Americans (me) and Brits are cousins, but it goes deeper than that.
As I write in my book, Welcome to Entrepreneur Country, the world has “gone network”; it’s no longer linear, hierarchical or top-down. We live in a time of carrots, not stick — of influence, not control. Technology creates exponential growth because of its inherent network effects.
The UK “did network” before it became fashionable. Most companies in my sector, venture-backed technology start-ups, spread across the world through the “Anglosphere” – a combination of the Commonwealth plus the US. The British Empire was a massive global network. It binds us today and those who are smart leverage it. The UK has contributed many successful, high-growth networks in various sectors – Alpha in the evangelical arena with 15m members, the Gazelle Colleges Group in enterprise education and now Tech City, which is 1,000 companies strong in east London. London feels like it is at the centre of the global network.
Leveraging networks is how successful entrepreneurs build game-changers. Financial services is an area that the UK is exceptionally good at. Let me give you some examples of the best companies at the crossroads of technology and financial services, some of which I have invested in.
The Prime Minister name-checked Alastair Lukies in his conference speech last week. Lukies founded and leads Monitise, the global leader in mobile money payments and banking. Backed by Visa, it is worth $600m (£370m). It won early success by integrating into the ATM networks, and has expanded throughout the Anglosphere in less than a decade and recently bought its biggest US competitor. Lukies had a simple insight: “If this is going to work, it has to work for everyone.” He has built the economics for the new ecosystem of mobile money, and as that industry’s architect he is going to make superior returns for his shareholders.
Nutmeg, the new online investment manager, launched just last week. As Nick Hungerford, its founder, said to me: “Everyone knows that their private banks are not making them money.” Nutmeg has secured top investors, such as Tim Draper of Silicon Valley fame and Daniel Aegerter, who sold Tradex in early 2000 for billions. Its product is one of the most user-friendly online consumer apps; you almost forget you are setting up funds to achieve financial goals.
It’s in the same family of applications as Money Dashboard, run by Gavin Littlejohn, which enables you to have a true picture of your financial position, and to have all of your financial assets in one place.
One of the few positives of the past half-decade’s financial crisis is that those in financial services are starting to understand that it isn’t an industry; it’s a service industry to industry. Capital has always followed ideas and the industrialists who built the global leading companies of their day. Money is really a proxy for trade and relationships, it hasn’t existed for forever. One of the current realities is that there is a lot of money, but not in the “usual” places – banks and govern-ments. It is on corporate balance sheets.
That is where a company such as Oxygen Finance starts. It understands that “spend” is your biggest corporate asset and turns your back-office into a revenue-generating asset. With £35bn owed to SMEs in this country, releasing that to them sooner would be a benefit to all parties. Oxygen has an early-payment model and automatic rebates, essentially turning liabilities into assets. It is building a business-to-business trading network that may ultimately replace the Visa network by integrating trading and financial services.
Access to financial services separates those who can aspire to and live in the first world and those who cannot. As the internet enables us to distribute productivity tools (phones being the biggest one) to more of the 7bn people on the planet, then money combined with those tools can lift the poor up.
Ultimately financial services comes down to the data that it learns about our lives. That data has a value to us and to the markets. Google has built a multi-billion pound business leveraging our data, albeit anonymously and aggregated. We get nothing for its use. Although Google says it simply organises the world’s information, it does much more — it organises the economics of the world’s information. That’s why it is winning. It has become an operating system for the online data. Ariadne, my firm, sold BeatThatQuote, a financial services price-comparison firm led by John Paleomylites, to Google for precisely that reason. BeatThatQuote was challenging the business model of Google by providing an economic value for the use of their data back to the user through a cashback deal. This is why Google paid 122 times earnings before interest, tax, depreciation and amortisation for it.
Some may not believe that the poor have a “financial value”, but they do. If we want to expand the world’s wealth for more people to participate in it, we need to think differently — very differently.
The data that reveal how we behave, our transactions and communications, could become an important asset that helps the poor establish a value to society.
As smart phones proliferate, the two-way broadcast channel will enable everyone from poor to rich to vote on the information they receive. Vestergaard Frandsen, a for-profit humanitarian development firm, distributes its “LifeStraws” in Kenya and then checks on usage with mobile phones. That data may become more valuable than it knows.
Mark Davies, the co-founder of the First Tuesday network with me, has set up a “Facebook for Farmers” backed by George Soros and providing data to African farmers. These services will lift the poor up.
Mr Cameron said last week that there was nothing that the UK could not do. British business builders are uniquely positioned and qualified to understand a future where financial services is reattaching itself to trade, where networks drive growth and new asset classes, such as personal data, your vote, and the money you spend, are emerging in the market place of ideas.
This is a structural change akin to the move from the horse to the car and the UK has a great advantage in this networked world – an island nation built on trade. The question is, will it make a unique contribution?
As British entrepreneurs and leaders, the opportunity is to organise the economics of new ecosystems so that everyone shares in the upside.