The UK has announced that they want to create a tech city in East London, encouraging innovation and trying to grow the tech sector in London. Problem is they’re going about it from the wrong direction. The press coverage is spread with names like Google, Facebook, McKinsey, Silicon Valley Bank and other big hitters. Problem is true innovation comes from taking risks and encouraging individuals to take risks and create the next generation of big companies.
I’m all in favour of the efforts and the investment that the government is putting in; I’d just like to see more encouragement of private investment and of the banking sector to invest in individuals who have the next big idea. The whole idea that the next Facebook or Google can come out of the UK with this framework is not realistic today. There’s a substantial change that needs to happen in angel investment, banking and culture before a big consumer tech company will come out of the UK. The guardian article with comments from Joe White is the only article I’ve read that points this out well.
A company needs much less capital today to get started. While the government looks at raising funds for investment what they really should be doing is passing on tax relief for investors who are investing in truly early stage companies. As well as changing and encouraging the banking sector to lend to early stage companies with solid teams and markets and help take on some of the risk. The UK government has some of the levers in place with the Enterprise Investment Scheme and the Enterprise Finance Guarantee but they’ve made these schemes so convoluted and so complicated that it’s really difficult for anyone to really take advantage of these levers.
The UK culture towards entrepreneurship is changing, but failure is still seen as a bad thing rather than a badge of having the courage to try something new. The media, with it’s programs like Dragon’s Den, doesn’t help this by making 4 entrepreneurs seem like bumbling idiots compared to every 1 who has their head screwed on right.
That being said, I do believe London is one of the top three places in the world to start a company – with the Valley and New York being the other two – and while this is a great step towards ensuring that London continues to compete globally on the technology front, there’s still some work on the other side of the spectrum that the government needs to do to take a leadership position globally.