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Report criticises Tech City initiative as CEO departs

Focus on expansion to Olympic Park risks alienating existing cluster around Silicon Roundabout

By Steve Evans

Olympic Tech City

A new report has suggested the government’s Tech City initiative risks damaging the existing cluster of businesses around Shoreditch if plans to expand the scheme to the Olympic Park are pushed through, a new report has suggested.

The report comes just days after it was revealed Tech City’s CEO Eric van der Kleij would be leaving when his contract expires this summer.

The report, from think tank Centre for London, says that expansion further east into Stratford, Hackney Wick and the Olympic Park, where prime minister David Cameron wants to turn the media centre into office space for start-ups, could results in Tech City losing its primary focus.

According to the report, that primary aim is to help the existing ecosystem of tech start-ups based in Shoreditch and centred on the Old Street roundabout, which has resulted in the Silicon Roundabout moniker. That may not happen if focus is shifted to the Olympic Park, the report said.

"Government, the GLA, London & Partners and TCIO (Tech City Investment Organisation) should temper their efforts to attract tech employers to the Olympic Park and its surrounding areas, where it distracts from the primary aim of helping SMEs and nurturing entrepreneurs," the report states.

The report adds that it anticipates only a "limited expansion" of the cluster into the Olympic Park is likely to occur. This is primarily because the existing cluster acts as a "digital economy corridor," the report claims.

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The report also voiced concerns that companies based in the Olympic Park would find it difficult to attract workers, which is not a problem in Shoredtich.

The Tech City initiative was launched in November 2010 by Cameron, who wanted to create a London rival to Silicon Valley, where start-ups would have access to skills and expertise from mentors as well as exposure to VC firms.

The area of east London was chosen due to the high number of digital start-ups that were already there and had been for many years. They were originally attracted by low rent, although as the area grew in popularity, prices have increased, which is a concern to TCIO.

The report also criticised a number of other aspects of Tech City, including the increasing rental costs in and around Shoreditch. The lack of decent high-speed internet access was also an issue for many businesses there, although van der Kleij has previously said that is an on-going concern for TCIO.

Access to mentors was also a cause for concern according to the report, with many businesses saying there is a demand for mentorship but a lack of people with the required experience available.

Banks in the UK are also not geared up to help the digital sector, the report found. This is in contrast to Silicon Valley, according to Rob Whitehead, deputy director of Centre for London and one of the report’s authors.

"It’s harder for entrepreneurs to access the right kind of finance here compared to the US," he said. "More can be done to encourage private investors. UK banks, VCs and Business Angels are missing out on the opportunities domestic firms offer, many of who are going to the US for funding."

In a statement the TCIO suggested the report had some "misconceptions" about it and the government’s role.

"Many of the actions it recommends as ‘new’, such as mentoring and attracting the right kind of investment to the area are already taking place," the statement said. "There are also recommendations in the report that we can take on board in the future."

The statement said that is agrees with the report’s claim that there is no simple formula for creating a successful high-tech cluster and added that its role is to provide help and support while that cluster continues to grow organically.

"In identifying the three aims of "Government Tech City strategy" as fostering small and medium size businesses in the area, promoting international investment into the area, and encouraging its spread eastwards to the Olympic Park, the report is not entirely accurate," the statement added.

"We focus on helping businesses set up in the area that’s right for them – whether that’s in Shoreditch, Greenwich or Stratford. In the past 18 months, there have been significant policy developments designed to support start-ups and the tech and digital industries. These include the new Seed Enterprise Investment Scheme, R&D tax credits, and the opening up of Government procurement to support SMEs," the statement added.

It was also recently revealed that TCIO CEO Eric van der Kleij would not be renewing his contract when it expires in September this year. TCIO had not responded to CBR’s request for comment on this matter at the time of publication.

 

More on Tech City:

Cameron plans east London Silicon Valley

London’s Tech City appoints start-up mentor

Tech City launches mentorship programme for UK entrepreneurs

Tech City celebrates first birthday

Tech City: A good year but work still to be done

Tech City: London Calling

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