This year’s annual Sunday Times Hiscox Tech Track 100 list of the fastest growing tech companies in Britain was released on Sunday and, as ever, it makes for fascinating reading for anybody with an interest in tech industry trends past and present.
Congratulations are in order for list topper LMAX Exchange, an electronic trading platform for foreign exchange that was spun out of Betfair as recently as 2012 and has an impressive compound annual growth rate of 307.80% between 2010/11 and 2013/14.
But for me, the numbers only tell half the story. It’s the overall trends that make for interesting reading. For example, LMAX are one of seven financial tech companies on the list and it’s no surprise that slightly better economic times have seen more companies operating in the higher end of an emerging market and fewer payday loan companies, who are now competing in an oversaturated arena.
Other areas of note include 15 mobile tech businesses, many of whom operate in the smartphone app market, as well as companies that work with social media, whether that’s making content go viral (14th placed Unruly) or monitoring customers’ responses on social (such as Brandwatch, who sit 33rd on the list).
Cloud computing and cyber security keep growing
But the trends I’m really interested are two that are crucial to the majority of businesses on the list: cloud computing and cyber security. For me, the growth in these are closely tied to the change in the way we define what a technology company actually is.
This definition used to be easy. In previous years, the list would be filled with IT consultants, and hardware manufacturers and resellers, which was logical given the barriers to starting a tech company were higher. But the idea of start-ups purchasing their own servers is now outdated – they’ll naturally head to the cloud.
And while those companies who used to sell servers only worked in the B2B space, cloud companies naturally also sell direct to consumer. This is a simple explanation for the growth of top ten Tech Track companies Cloud Distribution and CloudSense, who sit at four and seven respectively.
But it’s the knock-on effect from moving to the cloud that then explains the growth shown by online security companies, along with those traditional IT consultancies who’ve rebranded themselves as specialists in cyber risks.
In the 20 years we’ve been underwriting tech businesses at Hiscox, we’ve seen a shift in the challenge of managing their associated risks. For example, if we stick with the cloud, any start-up who bases their servers here are giving that cloud provider a vast amount of potentially sensitive business information. Having confidence that the cloud provider has the correct infrastructure to upload and store data, the security to support and keep this information secure, and contingency should the cloud become unavailable for whatever reason is crucial.
Disrupting the services sector
Then you’ve got the type of companies who are defined as tech companies but still essentially provide a traditional service for a digital era. This could be digital marketing firms, such as 2013’s top Tech Track company MVF Global (28th in this year’s list), online retailers, or the aforementioned smartphone apps that help people do everything from control the appliances in their home to ordering a taxi or a pizza.
These are often the most innovative, disruptive areas and bring their own challenges – I’ve spent many months with some of these companies finding solutions to underwrite what’s often a risk unique to that business.
If they’re straddling the B2B and B2C markets or solely focused on consumer over business then there are other issues to grapple with, usually around regulation and protection for consumers, which is far higher than when trading B2B.
The wider the audience and market, the greater the risk – there’s large amounts of consumer data to handle, not to mention different regulations for different countries if the business has plans to expand abroad.
The recent hacking stories – whether that’s celebrity pictures, small start-ups or eBay – show that anyone from individuals through to start-ups and large companies can suffer a hack. It’d be no surprise to see more high-profile cases in 2015 and even less of a shock to see cyber security firms once again sitting near the top of Tech Track this time next year.
Read more information about the Sunday Times Hiscox Tech Track 100 here.
Read more stories and analysis from Matthew Webb and previous Tech Track companies here.