Despite restrictions and lockdown, tech has survived the crisis
The numbers, by any measure, have been astonishing: 40m confirmed cases, a million dead around the world; stimulus packages worth tens or hundreds of billions in Europe and trillions in the United States; vast swathes of the planet’s population confined to their homes; countless businesses on the brink of extinction. The toll of this tiny virus has been enormous.
And yet amid the rubble, one sector has thrived. As stock markets crashed, tech valuations soared. While the FTSE is down 25pc since the start of the year; the Nasdaq is up almost 30pc. Many tech stocks have done far better. Zoom is up by 600pc. Nor has the appetite for stock market flotations cooled. Snowflake, which launched in September at $30bn, doubled in value on day one. And that for a company in cloud computing, where it must take on Google, Microsoft and Amazon.
It’s not just valuations. The pandemic has thrust tech companies to the heart of our everyday lives. In myriad sectors, from the high street to holidays, the digital replaced the physical. Airlines, offices, even the idea of cities themselves have taken a beating as we were finally forced to realise that working from home was a practical reality.
Telegraph Tech 100 2020: see the full list
Governments too, turned to technology as never before. At the height of the crisis, Matt Hancock recruited Google, Amazon, Microsoft, and Palantir to process patient data. Faculty, a British AI start-up whose founders Mark Warner (No 53) and Angie Ma (No 60) feature on our list, was called in too. Suddenly, having long sought to overcome barriers to access confidential health data, big tech was being ushered in. It was a watershed moment.
Indeed, our Tech Hot 100 ranking reads like a pandemic survival kit, stuffed with fintech to move money remotely, healthtech to see your doctor remotely and firms that will deliver everything from fitness wear and takeaway meals – or powdered “human fuel” – to your door. You need never leave home again.
Marc Warner's Faculty found itself at the heart of the Government's Covid-19 response
Credit: Sam Frost/Telegraph
“The pandemic has accelerated the switch to digital,” says Anne Boden (No 74), chief executive of Starling Bank. As arts venues closed, Britain’s traditionally strong, £4bn video gaming industry capitalised on a new and captive audience. Sales increased by more than 200pc at the beginning of lockdown and studios cannot find enough talent to meet demand.
As unemployment threatens the rest of the country, vacancies in gaming are up by 20pc in a year. One recent report revealed that the over-60s were finally having a crack with the controllers – playing games with grandchildren as a way to stay in touch. No wonder the sector, which made more than video, music and film during lockdown, is expected to triple its workforce – to 80,000 – in the next five years.
‘People expected a downturn’
Of course, there have been casualties too. Roland Lamb, of musical hardware company Roli, has dropped off the Tech 100 this year. The company has seen its value slashed in funding rounds – there is not much call for live music in the new world.
But largely the news has been positive – to the surprise of many in the tech business. Indeed there is still some anxiety about bubbles – how could there not be after hubris was met so firmly by nemesis in the dotcom crash of 20 years ago. “We were coming off the longest bull run in history,” says investor Eileen Burbidge. “People were expecting a downturn at some point.”
All the more so after 2019, a year of no little self-congratulation in UK tech, when start-ups raised more than £10bn, closing the funding gap on the US and China and leaving Britain the standout country in Europe to come and set up a new business. So much for the chill of Brexit.
Start-up funding in the UK in 2019 hit record levels
For many companies on our list, lockdown served as an emergency stress-test. They passed. “Across the board, everyone snapped into wartime mode and took stock,” Burbidge says. After all, they were only founded in the last few years and already had remote working policies – and software – in place. That and a tech-savvy workforce too. “It was obvious to do everything online,” says Charles Delingpole, of ComplyAdvantage (No 25).
Not only that, but the relentless push of high-growth start-ups to expand internationally meant that work was distributed globally, among various lockdown regimes. “Singapore locked down in Jan or Feb, London was one of the last. We therefore had a seamless transition,” Delingpole says. “It was the rationale of being global.” He says that his team “can [now] solve more and build more than we ever had, productivity has been very high. What’s holding us back is a shortage of coders and technical talent.”
‘High quality founders are hotly contested’
Not that it has all been smooth sailing. Cash-burn in start-ups is often high. As they grow, many rely on loans to tide them over to the next funding round. In April, during the greatest uncertainty, fears spread of a new credit crunch that would kill off many start-ups. It never happened. But that does not mean founders are not wary. Delingpole’s own company raised $50m in July even though, he says, “we were not burning cash – but it gives us a fortress balance sheet”.
At the bottom of the market – where would-be entrepreneurs sit and stare at a blank piece of paper, there is optimism too. “High quality founders with the beginnings of an idea have been able to raise money and been hotly contested,” says Hussein Kanji of Hoxton Ventures. “This tells you that it is a pretty vibrant market.”
Today, says Burbidge, “funding volume and appetite is back to near pre-Covid levels”. The big question for VCs, says Kanji, was “can we write a cheque in a virtual environment?” By summer it was clear the answer was yes. “Everyone now is happy receiving pitches in a Zoom way,” says Burbidge. “And everyone is investing again.”
Tech Hot 100: Methodology
The war on Covid is still far from over. But it is clear that the world has already crossed a threshold – a moment when digital understudies took the stage and proved they could deliver. There will be no going back. “After lockdown I went for a walk with our new investor,” says Delingpole of the person who had just backed him with $50m. “By then it was a done deal. But it was the first time we had met.”
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