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SVB UK Fintech Investment Trends Analysis

Here at the Forsyth Group we have been working with a lot of Fintech startups in recent times, and we have really noticed a momentum building in the sector. Silicon Valley Bank have recently released a report on Investment trends in Fintech, with a lot of statistics that corroborate our recent experiences with Fintech companies.

The report opens by detailing the fact that the fourth quarter of 2014 was the busiest time in the history of this space, with 214 deals taking place globally. The biggest acquirers of new Fintech startups are more established Fintech and payments businesses, and this market saw 211 exits in 2014 alone, making it the most fruitful period of the last five years. Further stats also show that the UK is the hub of Fintech in Europe, with $539M of Venture Capitalist funding in 2014, amounting to half of investment in the whole of Europe in this area.

Perhaps the headline funding round in recent times has been Transferwise, with their recent Series C raising $58M, which is thought to value the company at around $1B. However, this is by no means the only big raise of 2014, with others such as Borro, Funding circle, Nutmeg, Zopa, Block Chain and Powa all raising large rounds as well (see graph below). With press coverage increasing, and the recent FinovateEurope 2015 conference showcasing numerous exciting UK Fintech companies, including our client Meniga who won a Best of Show award, we can only see this trend continuing into 2015.

More positive UK-related stats abound in this report. Fintech is currently worth £20B in revenue to the UK economy, with 18% of this coming from emerging businesses. Due to the City of London’s global reach and reputation, the UK has four Fintech incubators, and it is one of three sectors that the CBI predicts will be worth a combined £300b to the UK economy by 2020. The report points out that whilst Fintech may seem like a new ‘buzzword’, in fact the sector isn’t new. The UK has traditionally been somewhat behind in Fintech, but this is all changing now, with 60% of all Fintech startups in Europe now being based in the UK. With the current support networks in place, such as the aforementioned incubators and the large banking sector, this trend should also continue, and we look forward to watching this space grow.

 

The future of the Games Industry

Our Friends at Digi-Capital have released their latest analysis of market trends, this time regarding the games industry. The Headline information is that 2014 saw a record $24B of game company exits across acquisitions and IPO’s, with more than half of this value being driven by mobile. $15B of the $24B was from acquisitions, with 5 ‘megadeals’ being responsible for $8.1B of this. The other $9B came from IPO’s, which was dominated by Asia. These statistics could be seen as representative of a bubble, but the analysis from Digi-Capital explains why these statistics have a more subtle meaning.

Digi-Capital hark back to an earlier report they prepared at the beginning of 2014, where they predicted that the games software market would reach $100B by the end of 2017. Having re-analysed the data from last year, they have revised this to happen at the end of 2018 instead. This is due to the fact that only mobile gaming is showing strong double digit growth, with the possibility that virtual reality could also become a breakout. This leaves their overall growth forecast for games software/hardware at 8.8%. While this is of course a healthy number, Digi-Capital point out that markets with single digit growth cannot be described as bubbles, as in these conditions “a rising tide no longer lifts all boats”. In this instance, not just any company can be guaranteed to grow exponentially on the crest of a wave, and the quality of the product and company is far more important.

Hit hardest by this single digit growth are the mid-tier games companies, according to the report. Big corporate firms with hit IP’s (Intellectual properties), user scale and cash flow are able to invest in infrastructure and marketing to compete in a stable growth market. Smaller independent firms may not have a hit IP yet, or the advantages that come from being a big firm, but their costs are far lower, allowing them too to compete. It’s the mid-tier firms that Digi-Capital warn could be in for a tough time. They may not have the hit IP’s yet, or the advantages from being a large-scale company, but they still have the costs associated with infrastructure and marketing. It isn’t the end for them by any means, as they of course still have the capability to produce a hit IP, but they seem to be in the most vulnerable position over the next few years.

A further challenge for mid-tier companies detailed in the report is the nature of acquisitions and investments in a stable growth market. The big corporate buyers are already managing their own cost bases, and so acquiring whole teams is low on their list of priorities. It is exceedingly difficult to overtake big companies when you are medium sized, and the investment amount of $1.5b in 2014, while not insignificant, is still 25% lower than it was in 2011. This all adds up to difficult years up ahead for non-savvy mid-tier games companies.

This analysis, while not overly pessimistic, means that companies have to be smarter to see success. KamaGames, who we have worked with, have a portfolio that currently reaches 70M users worldwide. They have now partnered with Manchester United, and will launch special edition s of their games with a Manchester United crest, imagery and theme. As they are one of the most supported teams worldwide, this opens up an opportunity to significantly grow their user base. Another way to keep up growth and attract attention is to focus on the highest growth area of the sector. Both KamaGames and another of our clients, Joybits, focus on the mobile side, as this is the only area with double digit growth. As detailed in a previous Forsyth Group blog, Games are the app segment with most frequent use after downloading, so there is scope for this area to continue to grow.

The report ends with a warning that until there is a new wave of innovation that can accelerate market growth, consolidation is the key. This isn’t necessarily bad news though, as it means that quality is more prized than quick, unwarranted growth.

Fulfilling those New Year’s resolutions – how are you doing?

January is a Marmite month: on the one hand we love the fresh start, the inspiring resolutions, the chance to make this the most healthy, productive, educational year of our lives; whilst on the other hand, we’re struggling to resist those glasses of wine, and stubbornly refusing to wake up before the crack of dawn to crack on with our new exercise regimes. On January 1st we bounded out of bed with the determination of an ironman triathlete (after the hangover had subsided); now that it’s almost half way through January, the novelty of cruciferous vegetables has worn off, and the sharp reality of running on a dark wintry night is hitting us hard, we’re looking to re-energise our motivation by reviewing our goals.

 

We’re determined to beat the January blues with both company-wide and individual life-hacks.  We’ll keep you updated on our progress and we wish you the best of luck with your own. As part of this, we will be blogging about the different apps/tech/self-help programs we use to 1. Make sure we stick to those pesky resolutions and 2. Let you know which apps/events/self-help programmes we find most effective.  We’d also love to hear what is helping you achieve your 2015 goals, so do reach out to let us know!

 

Coming up in reviews:

5 New Year’s Resolutions from the Forsyth Group

As it is the New Year, and by now everyone has returned to work, we thought we would write a list of our New Year’s resolutions, and how we are going to use technology to help to implement them.

1. Get some Headspace

I think we can all agree that January is not the best month. It’s cold, it’s dark, you’ve spent too much money on Christmas presents and parties, and summer seems a long way away. However, rather than letting it all get too much, we are going to use the Headspace app to clear our minds from stress, helping us to work harder and keep focussed, but also stay relaxed and beat those January blues.

2. Read More

In our busy modern lives, it can be difficult to either find the time or the motivation to read enough books, when it is all too easy to be distracted by a screen, be it the television, computer, tablet or phone. Mark Zuckerberg seems to have noticed this trend (which he is partially to blame for!), and has now started a book club on Facebook, which has already garnered over 180,000 likes, and the first book selected, “The End of Power”, has sold out on Amazon.

3. Learn a language

In our ever-increasingly global world, being able to communicate in more than one language is a vital skill. Now, thanks to apps like Duolingo, you can learn a new language on your phone, meaning it can be done anywhere. From the commute to the bath, there is now no excuse not to try to broaden your linguistic skills!

4. Drink better coffee

Here at the Forsyth Group some of us could safely be called caffeine addicts. This year, we’ve resolved to give up on instant coffee, and we have instead started ordering from Pact. With Pact’s algorithms, you can rate the coffee you receive and they will tailor future deliveries to your taste. The difference is unbelievable, with coffee now being a pleasure as well as a necessity!

5. Make small realistic changes

YOU-app is a new IOS app that aims to gently nudge its users into healthier daily habits by use of what they call “micro-actions”. Promoted heavily by Jamie Oliver, the idea behind the app is that to create sustainable change in one’s life, research has shown that small steps, rather than radical leaps, are far more effective. All of the above resolutions are achievable according to this small change principle, so let’s hope we can stick to them!

 

5 Tech Gadgets for your startup’s Secret Santa

It’s the last full week in the office before Christmas, so spoil your Secret Sant-ee with one of these genius gifts:

1 The 3Doodle is a 3D printing pen, allowing the user to draw in 3D using heated plastic filament, which cools almost instantly into a solid structure. Perfect for the artistic genius, or even somebody with a creative mind and a steady hand.

2 Every start-up has at least one team member who is permanently high on espressos. For your caffeine obsessed colleague, a USB cup warmer is the ideal gift! Simply plug it into a USB slot in their computer, and their precious morning cup of coffee will stay warmer for longer.

3 Are your colleagues burning the midnight oil in the rush before Christmas? Show them you care with the Night-Write Pen- perfect for those late nights drafting business plans. This gift is both thoughtful and cost-effective, as the pen has 2 bright LED bulbs emitting light, so feel free to turn the lights off when you leave them in the office.

4 Your CEO has all the charm and wit of Bond (or so you tell him), and he loves a Martini. All he needs now is the secret agent DVR Spy Watch, which includes a video camera, and 4GB of internal flash memory.  He’ll be offering you a lift in his Aston Martin in no time.

5 And finally, for the person who has everything, or the nihilistic philosopher in your office, we have the Box of nothing. This is literally an empty box, designed to remind the recipient that “You have everything. You need nothing.” Available at €34, or €199 for a version where the proceeds go to charity. Only recommended for colleagues with a sense of humour, or a charitable side, or else you’re getting a lump of coal in return next year.

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