We should make the UK a nature reserve for our young apps

Just a few months after its controversial IPO, the food supplier Deliveroo could go off the market. Last week, German rival Delivery Hero announced that it had a 5% stake in the deal, which almost brought the shares back to the price they were quoted at. A full quote isn’t imminent, but it’s hard to see why you’d want to own a twentieth of the loss-making Deliveroo unless you’re planning a full-company deal. When it eventually takes over the business, it will be nowhere near alone. Last year, its rival JustEat was incorporated into the Dutch takeaway and the merged company is now listed in Amsterdam. And last week, US-based Gopuff, which operates in the fast-growing instant delivery market, acquired UK start-up Dija to complement its previous acquisition of another UK start-up, Fancy.

Eat or be eaten

We can expect more deals in the next few years. In most markets, the app economy only offers space for one or two dominant players. There’s no room on our phone screens for nine or ten ride-sharing apps, and few of us can go to the trouble of switching between different ones to get the best price. One or at most two are enough. The same goes for takeaways. Or think about it, for banking, events, or buying a new car, or any other thing we could do with our phone. A global player is likely to emerge in almost every industry. The challenge for the UK is how can we ensure that some of our emerging stars are eating up their rivals before they are devoured themselves?

After all, the UK has many emerging giants of the app economy. In finance there are Wise, Revolut and Monzo. There is hopin at events. For used cars there is Cazoo. In insurance there is marshmallow and in fashion BooHoo and Asos. Overall, Britain now has more “unicorns,” known as tech startups valued at over a billion dollars, than any other rival except the US and China. But we have to make sure that they can expand globally and not just be acquired. How could we do that?

First the city has to stand behind them. Building a dominant global leadership position will almost certainly cost a lot of money. Local competitors may need to be bought up in countries around the world, and these acquisitions won’t come cheap. Losses at local subsidiaries may have to be borne for years before they even make a profit. It could end up being 10 billion. If so, the city should be ready to fund this, possibly round after round of the capital increase, without complaining that the company that is burning all the money has not yet made a profit. The American capital markets did very well, the British less so.

Just a little protection

Next, the government must deter foreign bidders. Nobody would argue for an absolute ban or the simplistic economic nationalism in which the French specialize. That would be a mistake, and in the next few years some promising UK startups will inevitably be sold. But the government could easily tip the balance against bidders from other countries. Regulators could take a closer look at the deals and put some restrictions on them. Licensing terms could be tweaked and labor law changed to make buying a UK company just a little more difficult. With a little more protection, some of the UK startups would have a chance of getting big enough to acquire competitors.

After all, entrepreneurs need to show courage and vision and aim to build the Amazons of the next decade and not just sell out at the first offer. And perhaps more importantly, so do investors. The London-based VC funds have to provide long-term support to companies, even if it does not turn out quick profits.