US social networks keeping an eye on UK startups

We are living in the age of social networks. Their extraordinary adoption worldwide has changed the way we interact with everything from friends and family to news outlets, brands and public figures.

It goes without saying that every social network views cutting-edge technology as the key to success. But with the value of a platform intrinsically linked to the quality of content on it, tech that can shape the way that content is produced, shared and consumed is of particular value. A large proportion of UK high-growth companies are no strangers to innovation in content-related technologies, and the major US-based social networks have been keeping close tabs on British companies in this field for several years, and indeed, snapping them up. A quick search on the Beauhurst platform gives us an overview of this activity.

The most recent example is Twitter’s acquisition of Magic Pony Technology – a company using machine learning to enhance images, including anything from a poor quality snap, to pixelated video, or recreating images based on other inputs, like similar images. Video quality in particular – plus the ability to enhance it – is seen by many as the future battleground for social media networks.

Founded by two postgraduates from Imperial College, Rob Bishop and Zehan Wang, Magic Pony was a graduate of the technology accelerator programme Entrepreneur First. The company’s rise has been nothing short of astonishing. Registered in December 2014, they received £1.25m in May 2015 – an unannounced transaction unearthed by Beauhurst’s Research team, valuing the young business at just shy of £2.5m. In April 2016, our researchers again uncovered an unannounced investment – this time just over £3m, with a valuation of £16.7m. Twitter’s acquisition, in June this year, for $150m (£102m), completes a truly remarkable journey for the business.

The youngest of the major social networks, Snapchat is no stranger to looking to UK tech as a way to expand its IP and products. Its features hugely rely on the ability of the user to capture and manipulate “selfies”, so its acquisition of Seene, a 3D modelling app developer, could enable the network to move beyond two dimensions into social networking in virtual and augmented reality.

A video demo of Seene’s app shows incredibly realistic 3D models captured of a face using only a smartphone, and processed within several seconds. The company was acquired at the venture-stage, with one previous fundraising in 2014 with EC1 Capital.

Two Big Ears, an Edinburgh-based virtual reality company, was snapped up by Facebook just a month before these two acquisitions. Acquired when still only at seed stage, the company focusses on immersive audio for 3D and VR applications. Oculus, the virtual reality developers owned by Facebook, see realistic, convincing audio as crucial to the future of truly immersive video. The Two Big Ears fundraisings were never made public, and their most recent, in November 2015, valued the company at £1m.

We know that high-growth businesses are driving innovation in the UK. Of the 8,000+ companies Beauhurst tracks, there will be many that larger investors will continue to keep an eye on. But with the significant fall in the value of sterling precipitated by Brexit, the probability of further strategic acquisitions by tech giants before the end of the year may only increase.

This article appears in The Deal – Beauhurst’s essential free review of investment activity. Download your copy now.