Less than six months ago, I spent my days in a sun-filled office with floor-to-ceiling windows and hipster-friendly exposed brick in the heart of San Francisco’s infamous SoMa district. These days, I’m in a not-so-luxurious office in London’s Bermondsey. As I write this, rain is pouring outside and it’s freezing.
I launched my own fintech start-up in London last year. With so many places battling to be the fintech ‘capital’ and San Francisco in a leading position. This is why I chose to base myself in the UK.
1. Getting the idea off the ground
Great products take time to develop and mature. It’s really hard (impossible) to write a plan for taking a new product to market. There are so many unknowns that it renders any kind of planning redundant. Start-ups work because they can iterate quickly and try lots of variations in order to hone in on the optimal formula. There is only one way to start and it involves packing in the day job and committing yourself completely to what you’re doing.
There’s an element of chicken-and-egg about it: you’ll never develop an idea to the point that you’re happy packing in your day job – but you can only achieve this if you’re working full-time. London has a unique programme called Entrepreneur First (EF) that gives potential founders the precious “slack on the line” (financially speaking) in order to commit to building ideas and turning them into companies.
Unlike their much-lauded Silicon Valley counterpart, Y Combinator, EF takes candidates’ “pre-idea”, creating a melting pot of technically-minded people all wanting to build new stuff. Without EF I think many great companies would have remained unexplored of their respective founders, as they while away the hours in big corporate office buildings.
2. Healthy scepticism
My American friends will definitely mention my scepticism within minutes of talking about me. I don’t I boast about, and it’s a common perception of Anglo-American transplants, but some scepticism is good in fintech.
There are always at least 100 reasons a particular idea won’t work: “Who is going to pay to stay with a stranger?”, “Why not just use Internet Relay Chat (IRC)?”, or even “Why do we need another search engine?”.
The Valley has a relentless optimism and appetite for new concepts, no matter how leftfield (Uber for dogs anyone?). The upshot is a willingness to do things that don’t scale and the resulting “unicorns”: Airbnb, Slack and even old timers like Google (to name a few).
Ideas take time to form into viable businesses, so it’s important to allow them time to develop. There’s also a glaring negative effect of too much optimism, particularly in a technology monoculture like San Francisco. I’m talking about companies built by great minds that solve insignificant problems. I’m talking about the 100th on-demand cookie delivery company, or the 1000th “niche” dating platform. If your environment doesn’t expose you to meaningful problems, it’s very difficult to develop meaningful solutions.
The diversity of London and its status as the UK’s cultural and economic epicentre provide a fertile environment for the development of companies looking to effect real social impact.
3. London is young and hungry
One of the oft-cited differences between Europe and the US is a lack of mafias. I’m not talking about the Corleone’s, but Musks, Thiels, Levchins, Moskovitzs, Andreessens, Horowitzs, and the like.
Successful companies breed successful companies. The PayPal Mafia alone is responsible for subsequent successes including Tesla Motors, LinkedIn, Matterport, Palantir Technologies, SpaceX, YouTube, Yelp, and Yammer.
The argument is that Europe’s younger start-up scene is yet to see successes of the same calibre and therefore hadn’t benefitted from its own crop of well-financed, experienced and committed serial founders. That said, if Thiel founded Palantir in 2004, six years after co-founding PayPal, can we expect similar follow-ups from TransferWise founders Kristo Käärmann and Taavet Hinrikus next year? What about Skype and Spotify?
4. The UK’s tax breaks
SEIS stands for Seed Enterprise Investment Scheme. Put simply, SEIS allows early-stage investors to minimise risk by claiming income tax relief of 50% on investments up to £100,000 per tax year. If an investment makes a return, investors are exempt from Capital Gains Tax on their profits. Likewise, if things don’t go well, the investor may offset their loss against their income tax.
5. The foreign talent available in the UK
So far I’ve glossed over the sizeable topic of immigration, but it has played a key role in my decision to build a company in the UK and can’t be overlooked. I was one of the lucky few “winners” of the infamous H1-B visa lottery, which allowed me to work in San Francisco. On 13 April the USCIS announced completion of the H1-B cap lottery selection processes, receiving a reported 233,000 applications for the 65,000 possible visas (excluding the 20,000 internal ‘master’s cap’).
Each year this problem gets worse, as those who missed out in previous years reapply. While organisations like FWD.us, founded by Zuckerberg, Gates, Hoffman et al. are leading the charge for reform, immigration still remains a hot topic in The Valley, and for all the wrong reasons. The UK has an opportunity to get it right. An open letter  signed by over 200 members of The Coalition for a Digital Economy (Coadec) and delivered to David Cameron in October warns of the adverse effects further restrictions upon skilled immigration could bring.
Fundamentally, right now London is reaping the benefits of ‘late mover advantage’. There’s a huge surge in both the number and quality of fintech firms out there, and this has created a buzz. It’s just a shame about the weather.
Freddy Kelly is co-founder and CEO of Credit Kudos, an alternative data platform for the credit industry. After completing a B.Sc. in Computer Science at the University of Manchester, Freddy moved to San Francisco to join the engineering team at Bitnami (YC W13). Prior to founding Credit Kudos, He was the first engineer at A16z-backed TXN, developing their transaction analytics platform.