Increasing numbers of UK tech startups looking stateside, Tech City lawyer claims
Daniel Glazer, partner at Fried Frank law firm, said there has been a huge uptick in the number of digital startups looking to expand to the US in order to accelerate the growth of their business.
The law firm's tech division was set up three years ago in an office near Old Street Roundabout in Shoreditch, London. "When we first started this in early 2012, we only had a handful of clients in the first year or so," said Glazer. "Since mid-2013 to now it's just exploded in terms of the number of companies we see and the number of companies we work with."
The lawyer, who divides his time between London and New York, said he now has US expansion talks discussions with four to five UK tech startups a week, adding that roughly 95 percent of them want to expand to either Silicon Valley or New York. Some also look at Boston, he added.
As a US-headquartered law firm, Fried Frank is able to help UK tech companies with US IP law, US employment law, US commercial contract law and US corporate structure law.
In the last 18 months, the law firm has given US expansion legal advice to approximately 100 tech firms, according to Glazer. Approximately 75 percent of those actually want to set up a physical office in the US (typically through a US subsidiary of their UK parent company) to be nearer potential US customers and investors.
Glazer said he believes the increasing amount of venture capital being invested in UK tech companies is helping them to expand internationally.
"In 2010 there was $69 million total of VC investment to London tech companies," he said. "Last year it was $1.45 billion. In the first quarter of this year it was $682 million. The more money flowing into London-based companies, the more capability they're going to have to expand."
Much of the money being invested in UK tech startups is coming from US investors.
Glazer believes that US venture capitalists started paying more attention to UK tech startups around the time prime minister David Cameron hailed London as a Tech City, largely due to the thriving startup scene around Old Street Roundabout in Shoreditch. It also coincided with an article in The New York Times called Technology on the Thames, said Glazer, adding that many Americans don't consider something newsworthy until it's in The New York Times.
Entrepreneurial economy
Glazer said the incease in venture capital investments is also linked to a "shift towards a more entrepreneurial economy".
"Gone are the days where you go and join a large corporate, work for 35 years, get your gold watch and retire," he added. "People take a much more dynamic approach to their careers now and the barriers to entry for creating your own company are so low following the internet boom."
The US is one of the largest markets in the world for technology so UK companies stand to access a vast customer base by moving there.
Fast-growing UK startups that have expanded to the US over the last few years include Shazam, Transferwise and Huddle. Each of them have recently raised large funding rounds, valuing them at close to a billion dollars. Another UK firm to expand to the US recently is Mike Lynch-backed cybersecurity startup Darktrace, which won Techworld's Enterprise Startup of the Year award last year.
Dave Palmer, director of technology at Darktrace, told Techworld: "Darktrace is growing rapidly in the US, where we are working with many Fortune 500 and mid-sized companies in a variety of industry sectors, including energy, financial services, media, healthcare, and transportation. We have a solid base of intelligence experts in North America too, from the NSA and the FBI, who work with our experts in the UK to deliver our mathematics-based approach to 75 customers worldwide.
"We are looking forward to continuing our expansion in the US market, as the industry transitions to proactive security strategies, based on real-time threat detection."
But not every company that goes to the US will find success. Those that fail usually expand without any real business case for doing so, said Glazer.
The vast majority of UK firms that open a US office use it purely for sales and marketing purposes. Very few hire engineers in the US because they are significantly more expensive than those in the UK and Europe, particularly in Silicon Valley where top engineers can earn in excess of $300,000.