20 December 2019
As we close in on the end of 2019 and the end of a decade (or do we?), now is a great time to look back at the year and make some predictions for 2020.
If you're interested in what happened during 2018, I did a similar article a year ago which can be found here. If you like this article, I would be forever grateful if you could share it! Click here to tweet.
Anyway, let's jump straight into it!
January - Move over, Monzo
Remember Viola Black? The challenger bank infamously ran an aggressive London advertising campaign with the strapline "Move over, Monzo". It caused a bit of an uproar with Monzo users, but got their name out there. I'd actually forgotten about them until I was researching for this, and a quick google search tells me that they have finally launched. Did anyone sign up? It all seems to have gone quiet.
February - Siri takes a liking to Barbie
It turns out the folks over at Apple are quite big fans of Barbie's voice - yep, that's Apple (the tech giant), and Barbie (the fashion doll). As it turns out, February was the month that Apple forked out a reported $30m (+ up to $10m earn-out) for the company that built the technology behind the interactive "Hello Barbie" doll.
PullString, the company behind the technology, was founded by former Pixar employees and provides a platform for clients to build voice apps that can communicate with people. It powered a range of toys, including Hello Barbie and Thomas the Tank Engine.
Presumably, Apple made the acquisition to bring the PullString team into its Siri project team. As numbers go, it's a relatively low-value acquisition for Apple.
March - IPO season begins
This month formally kicked off tech IPO season with Lyft being out of the gate. It seemed to go through relatively seamlessly in comparison to other floatations later in the year, although the share price has plummeted by around 34% since the IPO. The 15% drop in share price after just one month as a public company was perhaps a warning sign of what was to come...
April - Slack goes for a direct listing
Another one of the large tech companies hit the public markets in April. The cash-rich communication tool, Slack, didn't need to raise money through an IPO so they opted for the slightly different direct listing. It's since lost around 46% of its value. Its closest competitor, Microsoft Teams, recently announced that it has more daily active users than Slack.
May - Loot gets looted
Uber was another company to go through an IPO in May, but one of the more interesting things that happened in May was the digital banking app, Loot, fell into administration. The high profile collapse was reportedly caused by RBS pulling out of an acquisition offer, subsequently making the company run out of cash. Two things here:
- Some crowdfunding adverts for Loot were still showing around London Underground after its collapse due to the way tube adverts are bought and replaced, and;
- RBS subsequently hired the Loot team and released their own challenger product, Bó - I'll let you reach your own conclusions here!
This event led to one of my top-performing LinkedIn posts of the year - take a read here if you're interested.
June - Facebook takes aim at the global financial system
June saw the whitepaper released for Libra, the Facebook pioneered cryptocurrency that isn't officially a cryptocurrency. The strategy and key decisions would be made by the 21 founding members of the Libra Association, the majority of which are dominant tech companies. Saying Libra led to a backlash would be an understatement - within hours, U.S. regulators were calling for the project to be halted, citing recent concerns over other cryptocurrencies.
The U.S. House Committee on Financial Services also called for the project to stop, detailing concerns that it "could pose systemic risks that endanger the U.S. and global financial stability". It also prompted concerns from France, UK, Germany and Japan, just to name a few. Mastercard, Visa, eBay and Stripe subsequently dropped out of the programme, citing regulatory concerns.
I have to admit, I still find it mindblowing that a company started by a 19-year-old in a dorm room in 2004 has managed to create something that could endanger global financial stability...!
July - France and America get into a tech-related argument
July was the month that France passed a new digital tax that would impose a 3% levy on the French revenue of digital companies that hit certain criteria. It would result in more tax on around 30 companies, with a fair few of them residing in the US.
Naturally, Trump didn't take too well to this so hit back by suggesting an investigation into the tax, which may ultimately result in high tariffs for French goods imported into the US. Despite these threats, UK Prime Minister Borris Johnson suggested that the UK will push forward with a similar tax.
August - how to solve the WeWork problem
Whilst this tech-related article wouldn't be complete without mentioning the botched IPO attempt by WeWork (famously a tech company...), I won't spend too much time on it given how much has already been written. I'll leave you with SoftBank's complex solution to the so-called "WeWork problem":
Increased gross profit + reduced OPEX = increased EBITDA.
Check out my post here if you want to read more.
September - a fintech makes a profit
Tech startups and scaleups are well known for incurring millions (or even billions) of pounds of losses. The aim is to spend plenty of VC cash in the early years to build up a customer base, then mature into a sustainable, profit-making company. Transferwise has started to make that transition into a profitable company a little earlier than expected, reporting a second year of profit for March 2019 (results released in September 2019).
October - Starling Bank and electric cars
Two things I want to mention for October - first off, this was the month that Starling Bank released their first national TV commercial, supported by some online and radio adverts. It was a major push to increase on their existing 900,000 strong current account base. It'll be exciting to see the results.
Secondly, October was the month that Dyson dropped its electric car project, explaining that they had developed a "fantastic electric car", but it was simply "not commercially viable". After a failed attempt to find a buyer for the project, it was closed down.
A special shout out here also goes to BBC's Watchdog for running a feature entitled "What's going onzo, Monzo?" where they tried to uncover why Monzo was not telling customers why their account had been frozen for suspicious transactions. That's even after they featured a lawyer talking about AML "tipping off" regulations...
Monzo's official response is here.
November - London bans Uber (again)
Some may question whether Uber's strategic response to regulatory concern is just to throw their best lawyers at the problem until it goes away. In November, Transport for London revoked Uber's licence to operate in London (again), suggesting that it was unable to prove that individuals registered on the app were actually the individuals driving.
Naturally, Uber appealed the ban (again) which means they can continue to operate whilst the investigation takes place. This will either result in Uber getting its licence back, or it'll be revoked (again). Then they'll appeal it (again). It's an endless cycle.
Of course, we also need to mention Elon Musk's cybertruck here which has apparently received over 250k pre-orders, despite looking like it has come straight from a 1990's video game.
The European Commission has stated that the truck wouldn't be roadworthy in the EU as it wouldn't meet the pedestrian and cyclist protection standards. I guess they have good reason to be concerned after Elon Musk explained that the angular shape of the vehicle is because the stainless steel panels are too hard to stamp into shape (they'd break the press). I wouldn't like to be hit by that!
December - one step closer to getting rid of the paper receipt
Flux, the London based fintech aiming to abolish paper receipts, announced in December that they've hit the 1,000,000 paperless receipts milestone, have added another 5 merchants and have experienced a 1,000% growth rate.
The 5 new merchants will add to the existing merchants offering paperless receipts, which include Just Eat, KFC and Schuh. More here.
What's in store for 2020?
I think 2020 will be an interesting year for tech companies. We've clearly seen the sector come under close scrutiny for the level of mounting losses and unsustainable business models that have been seen in the IPOs.
Having spoken to a few CFOs involved with 'near-to-IPO' tech companies, there is an acknowledgement of the current state of the market, but no dent in the optimism that IPO remains a reasonable exit route.
Clear paths to profitability and more realistic valuations will be the key to success.
We'll also see regulators from around the world close in on tech companies, whether that's through making them pay their fair share of tax or making them operate in a more responsible way. There will be some more interesting cases come up and I'm sure some of the most talented lawyers will be rolled out once more.
Looking specifically at the UK market, we are now starting to see the Brexit fiasco, rightly or wrongly, come to a close. This should bring back some certainty when it comes to attracting overseas talent and investment, so now remains as good a time as ever to start a tech company.
At UHY, we're certainly seeing no slow down in entrepreneurs starting up and raising money to fuel their grand plans. It's always great to see and hear the groundbreaking new ideas that people are building, and it's a pleasure to get to help them along in their journey.
There's no dampener on UK tech companies taking on global markets either. We continue to assist with companies that are ready to go global by helping with their financial operations and/or strategic plans.
I look forward to seeing what 2020 brings!
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