Bay Area boasts the highest concentration of these; NY is some way behind it on that front and Europe generally is a long way behind NYC.

But with the rise of new fintech-specific accelerators and workspaces, as well as the general hype around the London fintech phenomenon, we are seeing a huge increase in both the number of fintech-focused VCs and in the number of US VCs backing London fintech startups.

Investment makes the world take note

New fintech funds are being created by the banks and investment managers (such as Orange Growth Capital), but it is particularly interesting to see the more generalist Tech VCs also piling in.

When big VC brands such as Sequoia, Accel, Andreessen Horowitz and Battery Ventures start to consistently back a tech sector, the world takes note.

When CB Insights carried out analysis on the investment patterns of 12 of the biggest global VC funds, results showed more than 300% growth in new monies being invested into fintech in 2013 in comparison to levels in 2009.

Our European neighbours are also seeing a marked increase in fintech investment – higher, in fact, than the levels of investment currently being poured into the traditional US tech.

UK fintech catching up

The US market remains much larger, though and we still have some way to go before we begin to consistently match the huge rounds being achieved in the US (think, for example: Square’s $100m round and Stripe’s $80M round).

However, while we all applauded the Funding Circle $65m series D round led by Index Ventures, this is a sign of things to come for Europe in general, but London specifically.

Investors are most actively looking at four segments: lending; personal finance; payments; and bitcoin/blockchain technologies. And in the next few columns for Tech City News, I will dig a little deeper into these areas (unless I get side-tracked on another flight, I guess).

A corporate partner, Richard Goold heads the US desk and co-chairs the firm-wide tech sector group at Wragge Lawrence Graham & Co. He spends his working life leading complex corporate transactions, generally in the tech sector and usually across borders. To accompany his insights in Fintech Monthy, he will be writing a monthly column on the biggest trends in fintech.