As I’ve said before, startup clusters are springing up all over the place and that’s great. There’s even one in my village (population 3,000) – well, two startups and a group of support services, including myself.
Clusters encourage innovation, particularly through external economies of scale – i.e. by providing access to the people, resources and infrastructure that startups need but don’t have themselves. And the more startups there are in an area, the lower the price of these services as they are shared across a greater number of companies.
A lot of these clusters seem to be driven from outside, particularly as both central and local governments realise that startup clusters are (a) sexy and (b) cheap. Why not give them a small pot of money/some space/a patronising visit to show you’re supporting innovation?
So, putting cynicism aside, what does a startup cluster require – and how does Cambridge measure up? I’ve been looking at Brad Feld’s work on building a startup ecosystem, based on 20 years experience in Boulder, Colorado. The aptly named Boulder Thesis highlights four things that these communities must have:
- They should involve entrepreneurs and feeders (people/institutions like universities, government, venture capitalists, lawyers, PR people). BUT they have to be led by entrepreneurs if they are to truly take off.
- Long term. It can take 20 years to build a community, so entrepreneurs need to stick around, even if they’ve built and sold their company long ago. And the same goes for those that fail – encourage them to stick around.
- They need to be inclusive, welcoming anyone, no matter what their skills or ideas.
- They need to be active, with a range of events and accelerator programmes to help encourage and nurture startups.
That’s Boulder. Let’s compare it to Cambridge.
Firstly there’s a large community of entrepreneurs and feeders in the city (so a tick there) and entrepreneurs are taking a leading role. And given the longevity of the Silicon Fen success story there are plenty of long term entrepreneurs who have stuck around, from Hermann Hauser to Mike Lynch.
It’s the third and fourth points where I believe Cambridge has issues. Don’t get me wrong, there are some incredibly welcoming people in the Cambridge community and some great events/accelerators that nurture startups. But, perhaps because of the size and depth of the community, spanning everything from medtech to green IT, groups can appear disconnected, with everyone focused on their niche. Some of this may come from the research-led nature of many Cambridge innovations, but, even in academia, cross-discipline working is becoming more normal after centuries of specialism. Compare this to places such as Norwich, which has a smaller (but still substantial) startup community that seems more cohesive, with greater communication between disparate companies with radically different ideas.
What Cambridge does have, and that I think is missing from Feld’s thesis, is the combination of new and old blood. The universities, and increasingly tech businesses, attract talent, much of which stays on and contributes to the ecosystem. But enough leaves to make space for new ideas so that things don’t go stale.
So, in true end of term report style, Cambridge needs to try harder when it comes to building a cohesive, overarching supercluster. It has the constituent parts, but what is needed is stronger glue to stick it together and help connect the bigger picture. Let’s see if 2014 brings a solution to this long term problem.
There can be a tendency in Cambridge to think that innovation ends at the city limits, and particularly that we’ve got the monopoly on tech startups in East Anglia.
Proof positive that this isn’t the case was on show last week at SyncNorwich, where more than 300 entrepreneurs, developers and members of the Norwich tech cluster talked about their diverse successes. This included market leaders such as FXhome, which produces special effects software for both Hollywood blockbusters and amateur filmmakers, Liftshare.com, the world’s most popular car sharing site and mobile interaction/payment firm Proxama. A whole host of newer startups, such as targeted mobile advertising company Kuoob, music community site SupaPass and educational software provider Wordwides (set up by a 16 year old) also talked about what they could offer.
There’s obviously been lots of activity in Norwich for quite a while (FXhome has been going for 10 years and Liftshare.com for 15), but what the evening did was give outside endorsement to the cluster. Mike Butcher from Tech Crunch came along and it gave everyone present belief that they were on the right road and that they should be shouting about it. In the days since, I’ve seen emails offering co-working spaces and there’s even a cluster name (Silicon Broads) being bandied about, along with a startup map.
Norwich isn’t the only cluster rising to prominence across Europe – the growth of cloud-based technologies, new agile development methodologies and a focus on entrepreneurship mean they are springing up everywhere. Some people see this as a bad thing – they point to the size of Silicon Valley and wonder how hundreds of disparate European cities can compete or scale. But as Butcher pointed out, the Valley has a 60 year head start and what is needed is to build bridges between the different hubs – after all takes 2 hours to drive from London to Norwich (or Cambridge), the same time to get from one end of Silicon Valley to the other.
What Europe needs to do is to use the nimbleness of having multiple centres to its advantage and turn disparateness into diversity. I’m reminded of the story of the ‘discovery’ of America. At the same time as Christopher Columbus was touting his plans around the courts of Europe, the Chinese Emperor was assembling a great fleet to explore the same area. Given the scale and backing put into the expedition it would have been likely that the first non-native settlers in the present day United States would have been Chinese, not European. However the Emperor died and his plans died with him – there was no alternative power that could take them on. In contrast Columbus, originally Genoese, travelled round Europe for years until he found a backer in the Spanish monarchy. The result? The world we know today.
So it is time that European startups (and political leaders) stopped dreaming of a single super hub that on its own can rival Silicon Valley. It’ll never happen and what we need to do is build bridges between the enormous variety of hubs across Europe. Making everyone aware of what is going on up the road (or further afield) is crucial to driving collaboration, unlocking opportunities and building a successful pan-European tech ecosystem that can break down barriers and silo working and deliver jobs and growth.
In a week that saw the publication of the long-awaited Cambridge Phenomenon book, celebrating 50 years of innovation in the area, some more sobering figures concerning continued investment have been published.
Research from tech-focused investment group Ascendant found that while generally VC investment is up in Q1 2012, money doesn’t seem to be coming to Cambridge. £307m was invested in tech companies in the UK and Ireland – with £188m going to London-based outfits, and £27m to Irish ones. Cambridge (and Oxford) saw very little new money.
While it can be misleading to generalise based on three months of data this could be a worrying trend as centralised government action to boost London’s Tech City draws potential funding (and talent) away from the Cambridge ecosystem. After all, as Rory Cellan-Jones points out in his BBC Blog, Cambridge has potentially a better chance of creating world-class tech companies than London as it has already developed an ecosystem with research at its heart to feed innovative ideas to the market. But investment funding for Cambridge is key – not just in ‘scientific’ spinouts such as Owlstone and ARM but the more internet-style businesses and the thriving cleantech sector that Cambridge also supports.
So how does Cambridge compete against the media-savvy Tech City community when it comes to gaining funding? I may be biased as a marketer, but really feel that public relations has a strong role to play. There is still a tendency amongst Cambridge startups to treat PR as an afterthought rather than an intrinsic part of how you create a company and drive its success. You need to know your audience and deliver the right message to it at the right time using language they understand to succeed. Otherwise the risk is that Cambridge will become seen solely as the domain of technical wizardry rather than as a driver of customer-focused innovation that leads the UK tech scene.
There’s good and bad news from the latest Deloitte UK technology Mergers & Acquisitions survey.
On the plus side respondents believe the market is looking up, with increased optimism and higher prices paid for tech businesses.
But on the downside confidence in going public in 2011 has crashed – with only 16 per cent seeing increased investor appetite for tech IPOs. And more worryingly given the government’s plans to use the tech sector to kick start the economy, the acquisition market is still being driven by overseas companies. 90 per cent of those surveyed believe that the US will remain the dominant buyer of UK tech businesses.
Why should this start ringing alarm bells? Not through any desire for protectionism of UK companies – tech is one of the most truly global markets and nowhere is that more obvious than in M&A. The issue is that the stall in IPOs combined with the acquisition of breakthrough UK tech businesses risks reducing the number of UK leaders we need to encourage other companies and sectors. Large, quoted companies create their own ecosystem, building up a network of suppliers, spin-outs and related businesses that mutually interconnect. For example, look at the cluster of neural network/data mining companies around Cambridge. Headed by Autonomy, companies as diverse as Linguamatics, Transversal and True Knowledge all use broadly similar technology to solve completely different sets of business problems. They benefit from access to staff and suppliers that understand the market – take out the kingpin and it gets more fragmented, and consequently companies and people drift away.
So we need a way of encouraging IPOs that attract investors for the medium to long-term – perhaps that would be a better use for government cash than propping up the banks or the Irish economy?
- Deloitte: UK Tech Firms Don’t Think 2011 Is The Year To Go Public (paidcontent.org)
- Brain drain fears as cash-rich US firms eye UK tech rivals (telegraph.co.uk)
- Tech Mergers and Acquisitions Coming Back (time.com)