Brian Spence, our expat financial services expert, considers some UK start-ups that have hit a valuation of US$1 billion or more in recent years – and the magic that made them.

While the UK may be a relatively small country in terms of size, it punches well above its weight in terms of entrepreneurial spirit. The UK scores third globally in the OECD’s country rankings for the number of start-up businesses created (behind only the US and China). It also has far more “unicorns” than other, larger European countries – almost half in fact.

As those interested in venture capital will know, a unicorn is defined as a start-up company which grows to reach a valuation of $1 billion or more. Current estimates put the number of European unicorns at 50, with 22 of these magical companies originating in the UK or based there (the number was 18 in 2016).

Many of these UK unicorns are already household names; they certainly reach into every area of life.

Billion-dollar babies

Deliveroo, a company that delivers food from customers’ favourite restaurants straight to their door, is one standout name. Founded only in 2013, this company has already reached a valuation of over $2 billion, employs some 2,000 people and operates in 200 UK cities.

Just Eat, an online platform for takeaway food delivery, is also helping to fill the nation’s stomachs – and its backers’ pockets. This company was valued at almost $8 billion last year and is worth more than many of the UK’s largest supermarkets.

Consumers need something to wash all that food down with, something which another start-up, Brew Dog, has clearly been helping them with. This artisanal brewery has built itself to a valuation of $1.4 billion with some exceptional branding work that now sees it featuring in the UK’s trendiest pubs and bars.

The UK is also big on cutting-edge technology, with biotech and gaming unicorns topping the unicorn rankings.

On the more socially useful side, we have BenevolentAI ($1.8 billion), a company which uses Artificial Intelligence to scan academic research to discover new uses for compounds and molecules; and Oxford Nanopore Technologies ($1.7 billion), a firm spun out of the University of Oxford to make DNA sequencing easier and more accessible through new devices.

Meanwhile, Improbable, a virtual simulation company has reached a valuation of over $1 billion after only five years of existence. Started up by three graduates, Improbable is lauded as having achieved the largest ever round of venture funding for a private UK firm ($500 million). “Improbable” indeed!

Dream investments

The UK government offers very attractive tax-breaks for investing in start-up companies and there have been some exceptional runs seen on AIM (the UK’s secondary stock market) that must have had risk-averse investors kicking themselves. Online fashion retailer ASOS is king among these: once shares were trading at just £0.03, but have rocketed to £6,574 at the time of writing. Anyone investing just $1,000 back in 2003 could have easily made themselves a millionaire by now!

So, what is the magic all these unicorns have in common? In short, I think it all boils down to them being ahead of trends and capitalising on them – whether these relate to technology, medicine, leisure or fashion. People are getting increasingly time-poor and reliant on their smartphones? An app-based food delivery platform is bound to do well. Fashion is moving faster than ever due to social media, but local shopping centres are dying out? Well then, an online fashion retailer offering easy returns can’t go wrong.

Put simply, our UK unicorns have seen the way society is heading and deployed out-of-the-box thinking to meet its needs – often leveraging cutting-edge technology to do so in entirely innovative ways.

Vietnamese society is changing at lightning fast pace, and the country is also rapidly becoming a technological powerhouse as its citizens’ wealth grows. One can’t help but think some serious unicorn-making magic is about to happen here.

The question for investors is where to find these mythical beasts – and how to find them early enough to make some real returns. I’d certainly be interested to hear of any foals finding their feet just now… - VNS

* Brian Spence is managing partner of S&P Investments. He has over 35 years of experience in the UK financial services industry as an investment manager, financial planner and M&A specialist. He is a regular contributor to the UK financial press and has a deep understanding of the financial services community. Brian’s column will reflect on all the challenges and opportunities within the Vietnamese market, bringing a fresh perspective to today’s hottest issues. The columnist’s email address is brian@sandpinvestments.com.