Posted by: Ved Sen | February 1, 2011

Feb 1, 2011, Start Up Conversation 2.0 – Silicon Roundabout Or The Future Knocking? #conv2

This evening ThinkPLANK & Dreamstake are running the first of our Start Up Conversations 2.0 Series.  As chair, I have to restrict my own opinions rather than foist them on the audience, so here are my thoughts in advance, and I hope to see some of these discussed this evening.

Paul Carr kicked the London tech scene in the proverbial cojones when it wasn’t looking, back in July 2009 with this piece, where he argued that "investors aren’t investing, revenues aren’t coming, founders are being forced out – or leaving of their own accord – and no one seems to have the first idea what to do about it". He concluded that the failings of the start-up industry industry in London is covered by a lot of feel-good bonhomie and partying.

Plenty of rebuttals appeared in the comments, but fate dealt the damning blow via the decision of the Guardian to discontinue Carr’s column because of the cut back on freelance budgets. Carr was subsequently recruited by TechCrunch, which perversely might amount to the same argument applied to new media in the UK.

Nonetheless, into the breach stepped Mike Butcher, TechCrunch’s Europe editor, clearly a little miffed that Carr hadn’t bothered to check with him about start-ups to cover. He questioned the search for profitability, and pointed to Badoo, Seatwave, Wonga and many others. He also went on to point that it might be London’s media industry which could be in trouble. Which, while provocative and with a kernel of truth, might look a bit far-fetched to many.

The moot point, I suppose is understanding the yardstick. Registering a limited company? Very few places in the world that you can do it in about 30 minutes. Breaking into an established value chain as a "new idea"? Certainly not the easiest place in the world for that. Likewise, very poor banking options for start-ups, by all accounts. On the plus side, a great base for creative talent and a hotbed of good ideas.

Where it falls down for London start-ups, I believe, is global domination. The successful UK social networking start up is likely to become a midsized company with a large market share in the UK. The successful US social networking site becomes Facebook. Not just social networking of course, the silicon valley launch-pad has given us Apple, Sun, Google, Twitter, ebay and Paypal who are all only following on from HP, Intel & AMD. Perhaps it’s a genetically embedded insularity of an island nation, or a quickly developed abhorrence to risk, potentially resulting from later hires from the conservative British business culture. As a result, Silicon Valley clearly calls the shots when it comes to household names and consequently, comfortably holds on to the sex appeal and its position as start up shanghri-la.

Certainly, one of the quirks of the London start-up scene is the poor contribution of the banks and the financial industry. Given that London survives on being a financial hub, above all else. In this city, derivatives traders, bankers and hedge fund managers make merry on the global markets and find every innovative trick in the book to make money. Yet, very little of that brainpower, or financial muscle is aimed at the start-ups. When I met Tony Fish, he suggested in a corridor conversation that London was very good for the larger deals of £ 100 million plus – but struggled with ventures.  Why is this? Clearly not a lack of funding potential but more an inability to understand start-ups.

A few years ago, at a talk I attended at the UKTI organized Technology World, I sat through a session from a lady who’s name I’ve forgotten but who had just written a book about the UK and US business cultures. She argued that in the US, which is built around exploration, risk and finding the next frontier, the word "new" is loaded with good associations. Conversely, in the UK, with centuries of tradition and hierarchy, the word "new" is often associated with untried, untrusted, but being "first" or "oldest" is actually a positive. Perhaps this is the cultural overhang that the start-up industry also suffers from?

A note of warning, while we strain to catch up with Silicon Valley, we need to keep looking over our shoulders. Second place is not a bad place but who’s behind us? Are we really second place? Is London better than New York? Or Chicago? Or Shanghai, Beijing, Seoul, Moscow, Rio or Bangalore?  As the BRIC countries burst forward, could they become the next centres of world dominating start-ups? The world took note when Lenovo bought IBM’s hardware business. And outside of Tech, there are many hungry Indian companies on a global buying spree. How long before they start investing in homegrown ventures?

At least we’re trying. London’s Silicon Roundabout, identified by Matt Biddulph (then at Dopplr) according to Wired, has now been given the Prime-Ministerial momentum following a 700% growth. The plans announced by the Government include equity finance to the tune of £200m, commitments from global majors like Google, Intel, Cisco and Facebook to open innovation hubs and accelerators, and by sector specific banks (Silicon Valley Bank, for example) to start operating in the UK. Advice will be available from Qualcomm and McKinsey, among others and research and academic support from the Loughborough University and UCL. Tech hubs have been set up for start-up office spaces and BT will even accelerate the Superfast Broadband rollout in the area.

If that doesn’t do it, I don’t know what will, but I can’t help feeling that the secret sauce is still the culture of risk. The pioneers often get the arrows in their backs but it doesn’t stop them from doing it again. While reading about this, the nicest phrase I’ve found is the idea of "failing forward". Are we ready to fail forward then?

As an aside, an interesting read – the history of Silicon Valleyhttp://www.netvalley.com/svhistory.html

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Responses

  1. Nice article Ved! It is indeed a new trend to see the BRIC have more startups the last couple of years. It’s a good shift for the investors to not have all their eggs in the same basket. Will be interesting to see how EU copes with the changes.

    -Nikhil


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