I have just completed a three-city tour in the UK and Ireland, including Dublin, Edinburgh and London, to check in on our fellow fintech entrepreneurs and and financial service leaders. I visited with executives from the very smallest to the very largest banking corporations in the world. It was a brilliant trip, and I’m glad to say that the winds of financial services innovation are raging in Ireland and Great Britain.
I was particularly impressed with the startup entrepreneurs I met at the CEO Roundtables that I hosted in Dublin and Edinburgh. While London may boast hundreds of fintechs within its borders — and incredible ecosystems like Barclays Rise — the smaller, tight-knit communities of Ireland and Scotland have a strong ethic and a lot of promise.
The Irish are known for their highly educated workforce, but the people with whom I met were eager to admit that they are “too humble.” That said, due to the influx of large multinational corporations that make Dublin their European HQ, the population has been well trained to build B2B technologies and services for export to larger markets — Europe, Africa, Asia and the Americas. There is solid infrastructure and rich governmental support for employers coming to Ireland to set up shop, and equally so for the Irish entrepreneurs who want to export their goods and services. Enterprise Ireland won universal accolades from the entrepreneurs with whom I spoke.
Top of mind for the fintechs is the strength of their financial regulatory body — which is well accepted as a good thing — but the lack of a regulatory sandbox is almost universally viewed negatively.
Scotland shares some of the same attributes as Ireland, except that it is a nation within the United Kingdom and therefore subject to both the Financial Conduct Authority (FCA), promulgator of the most famous regulatory sandbox (good!) and Brexit (bad!).
I went 304 words before mentioning Brexit
One distinct advantage that Dublin owns is that it is not in the UK. That is, it is an attractive destination for companies that need to diversify away from a post-Brexit Britain. One regulatory consultant told me that 80% of his clients looking for non-British alternatives were looking seriously at Dublin. Admittedly, some of these companies would commit to Dublin if and only if the UK’s passporting rights were revoked; still, the majority appear to be committed to Dublin no matter what — at the very least to use as an expansion office.
How do you say “Boulder” in Gaelic?
Ireland and Scotland share common struggles. These people want to catalyze ecosystems, a la Brad Feld’s Startup Communities. There are few repeat entrepreneurs who, once successful at building a tech startup, hurl themselves upon the challenge once again. Nor is there a socially ingrained custom of sharing & mentorship like we have in many startup communities in the States. Scaling is a challenge because it’s hard to build a deep bench in small cities, and even harder to recruit sales & marketing talent overseas.
All that said, great companies are being built here, companies that are destined to be successes on a global scale. And — ahem, my VC pals — the risk-adjusted valuations are low. In my opinion, that is simply because there is no VC ecosystem to speak of in Dublin, Edinburgh, Belfast or anywhere outside of London. Reminds me of my days in Silicon Valley many years ago, when we would speak of geographic investment borders in terms of minutes driving.
London is a premier city…
There are three things that give me confidence in London as a global financial superpower in a post-Brexit world. Momentum: the city has massive momentum, which may allow for continued growth through a hard Brexit. Community: the size and scope of the financial services population in London rivals (surpasses, if you ask Rajesh Agrawal) that of any other city in the world. People do have a tendancy to stay put; it would be hard to uproot so many thousands of people, no matter how bad the scenario. Regulation: the FCA is one of the most innovative regulatory bodies in the world, so there is very good reason for fintechs to stay there. As an example, it’s reported that the FCA has granted more than 80 e-money licenses, while maintaining high standards. Compare that to only three licenses granted in Ireland.
…but watch out!
In a word, the second-tier and tertiary communities of the UK and Ireland have a great deal of potential. To help them on their Odyssey, they are searching for mentorship, collaboration, workshopping and networking.
Spoiler alert! I believe LendIt Fintech can play a hand in helping them.