Countries and cities across the world are busily trying to build tech clusters. Partly this is due to the sexiness of tech (expect the UK election to feature plenty of photo opportunities of candidates with startups), partly down to the fact that it seems easy to do, and a lot to do with the benefits it delivers to a local economy. In an era where technology is radically changing how we work, play and live, high value tech companies are always going to be prized.
But how do you build a tech cluster? It may seem easy to do on the outside – set up some co-working spaces, provide some money and sit back and wait for the ideas to flourish, but it is actually incredibly difficult. This is demonstrated by the diverging fortunes of the locations of England’s oldest universities – Oxford and Cambridge. As a recent piece in The Economist explains, over the last few years Cambridge has added more well-paid jobs, highly educated residents and workers in general than its rival. This prompted a visit last October to the city from an Oxford delegation, with the leader of Oxford City Council admitting that “Cambridge is at least 20 years ahead of us.”
Given the longstanding competition between the two cities, it is easy for people in Cambridge to sit back smugly, pat each other on the back and congratulate themselves on a job well done. However, a better course of action is to take a look at what is behind Cambridge’s success, and see what can be done to improve things. After all, there are startup and tech clusters around the world – competition is global – so there’s nothing to stop entrepreneurs setting up in Silicon Valley, Munich, Paris or London rather than Cambridge.
I see five factors underpinning the success of any tech cluster:
1. Ideas and skills
The first thing you need to build any business is obviously a good idea. Universities, particularly those involved in scientific research such as Oxford and Cambridge have plenty of these. But you need a specific type of person to be involved with the research – with a mindset that goes beyond academia and understands how a breakthrough idea can be turned into a viable business. You then need to be able to access the right skills to develop the idea technically, whether through commercial research or programming.
2. Support infrastructure
This is where Cambridge scores highly in being able to commercialise discoveries, through a long-established support infrastructure. The Cambridge Science Park opened in the 1970s, while the University has put in place teams to help researchers turn their ideas into businesses. Research-led consultancies, such as Cambridge Consultants, provide another outlet to develop ideas, as well as helping to keep bright graduates in the city. There is also a full range of experienced lawyers, PR people, accountants and other key support businesses to help companies form and grow.
Obviously without money no idea is going to make it off the drawing board. Cambridge has attracted investment from local and international venture capital, and has a thriving group of angel investors, who can share their experiences as well as their funding. Due to the length of time Silicon Fen has been operating, investment has been recycled, with successful exits fuelling new startups that then have the opportunity to grow.
4. Space to expand
Cambridge is a small city, and the combination of its green belt, lack of post-industrial brownfield sites and an historic centre owned by colleges, puts a huge pressure on housing stocks. As anyone that lives in Cambridge knows, house prices are not far shy of London – but spare a thought for Oxford residents. In 2014 an Oxford home costs 11.3 times average local earnings, nearly double the British norm of 5.8 times. Additionally, as The Economist points out, there is space outside the Cambridge greenbelt for people to build on, with South Cambridgeshire Council, which surrounds the city, understanding the importance of helping the local economy. In contrast, Oxford has four different district councils, and a powerful lobby of wealthy residents who want to keep their countryside pristine, hampering housing development. That’s not to say that Cambridge is perfect, far from it. More can be done to improve transport links to reduce commuting time and to spread the benefits of Cambridge’s economic success.
Ultimately tech clusters are judged by the success of the companies they produce. And Cambridge, partly due to the longevity of the cluster, has created multiple billion dollar businesses, from ARM to Cambridge Silicon Radio. This not only puts the area on the map for investors, but attracts entrepreneurs who want to tap into talent and spawns new businesses as staff move on and set up on their own. You therefore see sub-clusters in particular areas of tech develop as specialists use their knowledge to solve different problems. This then further strengthens the ecosystem.
Tech clusters are slow to build and can’t be simply willed into existence by governments opening their wallets. They need patience, a full range of skills and co-operation across the ecosystem if they are to grow and flourish – as the relative fortunes of Cambridge and Oxford show.
Governments across Europe are always obsessing about creating their own Silicon Valleys, rivals to California that will catapult their country/city to international tech prominence, create jobs and make them cool by association. As I’ve said before, this is partly because such talk is cheap – bung a few million pounds/euros into some accelerators, set up a co-working space near a university and you can make some tub-thumping speeches about investing in innovation.
Obviously there’s a lot more to creating a new Silicon Valley than that. So I was interested to read a recent EU survey of European ICT Hubs, which ranks activity across the region. It doesn’t just analyse start-up activity, but also factors such as university strength, external links and business growth. While Munich, East London and Paris top the table, (with Cambridge at the top of tier 2), what is interesting is the sheer number of hubs and their relative strengths, despite many being quite close to each other.
There is a European obsession with a single hub to take on Silicon Valley, but as Paul Stasse points out in this piece on Tech.EU, if you zoom out and centre your ‘hub’ on Brussels, a 400km radius will bring in the majority of the EU’s ICT hubs. So consequently you need to go beyond individual cities or regions to move to a larger scale view. After all, Silicon Valley itself is not a single place, but a collection of cities and towns, that spreads from San Francisco through the Santa Clara Valley. So, while the Santa Clara Valley is geographically 30 miles long and 15 miles wide, the actual area of ‘Silicon Valley’ itself is much bigger.
In that case, why can’t Europe create its own Silicon Valley encompassing multiple hubs? Or even Valleys within countries – it is around 60 miles from London to Cambridge, so it wouldn’t be a stretch to build the M11 Valley (though with a catchier name).
The trouble is, California has some pretty big advantages that have helped Silicon Valley grow. While entrepreneurs and programmers flock there from all around the world there’s one business language (English), one legal system and one predominant culture. Being part of the US gives immediate access to over 300 million people in a single market. Europe’s diversity is both a strength and a weakness – you can’t simply up sticks and move your company from, say, France to Belgium, with the same ease as from San Jose to Palo Alto.
In my opinion what is needed are three things:
1 Be more open
I’m as guilty as the next person, but individual hubs need to look outward more, rather than believing that success ends at the ring road. Only by encouraging conversation between hubs and idea sharing will innovation flourish.
2 Make movement easier
You are never going to change cultures, but the EU has a role to play in standardising the playing field when it comes to creating companies, harmonising legal systems and generally helping create a single market. That way entrepreneurs and companies can move more easily and collaborate, without having to duplicate bureaucracy or red tape.
3 Celebrate what we have
It is time to end the obsession with creating the new Silicon Valley. It isn’t going to happen. Instead, celebrate the ability Europe has to build multiple, interlinked hubs that play to our strengths, rather than bemoan our inability to spawn the next Facebook.
Silicon Valley, Europe may not happen but by supporting existing, successful clusters and hubs we can build a technology industry that can drive innovation, growth and jobs.
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.
Last week Mike Lynch, founder of Autonomy, announced the first investment by his latest venture, Invoke Capital. It has put money into Darktrace, a security company founded by Cambridge mathematicians. Darktrace uses Bayesian logic to spot cyber security issues by learning what is normal inside a company network and then flagging behaviour that differs from this.
Lynch is a divisive figure, but whatever your views on him, he built Autonomy into a multi-billion pound business, achieving the biggest ever sale price for a UK tech company when he sold it to HP for £6.2 billion. Of course, since then HP has sacked Lynch, written down Autonomy’s value substantially and asked authorities on both sides of the Atlantic to investigate possible accounting irregularities at the firm.
But two things that Lynch said stood out for me. Firstly, he believes too many European tech companies are sold too early in their development (normally to US rivals) – raising tens of millions rather than billions. Invoke plans to change that by investing for the longer term and providing experienced managers to take businesses to the next level.
The second thing he really encapsulated was the difference between Cambridge and Tech City businesses. Speaking in The Economist, he said “What you will find in Cambridge is something which is fundamentally clever, while what you are going to find in Tech City is something where the raw science isn’t fundamentally clever, but its more attuned to the market and the consumer.”
So the difference is between Cambridge clever and Shoreditch smart – but (as Lynch also says) we need both if we are going to build strong, vibrant tech sector in the UK. After all there’s no point in clever technology if it doesn’t have a market, while there is a limited opportunity for low IP businesses – we already have enough social networks.
What we need is to bring the two clusters together and develop a mutual understanding so that both can learn from each other, cross-fertilise ideas and even work in partnership. Let’s face it – they are only 60 miles away from each other, just a bit more than the distance from San Francisco and Silicon Valley. Some people in Cambridge have a tendency to look down on any ideas that haven’t originated here (or spent years in development in the lab). In contrast denizens of Silicon Roundabout often view Cambridge companies as too technical, too geeky and taking too long to build in comparison with their agile media startups.
Two immediate things would help this necessary cross-fertilisation. Firstly, a forum to bring the two groups together to share ideas and network, and secondly, a realisation by the government that you’ve got to look at the tech sector as a whole. At the moment a lot of effort goes into TechCity but that needs to be widened to encompass tech companies across the UK (not just in Cambridge, but in other clusters too) with a cohesive set of policies that encourage innovation and longer term investing. Otherwise Lynch’s vision of building billion dollar businesses in the UK simply won’t be realised, and that will hurt everybody.
- Invoke Capital Makes First Investment in Fundamental Cyber Security Technology (prnewswire.com)
- Invoke Capital Makes First Investment in Fundamental Cyber Security Technology (virtual-strategy.com)
Yesterday’s CUTEC Technology Venture Conference (TVC) in Cambridge provided a lot of interesting talking points. One of the world’s largest student organised business events, it brought together over 400 entrepreneurs, businesspeople, investors, students and start-ups to discuss The Ideas Economy and how it could develop.
Doing justice to all the speakers and activities on the packed programme would require much more space than in my blog, so I’m going to pick a couple of key topics and focus individual posts on them.
The first is the long running debate on the differences in entrepreneurial culture between the UK/Europe and the US. BBC technology correspondent Rory Cellan-Jones pointed out that there had been a sea change in UK attitudes over the last 30 years – when he left Cambridge in 1981 neither he nor his contemporaries would have dreamed of setting up their own business. But the first dotcom bubble showed people what could be achieved on their own and made entrepreneurship a viable alternative to corporate life. And this has continued with the current bubble enabling braver, disruptive ideas to be tried.
However a panel of US entrepreneur Ted Shelton and adviser/investor/entrepreneur Sherry Couto, chaired by David Rowan of Wired pointed out there are still areas for the UK to work on. Failure is still seen as unremittingly bad, rather than a learning experience, short-term thinking means that entrepreneurs are likely to sell early rather than chase the investment needed to build the next tech giant and there are a lack of public role models to show people what can be achieved with an idea and hard work. Given that the highest profile business leader in the UK is probably Alan Sugar, this final point is definitely one I agree with.
Talking to start-ups and students at the event backed up these points – rather than rushing off to become accountants or consultants many were seriously looking at either starting up their own companies or working for smaller, fast growth businesses. Now we just need to extend that attitude to drive longer-term thinking, unlock investment and maybe, just possibly, the UK can create the next generation of tech businesses to sit alongside Facebook and Google as global household names.
- CUTEC Technology Ventures Conference 2011 (fakeiitian.com)