In our regular meetings with government, it’s not uncommon to be asked: why haven’t we produced a Google, Facebook, Apple, or Amazon, and how can we get one in the UK? It’s a question that everyone outside of Silicon Valley asks – including in other US states – so the answer has less to do with anything particular to the UK, and a lot to do with the particular story of the Valley.

A more interesting question might be why the UK has managed to build its own incredibly successful blessing (yes, that’s the right term) of unicorns. We have billion-dollar startups spanning a range of sectors, “from fintech and artificial intelligence, to cybersecurity and healthcare, each with vastly different business models and methods of growth.”

Whether we’re talking about unicorns ($1bn), decacorns ($10b) or hectocorns ($100b), acquisitions are an important way for businesses to scale, with 1 in 3 UK unicorns having made at least one acquisition prior to reaching their billion-dollar valuations. For example, The Hut Group, the Manchester based e-commerce company, made six acquisitions prior to becoming a unicorn and has since made 15 more.

While acquisitions are a fundamental part of a flourishing entrepreneurial ecosystem, regulators around the world are increasingly concerned about the competition implications of them. Facebook’s acquisition of Instagram is seen by many as a mistake – even though at the time the standard view was that Facebook’s purchase of the social media site for $1bn was evidence enough that a tech bubble was about to burst.

Nevertheless, this and other perceived post hoc failures have left regulators around the world feeling like something must be done. None is proposing to go further than the UK Government, informed by the Competition and Markets Authority (CMA), which would target the likes of Google, Facebook, Apple, and Amazon with the threat of blocking acquisitions that have a ‘realistic prospect’ of reducing competition – defined in law as being “greater than fanciful, but less than 50%.”

We think this is a bad idea. In a new paper out today with ICLE – to coincide with the Government’s consultation on competition in digital markets which we’ve responded to – Sam Dumitriu and Sam Bowman argue how the proposal risks damaging the startup ecosystem.

First, from a competition perspective, it risks protecting Big Tech incumbents from each other, as Sam Bowman argues in an article for CapX. For example (and there are plenty more), “Google bought Android in 2005, and used it to build an open source alternative to iOS. Without Google’s entry into the market, it could have been years before the iPhone had a serious competitor, allowing Apple to charge higher prices and work less hard to improve its own offering.”

Second, “getting acquired by a Big Tech company is an important way for startup entrepreneurs and their investors to ‘exit’ their firms and actually make a return,” writes Bowman. London’s investors aren’t keen either. When polled by Coadec, half said they would significantly curb the amount they invested.

Over recent years, nearly as many UK startups were bought by Microsoft, Google, Facebook, Amazon, and Apple as listed on the stock market. If the Government were threatening regulation to stymie IPOs there would rightly be an uproar (in fact, they’re rightly trying to reinvigorate IPOs by deregulating corporate governance and allowing dual-class shares).

The sale of a company isn’t the end of the story. Consider Alex Chesterman. In 2001 he started Lovefilm and sold it to Amazon in 2011. But that was just the start of his journey. He has since founded and exited two unicorns: Zoopla and Cazoo. How different would his story be if there was no opportunity to exit his first company?

I don’t know where the next Google, Facebook, Apple, or Amazon will be born. We have dozens of ideas for policies that increase the chances of it happening in the UK, but we shouldn’t lose sight of the fact we’re one of best places in the world to start and grow a business and remember what got us to where we are.

Join Us
Our Supporters and Advisers are vital for supporting our work – you might well be one of them, for which I thank you. For the rest of you, now’s the time to consider getting more involved.

First, we’re increasingly having to turn people away from events as they fill up quickly. Even virtual roundtables have to be capped so everyone can have their say. Of course, we will always host events and webinars that are open to everyone – for example, the Late Payments Task Force Webinar with the Small Business Commissioner – but with a growing network, demand is increasingly outstripping supply.

Second, next year we’re going to put the price up from £50 and £500, to £100 and £1,000. This won’t be the case for Supporters and Advisers who are already signed up. All subscriptions are frozen in time – the cost for us in inflation will be a deserved reward for your early support and loyalty.

Third, and most importantly, I think what we do really makes a difference to the state of entrepreneurship in the UK. A lot of our polices have gone on to become law. We don’t (and wouldn’t) take funding from government, and your support helps us undertake our independent research. If you want to know why we do what we do, read about it on our website.

You can easily join us here. Please feel free to drop me an email if you have any questions, or book a 15-minute Zoom call in my diary here.