Next big things on the internet?

Facebook is expected to float this year. Can UK dotcommers keep up with the pace set by the US? Laura Chesters reports

In the fast-moving world of technology, 2012 has seemed like a long time coming. There is one reason for that: this is the year Facebook is finally expected to make it onto the stock market. The new wave of hot internet stocks to brave the public gaze – LinkedIn, Zynga and Groupon – have merely been the warm-up acts. Now that the social media giant is limbering up to sell shares to the outside world, there are two questions to ponder.

First, can a website with 800m users and revenues of only $2.5 billion in the first nine months of last year really be valued at $100 billion? And, second, will Britain ever produce anything approaching such a global digital success?

The answer to the first question is probably, and to the second, probably not – but it won't stop a new generation of dotcommers from trying. The $300m injected into Twitter by Saudi billionaire Prince Alwaleed bin Talal shows there is plenty of money around for the right idea. Just don't expect Square Mile investors to join the rush. "The City of London has never been known for understanding technology and has never matched Silicon Valley's tradition of knowledgeable investment in technology start-ups, just as the UK government has never matched the vast investment made by the US government," said Geoff Mulgan, chief executive at the National Endowment for Science, Technology and the Arts.

The UK government is heavily promoting its commitment to Tech City – the area around Old Street in East London that is populated by technology firms. However, advice and funding are just as important as the physical space for new businesses.

Key to growing these businesses, according to one venture capitalist, is creating clusters of firms to support each other. Too often Britain's brightest technology successes have been isolated incidents, such as data-sorting firm Autonomy, sold to Hewlett-Packard for £6.6bn last summer.

Julie Meyer, chief executive of investment firm Ariadne Capital, said: "The problem in the UK is that the big companies have not created the network of companies around them – the ecosystem for others to thrive. We need to create broader networks for those that are just starting out." But there is evidence of certain sectors showing signs of creating a 'scene', such as financial services, where quick loans firm Wonga has made a splash.

"We have seen the growth of [mobile money firm] Monitise – a nine-year-old company that is a game changer and a global leader now in this sector," added Meyer. "The UK is good at financial services and we now have, I think, an ecosystem of these companies growing and innovating here."

Nasir Zubairi, founder of EuroTRX (see box below), said: "Incentives and costs are such that banks would rather allocate capital to investment banking operations or to lending to large corporates rather than to small firms."

Simon Prockter, founder of housebites.com (see below), said the key is to self-fund first.

"I invested everything I had in my business," he said. "We won't scale up too quickly. You need to sell everything you own before you start raising money. That way, you can get it to a point that the venture capitalist investors won't screw you for a large equity stake."

There are signs that fund-raising will become easier this year, as Silicon Valley Bank gets ready to open its doors fully to new business in London. But raising capital will never be as easy as it is in San Francisco, where a flock of business angels pour cash into start-ups almost as a hobby.

More than 50 years after it began commercialising technology created by the city's university, Cambridgeis the largest high-tech hub in Europe, even though it is still only about three per cent of the size of Silicon Valley.

Britain has its digital strengths, but Facebook has little to worry about on this side of the Atlantic for the time being. However, it won't stop the latest crop of entrepreneurial start-ups from trying to become the next big thing.

shopow.com

Friends Kevin Flood and Mike Harty launched a business combining price comparison with social networking last year. Their creation, Shopow, has 30,000 members and has so far signed up 27,000 businesses, including John Lewis, PC World and Asda, to sell products through the site. Flood and Harty, who met at Leeds University, get between 4 and 12 per cent of every sale made through the site. It relies on friends within a network to recommend and review products in the belief that people are more likely to buy something that has the backing of a friend than a stranger. The founders, both in their twenties, used contacts in the business world to find angel investors.

housebites.com

Housebites was set up three months ago after another online idea failed. Founder Simon Prockter creates bespoke food takeaways for people fed up with poor food or bad service. Housebites, launched in London, has secured a group of chefs to cook on demand and deliver the food direct to their neighbours. Prockter founded and sold SpeedDater, and was looking for another opportunity. He secured angel investors, including Michael Birch of Bebo fame, and initially raised funding for a Come Dine With Me idea. But the project flopped and his backers wanted their money back. It was at the eleventh hour that he came up with the housebites.com idea, and luckily the investors bought it.

sofa.com

The former owners of an upmarket food-delivery firm, Deliverance, have set up a new business selling furniture. Pat Reeves and Rohan Blacker were looking for a higher-margin business idea that required fewer physical premises. In the end, they settled on sofas, and now take more than £10m in sales a year. Reeves says: "To set up, you need to find a clear business model that is sufficiently different and offers a good opportunity to make money." He adds that entrepreneurs should make sure they buy a decent domain name. Reeves and Blacker used money from their previous business to start up.

euroTRX.com

Banker-turned-small business owner Nasir Zubairi is raising money for European Trade Receivables Exchange, an online alternative to banks for small businesses. It allows them to obtain the cash they need rather than waiting for invoices to be paid. Small businesses sell their invoices for below face value to investors who get a return on their money when the invoice is paid and the website provides the contract and the network for it to happen. Zubairi says: "While working with banks I became frustrated with the bureaucracy and the lack of agility. Technology shouldn't just be an enabler of business strategy, it should be a driver." He set up the business with founding partner Peter Davies.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
PROMOTED VIDEO
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little