A recent blog post by Monzo founder Tom Blomfield asks why the UK languishes behind the US when it comes to building technology businesses. He thinks he has found the answer.
The transatlantic divide between the UK and US can feel really wide when talking about technology business success. While the US races ahead in creating new tech unicorns – 928 worth a combined $3.2 trillion to date, according to Pitchbook, – the UK may lead Europe, but is still miles behind, with the whole region minting 215 unicorns to date, worth just under $620 billion. The gulf continues up the ladder, too: Microsoft, the US’s biggest tech company, has a market capitalization of $3.1 trillion, while the UK’s Arm has a market cap of $126 billion.
Tom Blomfield, a partner at famed startup incubator Y Combinator and a successful founder himself – he’s the former CEO of British neobank Monzo – asked in a recent blog post why the UK leads the way in academic research, but languishes when it comes to building successful businesses off the back of that work. “Undergraduates at top US universities start companies at more than 5x the rate of their British-educated peers,” he wrote.
Key among the issues he highlighted was that UK developers seem far too willing to be stalled by the fear of failing. “In the UK, the ideas of taking risk and of brazen, commercial ambition are seen as negatives,” he wrote. “The American dream is the belief that anyone can be successful if they are smart enough and work hard enough. Whether or not it is the reality for most Americans, Silicon Valley thrives on this optimism.”
American ideal, British pessimism?
For Angus Allan, senior product manager at xDesign, the UK’s reticence to take risks reminds him of a cultural phenomenon back in his home country of New Zealand: ‘tall poppy syndrome’. The principle is: don’t become too successful, or a tall poppy growing high above the rest, otherwise you’ll be cut down. “As an ex-founder from New Zealand, I have seen examples of tall poppy syndrome in the UK, and I think this plays a large part in what Tom is describing,” says Allan.
This feels like less of an issue for US entrepreneurs. “The US seems to exude more of a sense of individualism, of exceptionalism, where success and the will to take risks are celebrated,” he says.
Besnik Vrellaku, founder and CEO of Saleslow.io, also puts this down to a different business environment when it comes to buying software. “Both countries value big ambitions and respect entrepreneurs, but the business appetite differs hugely,” he says. “In the US, buyers are more willing to try new tools due to a hyper-competitive environment.”
Change your mindset, change your story?
If all those issues are at the heart of the gap between the US and UK’s successes in transforming talented developers into leading titans of industry, then they should be easily fixed. But it might not be as simple as that.
Demographics, business and industry realities, and access to funding are all at play. “The US market is vast and offers larger opportunities, making it more attractive for entrepreneurs,” says Vrellaku. “The UK market, being smaller and more saturated in certain areas, poses natural limitations.”
Those issues may well have become worse thanks to the 2016 vote for Brexit in the UK, which detaches the country from global markets and adds friction for any international growth. That has a knock-on effect on businesses that do succeed. UK success stories like the cybersecurity firm Darktrace is now owned by American private equity firm Thoma Bravo, and the chip designer Arm will list publicly in New York, rather than London.
“Many UK businesses don’t initially consider international expansion either, missing out on the broader market potential,” Vrellaku says. “However, leveraging digital tools and international payment platforms can facilitate global reach without a physical presence in the US.”
Sharp elbows and stiff upper lips
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There is a difference in mentality that can account for large parts of the gap between the UK and US, says Vrellaku. “This ‘do or die’ mentality fosters continuous innovation, resulting in shorter sales cycles” in the US. By contrast, the UK takes a more measured approach. “UK businesses often adopt a more complacent approach towards rapid growth and tech adoption, preferring sustainable, slower-paced growth,” he says.
The difference in attitude towards risk may stem from cultural gulfs. But it’s also reflective of different educational attitudes. The mantras instilled in the UK’s computer science graduates can shape their attitude to business once they graduate. “The university system in the UK might contribute to this cautious mindset, as practical, entrepreneurial experiences are limited, leading some to disengage from academic paths to focus on business ventures,” says Vrellaku.
“Failure in the UK carries a stigma, whereas in the US, failure is seen as a valuable learning experience, which encourages risk-taking,” says Vrellaku. Take the Amazon founder Jeff Bezos, who has admitted to making “billion-dollar” mistakes in his career that helped improve his decision-making in the future. Could a UK founder afford to make similar mistakes? Blomfield thinks things are starting to change, and that the flywheel that helps UK companies rapidly improve is starting to spin.
Green shoots
“I agree with Tom’s point that the flywheel is starting to spin,” says Allan. “There are so many start-up accelerators, coworking spaces, coaching programmes, and community events designed to support founders.” He points to companies like Blomfield’s former firm, Monzo, accounting software like FreeAgent, and payments company Wise as recent British success stories.
In those instances, success breeds success. Blomfeld’s peers at UK fintech GoCardless have gone on to build similar tech success stories, and a similar effect is starting to be seen with fintechs Monzo, Revolut, and TransferWise.
Seeing successful founders managing to break through glass ceilings should give the next generation of founders the confidence to overtake their US counterparts. “A generation of graduates exposed to a global community – largely thanks to tech – feel more comfortable pushing the boundary of what is possible, and maybe, just maybe, attitudes are starting to shift in the UK too,” says Allan.
The key thing is to change attitudes. “Can we gain our own sense of exceptionalism and be proud of what we can achieve? Can we start to share and celebrate and be honest about our achievements?” asks Allan. “I think so, if we want to.” It won’t be an easy shift however, requiring a concerted effort from founders, investors, universities, and, yes, politicians.
