This summer marked the second anniversary since I joined QED Investors to open up our London office. In those two years we have already created or invested in six UK companies that are all growing rapidly. Those of you on top of current events will have noticed that our decision must have been made after the by now infamous 2016 Brexit vote (and, yes, I was able to hold on until the third sentence of this article to mention the B-word).
So why did one of the leading fintech funds in the US and Lat Am, having invested in six out of the top ten fintech unicorns in America, choose to open an office in the UK in the midst of all the Brexit noise and drama? While answers to questions such as this are always subjective and open to interpretation, as the head of our UK office, my view is that there is a set of obvious answers to this question that are underpinned by more fundamental reasons.
In terms of the more obvious answers, first and foremost, London is geographically connected to the rest of the world in a unique manner. Sitting in London, one is simultaneously a manageable flight away from Mumbai, San Francisco, and Sao Paolo. More importantly, it is possible to have a video conference call with any of the aforementioned cities within the span of the same business day. This is the classic time zone advantage that is often attributed to London.
Moreover, London is also culturally connected: From sports (think football or tennis) to literature (Shakespeare!), the UK is connected to the rest of the world in a number of complex and subtle manners. One just has to walk the streets of Soho, Piccadilly, or Mayfair to witness this. On any given street corner, you can find people from Argentina to Zimbabwe talking to each other about and exchanging ideas in English, the Lingua Franca of the modern world.
Secondly, from a VC perspective, the crucial ingredients that a venture capital ecosystem needs are all present in London in spades: Access to ideas, capital, talent, and markets are all available more so than any other European capital. All these classic reasons that make London a natural destination is also supported by economic facts. More venture capital was deployed in the UK than in any other European country in 2018, London is the largest foreign exchange trading market in the world, etc.
However, beyond these more traditional answers there are more fundamental reasons that have catapulted London to the position it occupies today. After all, from the perspective of Marcus Aurelius close to two millennia ago, London would hardly have seemed a central and connected place as he was travelling from Rome to Cairo to meet Cleopatra. So, what are the reasons that made London so central to the modern world over the subsequent centuries, and how do they relate to venture capital?
While I am no historian, I did receive a masters degree from the University of Chicago, and in my own humble view, the first fundamental factor that set (and continues to set) the UK apart is the value it places on individual freedom and enterprise. This has resulted in a legal and regulatory system that is market friendly, while valuing intellectual property and innovation as well as free speech and thought. It is also closely intertwined with a long history of stability: The United Kingdom is one of the few countries in the world that have had continuous democratic governance over several centuries.
The second, and equally important reason is tolerance. This is in part driven by the centuries of experience the UK has in successfully integrating diverse cultures and has yielded big dividends today in terms of diversity and a society that values mutual respect. While I have witnessed successful and well-educated expat friends of mine living in other European capitals facing difficulties renting accommodation on account of what appears to have been nothing other than their names (incidentally Shakespeare’s Juliet has an appropriate quote about this), the tolerance and acceptance of London has stood out in contrast. And tolerance in the UK extends to everyone, including the non-digitally native workers that feel frustrated at having been left behind a rapidly evolving world. The UK clearly realizes that to have a well-functioning society, the needs and constraints of everybody have to be represented and balanced, which is a complex and ongoing process.
The third fundamental reason is that, the combination of tolerance and individual freedom has consequently resulted in the UK being able to attract and nurture creative communities in areas as diverse as technology, art, science, and media. Balancing creativity in areas as diverse as arts and Artificial Intelligence is not easy. And of course, it is this creativity that makes London and the UK fundamentally attractive for venture capital. It attracts the right kind of people and capital from across the globe, resulting a vibrant ecosystem.
While those are the reasons that have made London an attractive destination, last but certainly not least, one should also mention that the founder of QED, Nigel Morris is a Londoner (I know, I probably should have mentioned this at the beginning). While he moved to the US thirty-five years ago and co-founded Capital One which is now a top-ten publicly listed US bank, he still maintains a pied-a-terre in London as well as season tickets to Tottenham Hotspur (and he was willing to share said tickets with yours truly until I professed my support for a rival club in SW6). So I suppose in the end, determining why QED came to London is a classic example of historical analysis: big historical forces juxtaposed with the vision and values of individual actors. All I can say is that I am happy to be where I am, and excited about the future, both for London and the community of creators that call it home.
2 thoughts on “Why QED Chose to Invest in London”
Interesting article Yusuf – thanks. Having spent time in a lot of Cities I am convinced that London is the best! But then again, I am a Londoner who also follows a SW6 team (I hope we’re talking about the same one as there are two…?)