"Right now Silicon Valley is the leading place in the world for high-tech growth and innovation. But there’s no reason why it has to be so predominant. Question is: where will its challengers be? Bangalore? Hefei? Moscow?" That was the question Prime Minister David Cameron asked as he launched the East End Tech City (or UK Tech City, or Silicon Roundabout, or Silicon Old Street as it has also been called).
Why not London? asked Cameron. All the ingredients are here, he added. The aim is to extend the current hub of technology start-ups around Old Street, Shoreditch and Hoxton right out to the Olympic Park in Stratford to create a credible alternative to Silicon Valley, which occupies the southern part of the San Francisco Bay Area and now features the likes of Apple, Google, HP, Facebook, eBay, Oracle, NetApp, Juniper Networks and Cisco as well as many others.
"Our ambition is to bring together the creativity and energy of Shoreditch and the incredible possibilities of the Olympic Park to help make east London one of the world’s great technology centres," he said at the launch.
And why this part of the capital in particular? "Something is stirring in east London. Only three years ago, there were just 15 technology start-ups around Old Street and Shoreditch," Cameron explained.
London’s tech scene is burgeoning around the Silicon Roundabout
Fast forward to today and there are now more than 100 high-tech companies in the area. This on its own is incredibly exciting. "But combine that with the possibilities of the Olympic Park," said Cameron. "Just a few tube stops away, there’s the potential for nearly one million square feet of flexible office and research space, which our technology companies could expand in to.
"Add to that the Olympic Park’s green spaces, cafes and sports facilities, the quick access to City Airport and St. Pancras International and the fact that London has more outstanding universities than any other city in the world and it’s clear that in east London we have the potential to create one of the most dynamic working environments in the world," Cameron said.
Plans for the Queen Elizabeth Olympic Park after 2012, as it will then become known, include turning the press and broadcast centres into an ‘accelerator space’ offering office space and expertise to help companies develop.
Some of the companies namechecked by Cameron forming the new wave of tech success stories in east London includes Songkick, which lets users organise and track their favourite bands and receive alerts about concert dates, business card maker Moo.com, and online music site Last.fm, which was sold to media firm CBS for around £140m.
Other companies based around the famous Old Street roundabout (where the Silicon Roundabout moniker comes from) include travel site Dopplr, sold to Nokia for between €10m-€15m, and TweetDeck, the social media app that was recently sold to Twitter itself for a reported $40m-$50m.
These recent deals suggest that the long-established tech hub – before we factor in the Government-backed Tech City – is having plenty of success and that companies in the US are casting their eyes further afield than Silicon Valley. "It feels like a really big win for London," TweetDeck’s founder and CEO Iain Dodsworth told The Guardian.
"It feels like there’s something meaningful there. It’s quite a big deal that we were even bought in the first place. We are now Twitter, and we happen to be in London – it’s significant that Twitter understands the benefit of having something outside of San Francisco," he added.
It’s not just companies with a start-up mentality such as Twitter that are focusing their attention on Silicon Roundabout. Part of Cameron’s pledge was the involvement of some of the world’s biggest technology firms.
BT has said it will speed up the roll-out of its superfast broadband in the area, consultancy McKinsey & Company will be on hand to help nurture start-ups there, as will Qualcomm for matters relating to IP.
More controversially, Intel will establish a research lab in the Olympic Park, while Google will set up an Innovation Hub, "which will be a creative space for their researchers to come together with developers and academics to create the next generation of applications and services," as Cameron put it.
Facebook too will be there: its Developer Garage will have a permanent home to bring together developers and entrepreneurs from around the UK.
But that element has not met with universal praise by all Silicon Roundabout ventures. Chris Downs, founder of Levelbusiness.com, a start-up that offers free data on Companies House accounts and director information, tells CBR that having tech giants on the doorstep may not be beneficial to smaller firms.
"We’re already losing people to the big guys such as Google," Downs says. "Is it wise to invite them in? It’s tough to attract developers as it is. Do we need them there? It sounds great politically but may not help us much. We’re not there because of what David Cameron says, we’re there because other start-ups are there and we’re all being disruptive."
It’s an issue Eric Van der Kleij, CEO of the Tech City Investment Organisation, is aware of. "We’re addressing it," he tells CBR. "What we’re saying to our large corporates coming to Tech City is that yes, this is a great place to hire smart talent, but that we ask you to embrace a policy of training up two more developers or engineers from the local area for every developer or engineer that you hire. If everyone does that we’ll never run out of talent in the area."
Van der Kleij adds that from his experience of speaking to the community, they are generally in favour of having these companies around, as "they want to innovate and sell to them and with them. They need to be on the doorstep for that. The [big] companies like to be in the community as well because they believe the next generation of innovation that will fuel their growth will come from the area. It’s a very symbiotic relationship."
Downs’ point about being at Silicon Roundabout because other start-ups are there echoes one of the reasons why Silicon Valley became such a Mecca. The creative minds coming out of Stanford University start their own businesses, and so the venture capital (VC) firms flock there to find the next big thing. That prompts more start-ups to head there, and the circle continues.
Can the same thing possibly happen here? David Scott, SVP & GM, HP Storage is a Brit who moved to Silicon Valley back in 1991. He then went on to lead storage firm 3PAR when it was acquired by HP in 2010.
"Once an enabling ecosystem develops it’s very challenging for others to match it. The reason for Silicon Valley’s success is that it initially acquired a lot of entrepreneurial spirit and talent and around that built an entire set of supporting services," he tells CBR. "It’ll be a big challenge to replicate that anywhere in the world. It’s not because there are not brilliant entrepreneurs and engineers in the UK, because there are, but it’s more of an uphill struggle to get those businesses up off the ground."
Tech City will extend up to the Olympic Park
But there are signs that that sort of required ecosystem is developing in east London. "The magic of Silicon Valley is the cafes and bars, people meeting other people and discussing ideas and that is starting to happen here, it helps breed optimism," Levelbusiness.com’s Downs points out.
His firm originally began life down the road in Farringdon but saw the benefit of moving to Old Street because of the other companies there and the support they could offer each other. Another attractive aspect is the cheap office space on offer. Levelbusiness.com is based in the same building as TechHub, a community space offering small tech start-ups desks, Wi-Fi, the ever-present flow of coffee and, most importantly, support.
Put together by tech journalist Mike Butcher and entrepreneur Elizabeth Varley it will, as Butcher put it when announcing it on TechCrunch, "be at the heart of the London tech start-up scene. It’ll be funded through membership, sponsorship and other partners. It won’t be an ‘incubator’ or have its own venture fund or anything like that, it’ll just be a space."
"There’s a buzz and excitement around the UK tech scene at the moment, and TechHub feels very similar [to Silicon Valley]," says Victoria Ransom. Ransom is the co-founder and CEO of social media marketing firm Wildfire Interactive and has plenty of experience of Silicon Valley and the tech start-up scene having founded a number of companies before Wildfire.
"The thing about Silicon Valley is that everyone is thinking about entrepreneurship," Ransom continues, echoing David Scott’s comments. "If you go into a coffee shop in Palo Alto everyone in there is either an investor or an entrepreneur. You get so sucked in that you think, ‘Why wouldn’t I be an entrepreneur?’, plus for people living there it’s the same in terms of getting jobs – the only thing they’ll do is work for a start-up. I think here there’s probably not the same critical mass as in Silicon Valley, where if you’ve got lots of people around you taking that risk then it feels much easier doing it yourself."
Ransom goes on to explain that one of the other benefits is the easy access to VC money, another element that Eric Van der Kleij is working hard to get right for Tech City. He also suggests that Tech City may actually have an advantage over its US counterpart when it comes to VC funding.
"At the moment we’re taking one big VC fund around Tech City each week," he says. "They’re not stupid; they’ve got their scouts out and their radars are up. They know there is opportunity here. They tell us that in Silicon Valley they are competing for every good deal against the world’s best venture capitalists, so the entry values are high. Here, because there is still a scarcity of capital they think they can get much better entry deals. And they are right, they can."
The people behind Tech City will point to the fact that everything is in place in London to create a hub of technology companies – the office space, the infrastructure, the funding and perhaps most importantly the support and mentorship. But how will Tech City define success? Is it creating the next technology giant to rival Facebook, Google, Twitter and the others? Is it selling them for vast sums of money?
Van der Kleij, who suggests that the next Facebook, Google or Twitter is already up and running in east London, says success will be when his Tech City Investment Organisation can take a step back: "Our role is to see what’s needed here and nurture it so it’s sustainable. Success for us is when we don’t need to do that, when it’s up and running by itself.
"There are two goals," he continues. "For it to be acknowledged internationally as the digital capital of Europe, and to have a thriving tech community from Old Street right up to and including Stratford and beyond in the years following the Olympic Games. That to me is proper success."
