With 72 unicorns created since 2009 and $8.7 billion in venture funding last year, the UK is Europe’s leading startup hub.
Although it remains uncertain how Brexit will impact startups’ ease of recruiting and rapid scaling, initial pains are unlikely to displace London from its position as a global center for finance, media, retail, and technology.
As UK-based startups reach $1 billion (~£800 million) valuations at a rate of one per month, according to data from Dealroom, VC firms have raised $3.5 billion in new funds to fuel the next wave of investments.
Interested to learn where that capital could flow, I asked nine of London’s top consumer-focused VCs to find out which specific trends they’re using to identify startup investment opportunities:
- Julia Hawkins, Partner at LocalGlobe
- Lars Fjeldsoe-Nielsen, Partner at Balderton
- Sonali De Rycker, Partner at Accel Partners
- Christian Dorffer, Partner at Sweet Capital
- Danny Rimer, Partner at Index Ventures
- Reshma Sohoni, Managing Partner at Seedcamp
- Niall Wass, Partner at Atomico
- Paul Murphy, Partner at Northzone
- Nic Brisbourne, Partner at Forward Partners
Their responses highlighted the diversify of funding interests in the ecosystem, but also show that banking, consumer health, transport, direct-to-consumer brands, and social entertainment remain hot areas.
Julia Hawkins, Partner at LocalGlobe
“I’m very focused on the healthtech sector and within consumer health, I’m particularly interested in the potential for digital therapeutics to enable people to gain control over habits and treat certain chronic conditions such as mental health.
We’re thinking deeply about transportation, we’re already investors in Citymapper, Beryl and Voi and see the huge potential to improve how people move around cities and influence how urban centers are planned, all while reducing pollution.
On that topic, we’re watching the climate change debate closely and I’m heartened by the fact that people everywhere are becoming wholly committed to reducing waste. Companies that can produce truly circular products for our families, homes and places of work I think will do well.
It’s an incredibly interesting time in media with titanic worlds of video, gaming and music are shifting and I believe in the transformative power of games, music and immersive experiences — TikTok and Fortnite show just how powerful these can be and I believe new platforms such as Playdeo will make consuming media and entertainment much more active experiences in the future.”
Lars Fjeldsoe-Nielsen, Partner at Balderton
“We are excited about the disruption within the European transportation sector, where we’ve seen new types of vehicles, like e-scooters from VOI, and amazing advances in autonomous mobility solutions. Time is up for car ownership in many city centers and competition is fierce for environmentally-friendly alternatives. This creates an exciting opportunity to use tech to improve public transport options and to leverage the sharing economy which Citymapper offers, as well as overhaul the car hire sector as new players like Virtuo are aiming to do.
We are also impressed by the continued innovation in the financial sector. We are long-time investors in fintech and have backed Revolut and GoCardless, amongst others. Traditional banks and financial incumbents are battling fragmented and outdated technology stacks to adapt to rapidly changing consumer demands, which creates a huge opportunity for startups.”
Sonali De Rycker, Partner at Accel Partners
“We’re excited about three key trends in consumer tech. The first is fintech, for which the UK has created a very supportive environment. A few large businesses are being built from London, like Monzo, buoyed by new rules written around retail banking and next generation financial services as well as huge, unmet customer demand.
The second is healthtech. Healthcare is a large and untapped opportunity plagued by rising costs for providers and deteriorating patient experience. We are seeing a few platform companies that are finding ways to successfully solve these problems by providing digital healthcare to consumers, like Kry out of Sweden.
The third is the rise of European D2C brands. Most D2C success stories to date are in the US. However, we’re seeing some interesting companies emerge from Europe that are harnessing the region’s heritage in branding, deep supply chain production and significant industry expertise in several consumer verticals.”
Christian Dorffer, Partner at Sweet Capital
“At Sweet, we are currently investing actively in companies that promote self-discovery- and improvement and in companies that help make more authentic and relevant social connections for people. As the large social media apps have reached saturation, newer and more specialized apps are offering consumers more relevant tools and connections, aligned with their interests and daily life circumstances. We also see business models evolving, with consumers being willing to spend money on relevant content and social tools and brands being willing to allocate more budget to below-the-line, more targeted campaigns.”
Danny Rimer, Partner at Index Ventures
“Brands are ‘up for grabs.’ Other than in the luxury space, where storytelling and aspiration have made legacy matter, the consumer doesn’t really have any loyalty. It’s not because a mom used Nivea cream her whole life that her children will. The reality is that direct-to-consumer brands have a real opportunity to win over generations of customers with superior products, at better prices and with greater convenience.
Cities are in need of a big rethink. Polluted, congested and unsafe, new transportation options are emerging. Coupled with changes to public transport, ban of cars in city centers, and new retail spaces taking over newly opened areas, cities in the next few years will feel very different (and it’s about time).
There is a lot of hype around fintech and neo-banks, but in this instance I’d argue justifiably so. Financial services underpin every sector of the economy, and the new fintechs are still a fraction of the industry. The opportunity is not just to replace existing services with something a bit better, but to expand access to financial products, reduce (or eliminate) fees, and increase the flow of money in the economy.”
Reshma Sohoni, Managing Partner at Seedcamp
“For me, healthtech is truly the next frontier and where we’re making a large number of investments at Seedcamp. From democratizing access to our personal health on an ongoing basis to advanced scanning and computer vision technologies that can help with early detection of everything from strokes to cancer, there’s a true revolution going on across the sector.
I think we’re moving into an era where people are demanding a more holistic understanding of their overall health, rather than just treating one symptom at a time. Founders are waking up to this and are setting out to put people in control of their own health which, let’s be honest, is the most valuable thing we have. We’ve made numerous investments in this theme already, including Ezra , viz.ai , Spill , Thriva , MyRecovery , Peer Medical , and Doctorly.”
Niall Wass, Partner at Atomico
“Several themes we are excited about include:
- Food: protein alternatives such as our investment in Memphis Meats, dark kitchens, the intersection between health & personalized nutrition and the continued delivery culture.
- Housing and financing: real-time personalized mortgages such as our investment in Habito, better insurance products including underwriting methods, financing products to break the chain of selling and buying, even hassle-free rental marketplaces.
- Specialist work platforms or ‘managed marketplaces’ for regulated services such as childcare, including our recent investment in Koru Kids. These models work to build trust on the consumer side on high spend services through recruiting, vetting and training of the supply, which also transforms the quality of work for the supply side beyond a pure first-wave gig economy model.
- Direct-to-consumer models: we continue to be excited by innovative direct-to-consumer models that are creating better products at better prices, particularly in beauty and wellness and female healthtech.
- Personal mobility: we always have an eye on as it remains such a problem of time and cost — investments into Lime, Lilium, Omio, Ree Technology so far.”
Paul Murphy, Partner at Northzone
“The internet has always helped people find their ‘tribe’ online, however, we’re now seeing a new set of entrepreneurs combine dedicated communities with tech-enabled tools, leading to really exciting results. This is happening across a range of consumer sectors, such as commerce (Goop, Masse, Girls Night In), gaming (Fortnite, Rec Room), sports (Peloton, Outdoor Voices) and media (Substack).
I saw this with communities built around Dots and Giphy, and it is core to Northzone’s investment in Bunch and Klang. We believe these types of companies, that leverage the power of their specific community or tribe, will have a massive impact on their respective sectors.”
Nic Brisbourne, Partner at Forward Partners
“The biggest high-level trend we are currently getting behind in consumer investing is services marketplaces. We often refer to them as ‘thick marketplaces,’ because the platform has to do a lot of work to match the supply and demand side.
Our investment in Koru Kids is a good example — to match parents with childcare it’s important to vet the nannies and train them on an ongoing basis. At the next level of detail, we have been looking a lot at consumer credit recently and are beginning a deep dive on femtech (marketplace and other models).”