The idea of London becoming a technology center to rival other parts of the world has gained a lot of momentum in the last 12 months. From around 200 firms in early 2010 the city now boasts around 1500 new technology businesses and new business growth across the board has increased by roughly 20% during the last 3 years.
While interest in the tech potential of London is nothing new, what’s different about recent optimism is that the evidence of the UK’s affinity with the internet has become a lot clearer – especially in the last few years. 3 Steps Third-Age Entrepreneurs Should Take To Stay Innovative John OwridJohn Owrid Contributor 11 images Photos: The Billionaires Betting On Internet Gambling John OwridJohn Owrid Contributor Can Sport Betting Cash In On The Social Gambling Boom? John OwridJohn Owrid Contributor Boston Consulting Group’s 2012 report, ‘The Connected World’, showed that the internet economy’s contribution to UK GDP is now at 8.3% (higher than any other G20 nation) and likely to surge to 12.4% by 2016. By then, almost a quarter of sales in the UK are expected to take place online – double the share of Germany – which led Google’s executive chairman Eric Schmidt (in a recent speech at London’s Science Museum) to describe the country as a ‘world leader’ in e-commerce.
Clearly the UK is more than London, but London’s role in the growth of the UK economy cannot be understated. As a center for business development and investment, the city has the potential to mirror other global hotspots of tech development. In as clear an endorsement as you can get these days, the city now houses Facebook’s first engineering office outside the US and Google’s seven-storey center in east London that provides workspaces, free Wi-Fi and mentorship opportunities to start-ups. Other corporates such as Telefonica (with the launch of its incubator Wyra), Barclays Bank and Cisco have joined the rush to help new firms get off the ground. Saul Klein, a venture capitalist at Index Ventures, has made no secret of his belief that London’s moment may have arrived. He recently said, “We’re not living in a US internet any more, but we’re still living in an internet where English is the most important language.
The fact that English is so fundamental but we are not American is crucial, given the nature of the economies that are going to be fundamentally important in the future.” Whilst London has many business incubators, accelerator programmes and start-up support programmes, it doesn’t yet have anything close to the success of the US-based Y-Combinator which provides seed money, advice, and connections at two three-month programs per year. In turn this has caused some commentators to question whether London has the potential to become the birthplace of new businesses of equivalent scale and influence.
Technology has more of a habit of amplifying what’s already there than starting something that wasn’t. What existed on the US west coast in the pre-internet era has obviously influenced the type of businesses that have emerged in the region since. Whilst it might be simplistic to characterize them as the pioneering heavy-lifters of the tech boom, there is a sense that other parts of the world, London in particular, have been peripheral to the types of company and business model that thrive in Silicon Valley. So what might technology amplify in London, a place more Hollywood than Silicon Valley, and probably more Wall St and Capitol Hill too? As other commentators have observed, London is neither a square peg nor a round hole, but instead a potential melting pot for some interesting juxtapositions of finance, technology and culture. In addition, the city has also become a center for a behavioral economics movement, which has close connections with the city’s technology scene. On the debit side, whereas Silicon Valley was able to develop in a different time zone to the US financial establishment in New York, its’ London equivalent (Silicon Shoreditch) is physically overshadowed by its neighboring Square Mile.
This proximity seemingly amplifies differences rather than creates common ground. That is certainly one of the views of Tech London Advocates (TLA), a new private sector advocacy group founded by Russ Shaw. High-profile supporters of the group include a number of successful UK technology firms, including David Richards and Dan Crow of Songkick. TLA believes that there is significant and growing interest from large corporates based in the UK to get further involved in London’s burgeoning tech start-up sector. However the group feels that London risks losing both the capital and talent needed to help these businesses develop as later-stage growth companies – especially the type that push for an IPO. To ward off this risk TLA has taken on the challenge of getting the establishment to take more responsibility for supporting tech business growth. The group’s advocates have each been tasked with recruiting new members from investment banks, corporate (FTSE 250) companies and hedge funds.
Only time will tell if the initiative has the potential to give London an advantage California never had – using the proximity to the world’s leading financial sector to take lots of promising ideas to the higher ground. Whilst some financiers might feel that such a mission is unwarranted – the chief of RBS bank recently complained that business did not want to borrow – the disconnect between financiers and entrepreneurs suggests that banks are still looking in the wrong places for customers and that the relationship between money and new ventures needs further attention. If TLA can help create that, it will have done a good job.