London has a Silicon Valley obsession but it should get over it, says Benjamin Southworth, deputy CEO of the Tech City Investment Organisation
Tech City, London’s start-up hub, was abuzz with activity yesterday. The Future London event attracted some of tech’s top names, from Google to David Cameron’s techy adviser Rohan Silva.
Autonomy founder Mike Lynch was also on hand to offer some guidance to the capital’s young guns. Lynch is also a member of Cameron’s Council for Science and Technology, so was an ideal guest for imparting his knowledge on creating a tech giant, but most likely had other things on his mind on Tuesday. HP has just accused his old company of “accounting improprieties” that caused the Silicon Valley giant to report a £5 billion charge. Lynch subsequently denied any wrongdoing on Autonomy’s part.
Away from that controversy, the Tech City Investment Organisation proudly launched an apprenticeship programme to give 500 unemployed Londoners a chance to work at a top tech firm in the cluster, including at Google and Facebook. The Olympic Park broadcasting centre will also be running IT skills training every week for up to 350 young people. It’s all being funded by the government and Hackney Council – a positive sign for those who remain sceptical of the Coalition’s ostensible enthusiasm.
Private firms are playing their part too. Rackspace has confirmed it is to give away £12,000-worth of cloud hosting for free for accepted members of selected start-up accelerator or investor projects, as long as it is spread over a year. There’s a limit of £1,000 in any one month, but that’ll do for many who don’t require epic compute power during the teething stages of their existence. Rackspace is also offering mentoring as part of its UK Startup Programme, due to launch in the new year.
That’s on top of similar projects being run by a host of other tech behemoths, like Cisco, Vodafone and Intel.
Getting Tech City going
But amidst all the hubbub and back slapping, one major issue remains a cause for concern: private investment. It seems London is still years behind Silicon Valley in terms of attracting investors.
A report released yesterday by the Startup Genome project ranked London seventh globally in a list of the world’s top 20 start-up ecosystems. That made it the “most successful start-up ecosystem in Europe”. Not bad. But the same report found the city’s output was still 63 percent lower than Silicon Valley and a significant “funding gap” had emerged. London has 81 percent less capital raised by start-ups, prior to their products hitting the market, than those in Silicon Valley.
The report pointed to a lack of “super angels” and micro venture capitalists, whilst claiming London entrepreneurs were “less ambitious and more risk averse” than their counterparts in Silicon Valley. A lot more needs to be done to improve access to early stage financing. Generally investors are more risk averse, require far more validation and are less generous with valuations compared to those in the Valley,” said Rajeeb Dey, CEO and founder of start-up Enternships.com.
“Financiers of Europe have not kept up with tech entrepreneurs,” added Julie Meyer, founder and CEO of Ariadne Capital, speaking at the launch of Rackspace’s initiative yesterday.
The government can clearly play a part in helping those financiers catch up. Benjamin Southworth, recently-appointed deputy CEO of Tech City Investment Organisation, which works between government and industry to spur on development of the hub, admits to TechWeekEurope there isn’t a frenzy of investor activity right now.
“You can’t force people to invest. It’s their money,” he says, walking swiftly away from Google Campus to another meeting in Canary Wharf. “We’re trying our absolute best and we are constantly talking with investors and entrepreneurs about how best to serve their needs and make sure everyone is connected.”
There are a host of government-led initiatives, such as the Patent Box – a way to get a corporation tax deduction on profits from patents – and the Seed Enterprise Investment Scheme . These and other initiatives are designed to spawn a hive of investor activity in the capital, akin to what goes on in Silicon Valley. Tech City Investment Organisation’s new CEO, Joanna Shields, who has had plenty of interaction with firms from the Valley as former vice-president and managing director for Facebook in EMEA, should help with that too.
But Southworth thinks the focus should not solely lie on how much investor funding is coming in, and warns of comparisons with the Valley, as the Startup Genome report was guilty of. “Sustainability is as important as investment. Creating businesses that are meaningful and are profitable, that create jobs – that’s kind of what we need.”
“We’re obsessed with wanting to be the Valley and I’m not sure we should be the Valley. Can’t we be London? Can’t we just make brilliant businesses in London, as we always have in a variety of sectors? Right now it’s just about doing that in tech.”
From culture, to demographics, to population density, to weather, London is indeed very different from the Valley. But it certainly wouldn’t mind seeing some more successful tech companies emerging from the purportedly vibrant scene.
When asked to name some business-to-business orientated companies around the Silicon Roundabout, such as the next Oracle, IBM or whoever, Southworth is a little stumped, saying that isn’t really his area of interest. He can only name Huddle, which has been doing plenty of good work in the cloud collaboration space. But there are no others that can claim to be at Huddle’s level, given it has just kicked off an onslaught on the American market, having gained plenty of business here in the UK.
And that’s really the problem that lingers over Tech City with the dark November clouds: there just aren’t enough companies to rave about right now. If producing great businesses is what is really at the heart of the hub’s grand ambition, then why haven’t we seen more of them? As soon they start to emerge, the back slapping and histrionics might just be justified. That’s also when we might quit our obsession with the Valley.
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