Zirra’s 10 Highest Valued UK Startups

The moment after the British parliament ratified Brexit, it seemed that the separation of the UK from Europe was a done deal. Fortunately, Great Britain has a thriving startup scene that still attracts immigrants from all over the world and is starting to create a living ecosystem for giant global tech services. Some of those startups surpassed the clutter with a higher valuation and market share.  Companies such as Deliveroo, Global Switch, and Anaplan have been acknowledged as tech giants only a few months ago, due to larger than ever financial rounds.  

Zirra, a startup that has developed AI and machine learning technology to effectively analyze the private tech market, has already mapped the 5 highest valued automotive startups, and built a list of the top 100 most valued startups in Israel, today’s second largest startup ecosystems. Now, Zirra is proud to present you with a brand new and updated list of the 10 highest valued startups in the UK. Using  85 different data sources. Zirra has estimated the valuation of the startups in the list, marked success and risk factors and rated the leadership of each company. 

Here are some insights we picked from the list:

*UK tech has a sense of style and fashion, as expected. Two of the ten companies are offering high-end consumer products: Deliveroo is branded as a delivery service for restaurants meals, including some chef restaurants, and Farfetch runs an online marketplace that connects high-end fashion retailers with customers.

*Even though the UK is a pioneer in technology based financial services, only two of ten UK unicorns are in financial services: Funding Circle, a peer-to-peer service that matches retail investors with small business and TransferWise, a peer-to-peer money transfer service. UK is abundant in fintech services, but its tech industry is mature enough to offer giants in a variety of services such as pharma, AR, fashion retail and consumer services. A big chunk from the list are companies that avoid being active in the US, where the market is already crowded. Deliveroo, for instance, wants to take over Europe, the Middle East, and Southeast Asia. Global Switch, a cloud computing service, partnered with Chinese investors to expand into China and new Asian markets.

*In nine out of the ten UK unicorns there is at least one immigrant or a child born to first-generation immigrants in the founding team. Of those nine, seven companies have at least one immigrant in the founding team from the following countries: India, Estonia, Portugal, France, New Zealand, and the US.

Top 10 UK Startups

Search for a company

Search for a company

1. Global Switch

Global Switch is one of the largest data center providers on the globe, with centers located throughout Europe and Asia-Pacific. Data center management doesn’t sound too complicated for a tech company, but remember that Amazon’s cloud management platform makes Amazon about half its revenue. Now Global Switch is going global, with a new Chinese investor, promising to give higher reliability and better service for China’s industry.

Global Switch owns, operates and develops large scale, carrier, and cloud neutral data centers. It is a Tier 3 status (a reliability of 99.982%, second in the industry, inferior to Tier 4 with 99.995%) scrutinizing all key components like power, cooling, security, and connectivity. The company owns and operates more than 3 million square feet of carrier-neutral data centers space for global system integrators, telecommunication providers, enterprises, financial institutions, government organizations, and other hosting businesses.

Global Switch is a newcomer to the unicorn’s zoo. Reports of a $3 billion valuation went out only last December when the Chinese consortium Elegant Jubilee bought a 49% stake in the company. Aldersgate Investments owned by the Reuben brothers who sold the shares, stays with ownership of 51% , in Global Switch. The Chinese consortium that includes steel maker Jiangsu Sha, AVIC trust and Ping An, was assembled by Li Qiang, a Chinese telecom entrepreneur, who aims to bring a higher reliability service to Asia. Shortly after the funding announcement, Global Switch announced it will expand with two new data centers in Hong Kong and the second one in Singapore.

The largest unicorn in the UK, though, is not free of troubles. Back in September 2016, Global Switch’s center in London suffered its second power outage in three months. It is quite possible that the Reuben brothers looked for an investment partner to improve the technology and take it globally. Zirra estimates the valuation of Global Switch to be $5.8 billion, almost three times the original valuation at December’s financial round.

Search for a company

3. Deliveroo

Deliveroo sells and delivers restaurant meals to households or offices. It was founded by William Shu who moved from the US to the UK and didn’t find proper higher-end meals to order beyond junk food. After raising abruptly $275 million six months ago, this British delivery service became one of the highest valued worldwide on-demand startups. It became popular among customers who seek for a higher class meal, delivered directly from a premium restaurant. Despite this fact, most of the recommended offers in the homepage offer burgers, pizzas and pasta meals, which means that they are the most popular on the site.

The technology platform optimizes food ordering and delivery by integrating web and mobile consumers with restaurant tablet-based point-of-sale order management terminals. Deliveroo promises its logistics optimization algorithm will make the business efficient for both sides, and in the end will allow the company to profit from a standard fee of 2.50 pounds per order. Already today the company boasts a few cities to be profitable but does not mention them by name. It said in the past that building a loyal customer base is the key to profitability: The drivers, who are paid by the hour, will deliver more meals. In the near future, the company wants to build more kitchens that restaurants could use exclusively for providing takeout.

The giant financial round at August prized Deliveroo with a $1 billion valuation according to the press, but as for today, Zirra estimates the delivery service’s valuation between $1.2-$1.3 billion.

Deliveroo is expanding throughout Europe, and eastward towards Hong Kong, Singapore, and the United Arab Emirates. Even though, the company said it is unlikely to enter the US market, a decision that marks the overwhelming competition in the country and the fact that Deliveroo will not be the “Uber” of restaurant delivery service.

A leading meal delivery such as Deliveroo is dependant on yearly multi-million financial rounds. It has raised so far close to $500 million in order to maintain the fierce competition within a crowded market, to subsidize deliveries, and to expand to new territories. Deliveroo competes with incumbents such as UK-based Just Eat and Germany’s Delivery Hero, and other giants penetrating the food delivery business such as Uber and possibly Amazon. The latter has just tested its first drone delivery on UK soil last December.

The whole on-demand industry is on the hold, with smaller startups in the field having hard times to raise money. In recent months, several companies have shut down, while others have been acquired. Recently, Take Eat Easy filed for bankruptcy.

In addition, the company will have to deal with potential legal actions and protests from drivers claiming to be underpaid. Recently, the Independent Workers Union IWGB has been pointing towards Deliveroo, claiming it underpays the drivers and that it over-hires drivers, creating a spare time with no work for the rest of them. There are many bodies who seek the same ruling last year that Uber drivers are employees and not contractors.

4. Funding Circle

2016 was a bad year for many of the peer-to-peer lending companies such as Lending Club, Prosper, and Wonga, bringing them to re-shuffle their business strategy and in some cases to cut their workforce. But for the British P2P lending scene, and especially for Funding Circle, a company that matches lenders and governments with small businesses and cut out banks and other middlemen, the business was the best ever. After a hard start during the first six months 2016, the year as a whole ended very well, with almost 3 billion pounds in loans with quarter four higher in 90% than the year before, casting optimistic spirit as for the post-Brexit UK. Funding Circle took 35% of the market, and is close to overtaking incumbent Zopa.

The company reported on lending total of $1.3 billion in 2016 globally, with the last quarter lending as much as $500 million of it. This a 90% year-on-year growth, the company told TechCrunch. Last year’s total equals about a third of the money Funding Circle had lent since being founded in 2010.

Part of the growth is coming from the company’s new markets such as the US and new territories in central Europe. This achievement awarded Funding Circle a financial round of $100 million in the beginning of 2017, the largest European fintech round since 2015. According to Zirra, the valuation now stands on between $1.3B-$1.4B, a little above the $1B valuation the company got after raising money in 2015.

The giant financial round was raised not only to expand geographically but also to supply governments around the world with the confidence that the company is on stable grounds.

The company is lending money around the world, but its base is still profoundly British. Out of its 60,000 investors, 55,000 of them are UK-based retail investors. 2017 will be the year that Funding Circle will be tested upon its success to bring US retail investors to its platform and acquire more local companies.

After taking over the p2p lending scene, topping Zopa, the popular lending service, Funding Circle will have to tackle quite a few challenges abroad. It will have to address regulatory issues of each market it enters and may need to solve it by acquiring local companies. In the US, and already in Europe, Funding Circle will find a crowded market and will have to display a strong differentiating factor in order to surpass the clutter.

And finally, after a hot year, the British p2p lending is on the verge of cooling after FCA’s announcement on the “evidence of potential investor detriment” that demands “strengthening rules in the area.”

6. Shazam

Shazam is one of the single favorable consumer apps that are still making it to our phone screen and stays there for the time we’ll need it on the road or while watching a movie at home. It allows as much as 400 million users to identify songs, as well as TV programs, movies, and advertisements. Adding about 10 million downloads per month, Shazam is still one of the leading iPhone apps of all time – when it comes to downloads. A veteran service, founded in 2002, Shazam is estimated by Zirra at $1.2B-$1.3B. In case Amazon or Apple would like to acquire the company, the price can go up to $2.2B. According to Zirra, Shazam’s chances of going to an exit in the next 3 years is high and estimated at about 70%.

After partnering with entertainment companies such as Spotify, AMC and A+E, and artists such as Coldplay, One Direction, and Usher in order to sell more advertising spaces on the Shazam apps, the company now wants to identify products found on retail stores.

However, Shazam is not free of trouble: First, Amazon is becoming a competitor with is in-store computer vision based detection of products. Amazon, with its popular Echo voice recognition device, can also detect content home as efficiently as Shazam. Other companies are growing today in voice detection industry, making Shazam obsolete.  

In addition, the company is suffering from a significant turnover in founding team and key management. More than half the original founders are no longer with the company. They also have some IP issues: There are allegations of illegal actions, such as copying, plagiarism and IP infringement against the company. Shazam also sold the proprietary software on which their company is based, but re-acquired the rights later. However, the software is no longer fully proprietary anymore.

All that can complicate a possible fundraising effort. Shazam has raised only $150 million so far, a modest amount for a unicorn, and it has a significant cash repository which may allow for expansion and growth. But the company will need more cash to grow: It already has registered pre-tax losses on their taxes despite a high valuation due to rapid growth and expansion.

9. Blippar

UK-based Blippar turned out to be one of the biggest and most promising AR tech and content companies on the globe, raising almost $100 million and serving dozens of brands, publishers, and agencies around the world. In addition to augmented reality and computer vision technology, Blippar’s strategy was commercial from the beginning, offering a platform that allows its customers to create AR content themselves. The company had counted Coca-Cola, Pepsi, McDonald’s, and Walt Disney as clients.

Even though, one should note that Blippar is standing on shaking grounds. The company said its losses are widening and that it would need to raise new capital due to increasing investment in marketing and R&D, but numbers are still small are not adequate to a company that considers itself as a unicorn. Losses are estimated at $31 million while revenue is no more than $11 million. Last July Blippar closed its offices in Amsterdam after cutting staff in Japan a few months earlier.

The company has seen better days in terms of valuation. In 2015, the company was rumored to have been valued at $1.5 billion following a takeover by US-based mobile chip maker Qualcomm. Zirra, a company that analyzes startups using data from 85 public sources, estimates Blippar’s valuation at no more than $700 million. According to a report published by Bippars’ accountants, the company is in a need for another financing round, after raising about $100 million in two rounds together, the last one a year ago.

Despite being a leader in its industry, the whole AR market is still small and technology is considered as premature. In contrast to other leading companies such as Magic Leap, Meta or Lumus, Blippar is not involved in creating new headsets – a device that could be a ‘killer-app.’ Blippar is a member of the older generation of companies that merges reality and virtual objects on mobile phones, together with Pokemon Go (Niantic) and Total Immersion.

Blippar is different from most of these companies in its computer vision and deep learning technology that allows its app to recognize objects immediately and efficiently. Blippar creates the “Wikipedia” of the visual world, a byproduct of its technology that allows to get recommendations, definitions and more features about each object scanned. In that manner, Blippar is a unique startup, but largest companies such as Amazon, Apple and Google already have a similar ability to bring to market such an app. Until now they haven’t done so, which is good news for Blippar.

As an AR platform, Blippar will probably keep focusing on ads. That turns it into a company operating in the adtech industry which is undervalued today.

Search for a company

How does Zirra value private companies?

The Zirra Valuation Process uses AI and machine learning technology and it involves both Intrinsic and Relative valuation algorithms. The intrinsic data includes revenue and expense estimations, traffic trajectories, investment history, and velocity, based on aggregated sources. In the relative analysis, data is compared and benchmarked with a database of thousands of companies with correlation to stage, space, size, and trajectory.

It then produces a map of competitors based on the data set, rated in accordance with the degree of direct competition, its size, threat, and proximity of the shared customer and partner base. Results are sent to relevant experts in our 450 strong expert community. Experts comment on both quantitative analytics (scores and metrics) and qualitative analytics (risks, opportunities, competitors).

Where do we get the data from?

Data is extracted from 85 different data sources, regularly updated (daily to weekly). Sources include both open and licensed directories such as the company website, Bloomberg, Linkedin, SimilarWeb, and Adwords; It can be “derived data” such as Glassdoor reviews, consumer reviews, sentiment analysis from open web articles; or other data points such as academic researchers, stock indexes, and macroeconomic parameters.

Why did we do it?

The private tech industry is one of the most secretive and mysterious – yet it is rich and growing rapidly. Those who are working in the startup ecosystem themselves, entrepreneurs, venture capitalists, reporters, are suffering from serious disinformation regarding the economy that surrounds them. The result of this panoply of secrets, taboos, and mysteries is enormous disinformation surrounding the startups market. Here at Zirra, we decided to do something about that. We have made it our mission to bring transparency to the private tech market.

Assaf Gilad

An ex-journalist from Calcalist, a leading business and tech news outlet in Israel, I'm now writing about startups for Zirra.com.