Tech City's silicon dreams

22 September 2011 Last updated at 08:14 GMT The Old Street area is home to many creative industries including art and fashion Can east London really rival Silicon Valley as a place to start technology businesses? Indeed, can it even rival the likes of Cambridge, home to giants like ARM and Autonomy, or Guildford, where some of Britain's best games firms have been born?

That's been the ambition since last November, when David Cameron set out his vision for what's become known as Tech City in a speech at the Tech Hub just off "Silicon Roundabout" - or Old Street as less digital folks know it.

I've been something of a sceptic because, while the area does have a healthy sprinkling of web and new media start-ups, it seems to lack some of the key components of a successful cluster.

There is no world-class university to feed out ideas and ambitious young scientists, no giant anchor company to spin off new firms, no community of angel investors.

But this week I met two men who did a pretty good job of selling the idea that Shoreditch, Stratford and the Olympic Park could soon be the cradle of the Googles and Facebooks of tomorrow.

Eric Van Der Kleij is a serial entrepreneur with a good record of building technology businesses in London, and is now running the Tech City Investment Organisation, appointed by Number 10.

He brought with him to our meeting Bob Schukai, a London-based American technology executive who's acting as an unpaid ambassador for Tech City in the US.

Both were bubbling with enthusiasm about the project, and keen to lay out the evidence that they were already making a difference.

The number of start-ups in the area had more than doubled from 200 to 500, they told me, making Tech City Europe's fastest growing cluster.

Well okay, but rapid growth from a small base does not necessarily mean much - look back at the dotcom bubble and remember all those start-ups claiming 1000% user growth in six months. And gone six months later.

But they were already making a difference to the policy environment.

Number 10, they assured me, was listening to their advice on tax breaks for entrepreneurs and on looser immigration rules for skilled individuals who might start companies here.

Olympic appeal

Yes, but such changes would apply across the UK - what was so special about east London?

Eric explained that there were two things: "One is it's an entirely natural cluster which has grown naturally without help, rather than a greenfield site - the other is the Olympics. We have the opportunity to spend £9bn on the most extraordinary infrastructure."

The new £1.45bn Westfield complex houses more than 300 shops and 70 restaurants

Already, he said, east London was benefiting from better connectivity - BT has upgraded its networks for the area, while Virgin is using it to trial its 1.5 Gb/s broadband service.

I mentioned that colleagues had found that it was just about impossible to make phone calls from the new Stratford Westfield shopping centre and they agreed that better mobile coverage was a priority.

But what was the plan to get business booming? This had four elements, Eric Van Der Kleij assured me, rattling through his plan.

Big corporates like Google and Cisco had committed to invest in the area, with ambitious plans to build research bases employing hundreds of engineers.

Tech City's job will be to make sure those plans are put into action,

Then there will be help for new businesses, including an Entrepreneurs' Festival in November where mentors will help start-ups to refine their business ideas.

Investors were being lured to the area, with showcases of what was on offer.

And finally there was work underway to develop and showcase the talent the area will need, building on an existing set of skills among the coders, designers, artists and new media types already populating the lofts and studios of east London.

I came back to the big question - why east London, not Cambridge, not Newcastle or Manchester?

"My job is to concentrate on London, then make sure it is connected to the rest of the UK," said Eric. "It's a younger cluster - but it has really good assets on its doorstep, customers in the City Of London, the advertising agencies, the post-production industry in Soho."

And Bob Schukai chimed in to underline how much easier it is to market London to American entrepreneurs and investors.

"London is the easiest city to sell around the world," he explained. "If you say pack up your bags and go to Cambridge, think what you're asking your poor lazy American to do - first they've got to get through Heathrow."

The evangelists for Tech City certainly deliver an impressive elevator pitch.

And, from existing businesses like the thriving games firm Moshi Monsters to new ones like Housebites, which promises to reinvent the takeaway, there are already examples of enterprise flowering in the noisy streets around Silicon Roundabout.

But is this already "the Digital Capital of Europe" or "the number one European location for IT and the creative industries", as Tech City's website proclaims?

I think the likes of Cambridge - or Munich, Tallinn and Helsinki - might say come back in 2015 and we'll see about that.

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Silicon roundabout

7 September 2011 Last updated at 23:03 GMT By Mike Wendling In Business, BBC Radio 4 Hundreds of tech firms are based near the "Silicon roundabout" in east London Can London really build the kind of entrepreneurial hub which could challenge California's tech dominance?

They are brimming with confidence. They have the latest technology at their disposal. And they are looking for serious backers to fund their digital ideas.

"I'm skipping lunch," one announces, hunched over a laptop. "I'll take a break when I'm either rich or dead."

These internet entrepreneurs are not in Silicon Valley, or even New York. They are in London, at an event called Seedcamp Week - a sort of networking event, venture capital competition and problem-solving session all rolled into one.

The ambition of the 20 start-ups at Seedcamp is matched by the breadth of industries they hope to disrupt. Crashpadder is a service taking on hotels, while FarmerOn wants to harness online tools to manage cows, crops and tractors.

TransferWise is a user-to-user foreign exchange site which cuts out banks and their commissions.

'Organic' growth

"Since our launch in January, we've handled £3m in transfers," says TransferWise co-founder Kristo Kaarmann. "We've saved 100,000 euros (£88,000) for our customers and they love us for it."

Continue reading the main story

Tech City is one of the fastest-growing technology clusters in Europe at the moment”

End Quote Eric Van Der Kleij "Entrepreneur-in-residence" "For us, this week is about speaking to people and getting their advice about how we grow faster and make it a sustainable global business," he says.

TransferWise is just one of the hundreds of companies that are based near so-called "Silicon Roundabout" in east London.

Before the recent flurry of Web 2.0 startups, it was simply Old Street Roundabout, a notorious - and notoriously ugly - traffic blackspot.

Around this shabby, hip neighbourhood, hundreds of small technology companies have started up this year alone, thumbing their noses at the economic gloom around them and hoping to build tech companies to compete with the world's best.

The government has noticed. It has declared a swath of east London "Tech City UK", and hopes that the roundabout magic will spread all the way out to the Olympic Village in Stratford, more than three miles away.

But Eric Van Der Kleij, Tech City's "entrepreneur-in-residence", insists that the government will keep a light touch:

"Tech City is one of the fastest-growing technology clusters in Europe at the moment," he says. "It's entirely organic... the companies that identified the Old Street Roundabout area of London as the right home for them did so naturally."

He has no doubt about what kicked off the start-up boom - by his estimate, the number of new companies has doubled in under a year.

"It's such an attractive area, and fun to be in," he says. "Where we are now around Old Street Roundabout, if you did an hour's walk you would come to 100 art galleries, and the culture of this area is what makes it so attractive to the creative classes."

Some entrepreneurs bristle at the name even as they extol the tech virtues of the capital. Alex Asseily started Jawbone, a mobile phone products company, in California. But when it came time to start a new venture, he returned to London.

"We don't make any silicon in London," he says. "And Silicon Valley has held on to the name because they really did make silicon and the semiconductor industry really did start there.

"But it's valuable to start thinking what is it that London really does well."

Different flavour

"London is at the intersection of Europe and North America.

"Americans feel comfortable here, it's a place where Europeans converge to do business, people from the Middle East come and of course people from the Far East come as well.

Continue reading the main story

I'm not convinced that being based in Silicon Valley would make any difference”

End Quote Jerome Touze Co-founder, WAYN.com "What better place to have global ambitions than the global capital?"

One of the biggest hits of the new generation of London tech businesses is Mind Candy, creators of Moshi Monsters, a social network and game for under-13-year-olds.

Founder Michael Acton Smith is an industry veteran who started his first tech business in the 90s. He hit a wall when Mind Candy's first big product, a complex online game, was a commercial failure.

Moshi Monsters was his last throw of the dice, but a good one - it now has 50 million tiny users.

"I love London - there's a great buzz and energy here at the moment," he says. "A lot of my friends are moving to build their businesses in Silicon Valley, but while I like visiting there, I'd rather build my business here."

Spend some time on the fringes of the City of London, in old warehouses with creaky staircases and broken lifts, and you will definitely notice the companies here have a slightly different flavour than their Californian counterparts.

Many focus on art, design or music, such as early success story Last.fm, an online music recommendation service which was bought by American giant CBS for £140m in 2007.

Others are lifestyle-focused businesses hoping to create a new generation of social networks.

WAYN.com - the acronym stands for "Where Are You Now?" - began life as a travel network. It has since broadened its appeal, according to co-founder Jerome Touze, to "people who want to do stuff".

"If you look at our business, we are more of a media company than a technology company," he says.

"It makes a great deal of sense for us to be based in London, and I'm not convinced that being based in Silicon Valley would make any difference."

From a slow start early in the last decade, WAYN now has more than 17 million users.

However, Touze does admit that funding and attention would probably have come more quickly in Silicon Valley, California.

And along with the relatively slow speed of growth come other big questions.

Is the boom really a bubble, ready to burst just like the first tech bubble a decade ago?

Will British tech companies stay here to grow instead of, as has been the pattern, being sold to American firms?

Can London really build the kind of Silicon Valley machine - including entrepreneurs, developers, and different types of investors - that is the envy of the world?

Those are some serious challenges, but they don't seem to bother the entrepreneurs at Seedcamp Week very much.

They are too busy working hard, right through lunch.

In Business is on BBC Radio 4 on on Thursday 8 September at 20:30 BST and Sunday 11 September at 21:30 BST. Or listen via the Radio 4 website or download the programme podcast.

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