Tech communities are grown not dumped

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.

  • Sergi Martorell

    Farhan, great article! I couldn't agree more with your comments. All of a sudden everyone seems to be talking about the silicon roundabout, tech East London, etc. I remember back in the late nineties / early 2000 the area was already booming with dotcom startups, digital media companies, etc. The bubble burst but East London continued to be the home of many entrepreneurs (most notable example is probably Last.fm). The recent government announcement feels like a PR exercise to me. As you point out, more encouragement of private investment is what it's really needed and the banking sector should open up to small businesses again. We know that Government support of tech is crucial (Silicon Valley & Israel are good examples) but it's not enough. We also need efficient capital markets, a thriving angel community, risk taking culture, good universities, etc. Good news is that the UK is miles ahead of most European countries; why doesn't the Government build on this and develops a more ambitous strategy that creates a cluster encompassing London, Cambridge, Oxford? Silicon Valley includes the whole stretch from San Francisco to San Jose!! It's not only the Marina District in SF or Palo Alto near Stanford Uni. The tech city in East London sounds great but again, it falls short of real ambition.

  • http://www.fiftybyfifty.com/lifeoffarhan/ Farhan Lalji

    Thanks for the comment Sergi. Agree with the sentiment. The government's efforts are amplifying work that's already being done rather then really fixing the markets and issues that struggling or aspiring entrepreneurs face.

    I don't feel as strongly about the geographical issue as you and some of the commenters on other sites have been. I think if it works in one place than you can take what works and replicate in other areas. I think the efforts you put in London will have vibrations in the other areas helping those locations as well.