Like a lot of people I was initially shocked by the recent £24 billion takeover of ARM by Softbank of Japan. Not only was it the biggest acquisition ever of a European IT company, but it was also widely seen as the jewel in the crown of the Cambridge/UK tech scene.
A few years ago Cambridge had three stock market listed companies worth over a billion pounds each – ARM, Autonomy and Cambridge Silicon Radio (CSR). All have now been acquired, with varying degrees of success – HP, Autonomy’s purchaser is still suing the previous management about alleged overstating of accounts.
At the same time a large number of the next tier of Cambridge companies, such as Jagex, cr360 and Domino Printing Sciences, have also been bought, leaving many people wondering where the next tech superstar will come from. This is particularly true as an increasing number of earlier stage businesses in exciting markets have been acquired by tech giants – Internet of Things startup Neul was bought by Huawei, Evi by Amazon and Phonetic Arts by Google. And that’s just the acquisitions that were announced. I’m sure that in many cases promising technology has been snapped up without making it into the press, as the deal size has been relatively small.
So, as someone involved in the Cambridge tech scene, should we be worried? Is Silicon Fen going to turn into an offshoot of Silicon Valley – a bit like the tech towns around Heathrow, but with a bit more IP? Thinking about it more rationally, there are two main reasons for the flurry of acquisitions, particularly of smaller businesses.
1 Cambridge’s reputation
All of these acquisitions are actually recognition of the strength of the Cambridge tech sector. Big companies are attracted to the area because of the talent and innovation on show, and are increasingly willing to take a punt on earlier stage businesses to get in first and lay their hands on new technology and IP. They’ve realised that not every acquisition will work, but that the wins should outweigh the losses. So, Cambridge’s PR has worked in attracting the largest tech companies to the area.
2 Changing mix of companies
Traditionally, a lot of Cambridge startups were built on biotech, science and engineering, either from the University or the innovative consultancies that differentiate the city from many other clusters. As Cambridge grows, a greater number of companies are software-based, which means that developing their technology is faster than when trying to commercialise a product from an interesting piece of lab research. Therefore, they are likely to have a steeper growth curve, and potentially a shorter lifespan as they reach maturity (and acquisition) quicker.
A further reason for optimism is given by the new Cambridge Cluster Map, which lists the nearly 22,000 businesses based within 20 miles of the city centre. With a turnover of £33 billion, the map demonstrates the range of companies and the strength of the local economy. A third of this turnover is made up of knowledge-intensive businesses, employing nearly 60,000 people. That’s a lot of innovation, whoever ultimately owns the companies concerned.
Looking back, I think commentators will see that the ARM acquisition is part of a change in Cambridge as it matures and becomes a recognised part of the global tech sector. The economy will continue to grow, but more of the capital will come from outside the city. While this means we will have fewer ARMs and CSRs, and more outposts of Amazon, Apple and Google, it won’t stop growth and innovation, which means the Cambridge Phenomenon is likely to go from strength to strength.
Devolution is all the rage in Whitehall at the moment, with areas outside London encouraged to band together, elect a mayor and take more control over their finances and future. The aim is to counterbalance the economic power of London – or if you want to be cynical to woo wavering Labour/LibDem voters over to the Tory party.
The first of these projects, the Northern Powerhouse, was trumpeted by George Osborne two years ago, and has seen powers over health spending devolved, plans for elected mayors take shape, and funding announced for transport improvements, although many remain sceptical until things actually happen.
In his last budget, the Chancellor spread devolution even wider, announcing plans for an Eastern Powerhouse, covering Norfolk, Suffolk and Cambridgeshire. Except it isn’t all of Cambridgeshire since Cambridge City Council has said from the outset that it doesn’t want to be part of the agreement. And it turns out that it may not be any of the county at all as Cambridgeshire County Council rejected the deal offered by the Government at a meeting on 25th March, calling for the terms to be renegotiated.
In fact, Cambridgeshire was never part of the original plans, which were for an authority to cover Norfolk and Suffolk. But the Government deemed this not large enough, so pushed to add Cambridgeshire to the mix. The fraught negotiations, which involve 22 separate county and borough councils, demonstrate the difficulty of getting any agreement across such a wide area.
As someone who lives in Suffolk and spends a lot of time working in Cambridge I can see the Chancellor’s original idea behind the Eastern Powerhouse – use the energy and buzzing economies of Cambridge and Norwich to revitalise the rest of the East. But as a PR person I’m deeply sceptical of initiatives that are strong on bluster but short on details. I remember the Cambridge 2 Ipswich High Tech Corridor of 2000 which signally failed to generate much entrepreneurship between the two places. For the Eastern Powerhouse to work it has to be more than a paper tiger and, I believe, have the following attributes:
1. Proper investment in communications
The Northern Powerhouse has been criticised for slow progress on improving transport links, but at least there are motorways linking Leeds and Manchester. Roads in Suffolk and Norfolk are simply not up to scratch, and there is no spare capacity – if the A14 is blocked then forget trying to get from East to West in a hurry. Trains are lackadaisical when it comes to speed – you can get from York to London in about the same time as London to Norwich, despite it being almost twice as far away.
The other thing that the region lacks is 21st century (or even 20th century) telecommunications. Cities in the region may have 3G, or occasionally 4G, but in rural areas you are lucky to get any coverage at all. What brought this home to me was when I was in the middle of the Yorkshire moors, miles from anywhere – and I had a 4G signal. At home 2G is the norm. And you can forget Fibre to the Home connections – many villages in Suffolk have yet to receive any fibre connectivity at all. This is all despite BT’s main research labs being located in the county.
So, if an Eastern Powerhouse is to flourish it needs serious investment in transport and communications – potentially billions of pounds. And this isn’t just moving existing spending commitments to a new pot. This is going to have to come from central government and intoday’s straitened times I simply can’t see this happening.
2. Investment in skills
Both Suffolk and Norfolk languish near the bottom of league tables for school achievement, with inspections by Ofsted heavily criticising both county councils. Again, this comes down to investment – government policies have focused money on underachieving inner city schools but have neglected rural and coastal areas. Suffolk only got a university within the last decade, while Peterborough has been promised one as part of the Powerhouse proposals.
3. Change in leadership
Since I moved to Suffolk the County Council has shut my son’s school, tried to build a waste incinerator in an area that failed to meet its own environmental criteria and had to cope with a chief executive who received a six figure payoff after being accused (and cleared of) bullying that led to the suicide of another official. I’ve seen the damage cuts have done to its own education department and the slow speed at which vital decisions are made. Suffice to say I have an incredibly low view of its utility or the calibre of its elected officers. Yet, when there is talk of an elected mayor, it is widely believed it will come from one of the county councils. I therefore heartily agree with entrepreneur Peter Dawe, who says he will stand for the post of elected mayor of the region, criticising local councillors for “their myopic, parochial interests based on the past, and on keeping what powers they have, whilst carping about lack of money.” However I can see party machines mobilising to shut out an independent that threatens their candidates.
4. Change in attitudes
This is probably the hardest thing to change, but people need to be encouraged to realise their potential – and high achievers need to be encouraged to return to the county. More young people need to go to university or college, and more should be done to support innovative new businesses that deliver jobs to the region. This doesn’t just require investment, but a cultural change that opens up opportunities to everyone – however it does rely on the communications, skills and leadership change mentioned above if it is going to happen.
If the Eastern Powerhouse is to achieve anything it needs to address these four areas – otherwise it risks being a solely cosmetic extra and costly layer of government that will fail to improve the aspirations, careers, and lives of those within the region.
Despite all the talk of innovation, there are plenty of things that people continue to do, even though they are no longer the optimal way to achieve something.
Take typing for example. The QWERTY keyboard dates back to the first, manual typewriters, where the typist hit a key manually pushing the inked letter onto a sheet of paper. The problem with the first typewriter designs was that people could hit the keys faster than the machine would cope with, leading to jams as multiple keys became intertwined. Hence adopting what was essentially a sub-optimal system in terms of speed, in order to make typewriters more efficient overall. Now, in the digital age jamming is no longer a problem, yet everyone still uses a QWERTY keyboard, as that is the de facto standard, irrespective of the fact that it can give you carpal tunnel and repetitive strain injuries.
Driving is another area where tradition dictates what we do. The reason that in England we drive on the left dates back to the days when people rode horses – as the majority of the population was right handed you could hold your reins with your left hand, leaving the other free for your sword. As part of the French Revolution this was reversed in France, and then imposed by Napoleon on the countries he conquered. This means that the majority of countries in the world now drive on the right, despite the fact that accident rates are lower amongst left hand drivers, perhaps due to right eye dominance.
These two examples demonstrate two things:
- The most logical, sensible solution can’t necessarily overcome the status quo, particularly if it means people have to completely relearn how they operate.
- People continue to choose a particular course of action, even if the reasons for it are lost in the mists of time. Tradition rules.
Why is this important? I meet a lot of technology startups, and many of them enthusiastically talk about how their invention will completely change a market or sector. Build it and they will come seems to be the mantra. All it takes is for people to see how outmoded and inefficient the current technology is, and switch to their new, unproven, but potentially much better solution. And normally relearn how they operate. And pay a bit more. Often, they then wonder why they fail to get market traction or growth.
Essentially people weren’t sufficiently convinced of the advantages to change what they did. They preferred to be inefficient rather than invest the time to solve a problem. We’ve all done this, spending an extra minute or so doing something on our PC because that’s how we were taught 20 years ago, rather than spending 15 minutes reading the manual and upgrading our knowledge.
This isn’t to say that innovation can’t happen. Look at the Dyson vacuum cleaner – the advantages of changing (no bag, better performance), outweighed the higher cost and learning how it worked. But in that case the benefits were extremely clear, and, most importantly, marketed very well.
So, the lessons for every business, whether a startup or not, are clear. The vast majority of the population generally doesn’t like change, and therefore the benefits of something new have to dramatically outweigh the disadvantages of how things have always been done. Innovation has to be clearly marketed if it is going to take root with the majority, as opposed to early adopters – it won’t just sell itself. It has to fit inside the ecosystem of what people are comfortable with, and provide them with the best overall experience. That’s why VHS beat the technologically superior Betamax technology – it had the content from Hollywood studios and was easier to operate. Often it can be easier to sell a better mousetrap than a completely new method of rodent killing device. Therefore talk to your audience, understand their pain points and make sure you provide a simple, powerful solution – otherwise you are likely to join the ranks of technically superior, but unused products, and all your innovation will be wasted.
This month marks several major anniversaries in my life. I’ll have been married for 15 years and July 1st was the beginning of my sixth year of running my own business. Leaving aside everything I’ve learnt from my marriage, here are the top five things I’ve learnt after setting up on my own:
1. Network, network, network
It doesn’t really matter what type of business you are, the easiest way to bring in new revenues is to be recommended by someone else. That only happens if you both do a good job for existing clients, and more importantly network with the community around you. Trekking out after work to meet new people can seem a bit like going to the gym – you know it is good for you, but you can invent 1001 excuses why you should just stay at home. Just like physical exercise, you need to overrule the little voice in your head and spend time networking. At the very least it’ll get you out and talking to people with potentially similar interests, or who offer complementary services – and it will also increase your public presence and ensure companies know who you are. And networking doesn’t stop there – connect with people on LinkedIn, follow them on Twitter and make sure you make the effort stay in touch.
2. What goes around comes around
This may sound a little Zen, but I’m a firm believer that being nice to people, and helping them, stores up good luck that could help you in the future. Give people that can’t afford to hire you advice, connect them to people that can help them and be supportive of the community around you. Even if it doesn’t bring you direct business you’ll feel better about the world around you and know that you’ve made a bit of a difference.
3. Learn to let go
If you are in a business that revolves around selling your time and expertise, there’s a natural ceiling on how much work you can do. There are only 24 hours in a day, and working on all of them isn’t a long term business strategy. So be ruthless and look through your workload. Hire people to help – whether experts such as an accountant to look after your book-keeping or someone to assist with admin, they will free you up to focus on what clients are actually paying you for. And you’ll (hopefully) get your evenings back too.
4. Keep doing new stuff
I know a lot of people that have built successful businesses, get to year six and decide on a complete change of tack, such as creating their own start-up. While I couldn’t do this myself, it shows the need to keep challenging yourself and doing new stuff. On a less dramatic note it could mean offering new services, taking on clients in a completely different sector or investing in new skills and qualifications. The world is changing fast and failing to change with it will not only leave you bored, but you’ll gradually lose clients as they move to businesses that offer new services that meet their new needs.
5. Build up an ecosystem
No business is an island, and you can’t survive on your own. As well as networking, make sure you plug into people with complementary skills who can help you, whether with advice, mentoring or just providing you with a sympathetic ear from time to time. I know I’d not have built my business without the support of a whole range of people, which is another reason to spend time networking in both the real and virtual worlds.
Don’t get me wrong, the last five years has been a lot of hard work, a few tantrums and occasional worries about where the next job would come from. However it has also been tremendous fun, bringing me into contact with a wide range of interesting, innovative and sometimes quirky people. I’ve learnt a lot, enjoyed being my own boss and been able to (sort of) balance work and life. Here’s to the next five years!
Mankind has always had a fascination for mythical beasts, and none more so than the unicorn. Despite allegedly dying out in the flood after failing to board Noah’s Ark in time, they are still all around us in popular culture, from Harry Potter to children’s toys. I even found an exhibit in a Vienna museum labelled matter of factly as a “unicorn horn” – it was actually from a narwhal.
The horned horses are back in the news, in the world of tech at least, with any startup valued at over $1 billion by venture capitalists now dubbed a unicorn. However with more than 100 companies now achieving unicorn status there’s a growing worry that startups are trading short term valuations for longer term success. True, unicorn status helps attract skilled staff, but down the line it requires either a trade buyer that is willing to pay big money or an IPO to translate mythical (paper) valuations into hard cash. There have also been a raft of stories on how investors have structured their unicorn funding in ways that protect their cash (rather than the shares of others, such as founding teams) if the company should lose its value.
A focus on unicorns also favours certain sectors and types of company. A browse through Fortune’s latest unicorn list reveals a large number of consumer electronics (Xiaomi, Jawbone), retail (FlipKart, Snapdeal) and sharing economy (Uber, Airbnb) companies. In many ways this is what you expect – company valuations are based on what the addressable market is, so the biggest investment goes into those startups that can make most money.
However, it does potentially limit where investors put their money. There are lots of startups that will never be a Facebook or an Uber, but have the potential to be extremely successful niche players that could well grow into billion dollar valued companies. Look at ARM – when it began as a spin-off from Acorn Computers with a completely new business model, very few would have predicted its current success.
There’s also a definite geographic bias where unicorn investors are putting their money – Silicon Valley, China and India. Out of the latest Fortune list just three are in Europe, one in Australia and one in Israel. This doesn’t reflect the energy, ideas and potential in any of these places, particularly in emerging sectors. The danger is that if investors spend their time chasing unicorns they’ll miss out on the startups that could do with their help to build long term businesses that can make a difference to many markets.
So I think we need to add another category alongside unicorns. Keeping the mythical theme I’d go for centaurs. Sturdier than a unicorn, probably better in a fight and with a bit more intelligence (and opposable thumbs). They may not have the beauty or the (frankly over the top) horn of their flashier cousins but they are built for the long term, rather than mythical valuations that don’t necessarily deliver. Given the potential returns they can produce, it is time for investors to move away from the fascination with unicorns to more realistic startups that may be uglier, but have just as much potential.
According to a new report, more and more of us are working in digital technology companies. Research led by Tech Nation has found that 1.46 million people (or 7% of the workforce) are employed by more than 47,000 digital companies across the UK – and of these just 250,000 are working in inner London. 74% of digital companies are located outside London.
To put that in perspective, according to other government figures, agriculture employs 535,000 workers, construction 2.2 million and manufacturing 2.6 million. So nearly three times as many people tend computers instead of animals. Heartening stuff, and a welcome antidote to some of the more extreme London-oriented digital stories seen in the media.
The highest density clusters in the report are Brighton & Hove, Inner London, Berkshire (including Reading), Edinburgh and Cambridge, while the highest rates of digital employment are in London, Bristol and Bath, Greater Manchester, Berkshire and Leeds.
It is easy to be cynical about the timing of the government-backed report, with an election coming up fast. I’d also query the definition of ‘digital’ – my PR business makes it in, which seems to show a wide classification range (not that I’m complaining). The headline findings that certain sectors have more digital companies than the national average (Brighton 3.3x, Cambridge 1.5x, for example), is interesting, but needs to be put into context. Brighton employs 7,458 people in digital, out of a population of 155,000 – under 5% compared to other clusters that potentially have a greater proportion of digital workers.
But what is more interesting is how the research reinforces the importance of clusters. Statistics include:
- 77% of respondents have a network of entrepreneurs with whom they share experiences and ideas. This rises to 90% in Cambridge.
- 54% believe their clusters help attract talent (65% in Cambridge).
- 40% believe their cluster gets them access to affordable property (such as science parks or co-working spaces).
- 33% believe their cluster helps attract inward investment
- For Cambridge, access to advice and mentorship was seen as twice as important to growth than nationally (scoring +100%), and the positive perception of the Cambridge brand (+62%), was also a key driver for expansion.
- Issues highlighted in Cambridge include poor transport infrastructure (scoring -111% compared to the UK average) and lack of available property (-31%).
This clearly demonstrates that to succeed and grow, tech businesses need to be part of an ecosystem that provides support, the right conditions to start (and grow) and that more and more of these are springing up across the UK. Nurturing a cluster takes time, so everyone involved, from local government to academia and investors have to think long term if they want to develop a tech ecosystem in their area.
What I’d like to see is companies and regions use this report as a starting point to build closer ties. Firstly, any businesses that feel they’ve missed out need to get on board and be given the chance to be added to the report. This is vital to keep it as a living, interactive document that maps changes over time.
Secondly, local government and organisations need to take a look and make sure that they are reaching the companies in their area, and providing them with the conditions for growth. At the very least local networks (or in their absence, local councils) should be making digital companies aware of their existence, and what they can do to help them. That way more sub clusters will form and grow, strengthening the overall picture.
I don’t think we’re yet the full Tech Nation that the report and research promises, but we’re definitely on the way – we therefore need continued focus and investment if we’re going to move forward, across the country.