They pretty clearly state their metric for performance is "unicorns per $1bn" (3.08 vs 1.22).
They're suggesting dollars invested in UK startups are more likely to create a unicorn than those same dollars put into us startups, hence higher performance.
Quite typically the highest return investments are picked first; as such there is a diseconomy of scale, it should be of no surprise that the ROI decreases as investment scales. Perhaps instead of thinking of it as a sign of efficiency it should be thought of as an underdeveloped market with the UK foolishly leaving money on the table.
Also it is not measuring average returns per $ but returns split by company then a vector operation of ceiling (1bn) divided by my 1bn then aggregated.
Thats a dumb metric. It is like saying conditioned on a doctor saw you, how many people were saved. You gotta count folks who died because they did not see the doctor too.
Some of the unicorns could be simply rent seekers making money by colluding with government people. Investors saw them sure shot and hence invested. That model is neither scalable not healthy.
Well, yeah. Presumably the way they achieve a good ratio is by being more discerning with their investments. If you try to scale that you get the US's numbers as you throw money at anyone with a pitch deck.
The thing is, the US model is still better in aggregate as it basically results in every single unicorn being birthed (in theory, there’s simply no lack of funding for plausibly good ideas). Focusing on a conversion metric is a vanity exercise when absolute value creation is available.
We would all rather own a huge low margin business than a tiny high margin business. Eg, 5% margin on $1B of sales is better than 80% margin on $10M sales.
I know nothing about UK investment culture, but I have been building startups for 15 years, volunteered for multiple accelerators, made angel investments and rubbed shoulders with many US VCs.
My impression of the US VC industry, especially near the end of the zirp era and even more especially during covid, the amount of VC capital being deployed far surpassed the number of competent VCs or startup founders.
Many VCs were making decisions based on factors that were NOT correlated with future venture success. Many VCs in fact probably biased companies away from future success, because they didn't understand what they were doing and their instincts from prior industries or investment regimes were directly the opposite of what was needed for an early stage startup.
In other words, there is risk aversion, and there is foolishness. I know for a fact there was a lot of foolishness going on in us VC investing (I even participated in some of it, learned from it, and I know better now).
I'm not just talking about VCs throwing money at anyone with a pitch deck. I'm talking about VCs having a backwards understanding of what makes startups successful and actively pressuring startups that could have worked into doing the wrong things.
There is a core of US VCs that are the world leaders in what they do, exceptionally aware of what makes startups successful and have the track record to prove it - this minority is overwhelming responsible for the industry's ROI. There is also a massive graveyard of fools who tried to replicate that success and failed for a variety of reasons.
Also if the UK investor says "we'd love to invest, can do the whole round, want you to send us your current cap table, we need to get the deal done before April because we have capital to deploy before end of the current financial year" don't actually expect the funds.
I had the misfortune to be pitching to VCs in the UK, the money was so expensive that it’s just not worth it, much better off moving to the US if you can.
That might be a case of selection bias. The only reason to put up with UK regulations and other issues is if you have a compelling reason to do so (compared to similar opportunities).
This doesn't explain though "why now?". All of these reasons would make sense, but they've been in legal disputes before in the 13 years since the game came out. And why would they suddenly care about players' frustration? The skins economy isn't wildly different now than previously.
Well, I don't know their motives, but if we were talking just about legal issues, at least in the EU we're seeing stricter laws about loot boxes this year (and I'm all in about that).
