Hubris, meet nemesis. Dan Wagner, the founder of Powa Technologies, claimed to be building “the biggest tech company in living memory” — a British giant that would leave Google and Alibaba in its dust. But as the Financial Times reported on Wednesday, the mobile commerce company has had to delay some payments to staff and suppliers. In a video message to staff late last year, Wagner admitted that Powa was “basically pre-revenue”. This “unicorn” (the term used to refer to private companies valued at more than $1bn) may still have a bright future — but for the moment its mane is looking rather ragged.
What is most interesting about Powa, however, is not the imbalance between rhetoric and revenue. It is that its global ambitions (including a joint venture in China) make it a novelty — and a rarity — on the London scene.
Britain is increasingly skilled at turning its brainpower into thriving tech firms. But these tend to end up in the arms of the American giants. Take SwiftKey: two of its co-founders turned their frustration with typing on mobile phones into a predictive keyboard app downloaded by more than 300m people, a deal to provide Stephen Hawking’s language software, and finally a buyout from Microsoft earlier this month for $250m. The only one not celebrating was the third co-founder, who traded his initial stake for a bicycle.
Before that there was DeepMind, the British artificial intelligence company acquired by Google for a reported £400m. And VocalIQ, one of three British tech firms acquired by Apple in 2015.
“I think there’s definitely an issue in Britain, and with technology companies in particular, of thinking that the route to success is being bought by a larger — usually American — company,” says Matt Warman, Conservative MP for Boston and Skegness, and a former technology journalist. The digital economy has a built-in tendency towards monopoly, due to the network effects that entrench market advantage. Yet the firms doing the monopolising seem always to be American. They have the so-called Fangs — Facebook, Amazon, Netflix, Google. We get a selection of stubby molars.
What is the explanation? Partly, it is about culture. London is now Europe’s largest tech hub, with more than half of the continent’s unicorns. But a recent report noted that in comparison to other hubs, London “lacks a fully authentic entrepreneurial spirit”. An earlier survey found that twice as many company founders were after a quick buck as in New York or Silicon Valley. The Brits wanted a slice of the action; the Americans wanted the whole pie.
Yet ascribing this phenomenon to a national inferiority complex is, Mr Warman insists, “horribly unfair”. Rohan Silva, who as an adviser to David Cameron helped build up Tech City in east London, argues that “it takes a village to raise a unicorn”. Building multibillion-dollar companies does not just require entrepreneurs and investors, he says, but an array of specialised executive talent with experience of growing companies.
Mr Silva claims London is building up its talent pool — not least because the founders who “exit” to US giants often then invest in new start-ups. But obstacles remain. For example, tax relief for entrepreneurs is capped at £10m. “It means there is a massive incentive to sell before your stake is worth that,” he says. “I meet loads of entrepreneurs who are grappling with that quandary.”
But there are also structural problems that British, and European, firms may never overcome. For a company such as Uber or Facebook, with operations in 50 American states, overseas expansion rarely represents an existential risk. For companies from smaller countries, it might mean doubling in size. That makes it a much riskier bet — and one that many of Powa’s British rivals have, entirely rationally, shied away from.
It is obviously good news that Britain is building tech firms, of any size. But their failure to join the ranks of the megafauna is a problem for politicians as well as entrepreneurs.
As the recent wrangling over Google’s tax bills shows, relations between tech giants and national governments are tense and getting tenser. The Fangs are, increasingly, actors with real global muscle; the same may soon be said of their Chinese equivalents.
Europe has talked endlessly about the need to build tech champions of its own. But instead the US giants have grown larger — trampling or swallowing firms both at home and abroad.
In the old days, countries used to measure their virility by the size of their fleets. If tech giants are the new dreadnoughts, Britain and Europe were long ago blown out of the water.
The writer is author of ‘The Great Acceleration: How the World is Getting Faster, Faster’