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.
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)
On the face of it, David Cameron’s announcement of a £1m prize for solving a ‘grand innovation challenge’ is good news for UK science and industry. The competition will look at the biggest issue of our time (as selected by the public) and then be judged by an illustrious panel, chaired by Lord Rees, the English Astronomer Royal. The Prime Minister likened the competition to the 1714 Longitude Prize which was created to solve the problem of navigation at sea, and which spurred unknown Yorkshire clockmaker John Harrison to develop much more accurate marine timepieces.
All well and good – anything that stimulates debate on pressing problems for mankind and supports scientists and engineers is obviously welcome. Even Cameron’s idea of a ‘Britain’s got talent’-style show to identify the key issue that scientists have to solve is an attempt to put engineering and research back into the mainstream.
But there’s three main problems I can see – and unfortunately they run through a lot of the coalition’s thinking on science, engineering, technology and entrepreneurship.
Firstly, £1m is a pitifully small amount of money for an idea that will solve ‘the biggest problem of our time’. The annual Breakthrough Prize in Life Sciences (bankrolled by Mark Zuckerberg, Google co-founder Sergey Brin and tech investor Yuri Milner) has distributed $33m to 11 winners. And that’s just in one year. The new Longitude Prize is being funded by the Technology Strategy Board (TSB) and it appears (from what I’ve read) that the £1m is not new money, but is from the TSB’s existing budget. Hardly an expansion of government investment in science and engineering.
Secondly, like all politicians Cameron is driven by short timescales. Solving the problems the world faces can’t be accomplished in a single term in office. Research simply does not move that fast. If the Prime Minister checked his historical facts (perhaps he needs to speak to Michael Gove), this has always been the case. The original Longitude competition began in 1714 but Harrison’s clock was not successfully operational until the 1760s. And even then he was judged not to have won the official prize itself (though he was awarded multiple grants during his lifetime to recognise his achievements).
Thirdly, modern research is a global undertaking. Scientists work with their peers across the world, collaborating to solve problems across disciplines and countries. Look at the Human Genome Project – while the Wellcome Sanger Institute in Cambridge made an enormous contribution to sequence human DNA, it was a truly global effort, involving scientists from across the world. So if Cameron expects his prize to be won by a 100% British entry, he’s likely to be proved mistaken.
I really hope that the new Longitude Prize takes off and increases interest in science, engineering and technology. But, like investment in championing Tech City, it smacks of a short term, PR-led approach by the Prime Minister – aiming for headlines, not the lasting breakthroughs that take decades to unlock.
Very few of us like paying tax, but there’s a fine line between legitimately reducing your tax bill and actively avoiding paying the tax that is due. And at a time of austerity where everyone is tightening their belts, there’s obviously a push by governments to close loopholes and maximise the revenues they receive.
Given their high profile and obvious success Starbucks and Amazon have both been the subject of widespread condemnation of their tax avoidance methods, and I’ve covered Starbucks inept PR response in a previous blog. Google was up before a House of Commons Select Committee last week (for the second time), backing up its claims that, despite revenue of £3 billion in the UK, all its advertising sales actually take place in the lower tax environment of Ireland. Google boss Eric Schmidt has countered that the company invests heavily in the UK with its profits, including spending £1 billion on a new HQ that he estimates will raise £80m per year in employment taxes and £50m in stamp duty.
Apple is the next company caught in the public spotlight, with CEO Tim Cook appearing before a US Senate committee that had accused it of ‘being among America’s largest tax avoiders’. Meanwhile, the loophole that sees Amazon and other big US ecommerce companies avoid paying local sales taxes is being challenged by a new law passing through Congress, with estimates of between $12 and $23 billion extra being collected.
Given the close links between Google and UK politicians (Ed Miliband is appearing at a Google event this week and Schmidt is expected to meet David Cameron on his current UK trip), the cynical view is that this is a lot of sound and fury, signifying nothing. But it does create an image problem for the companies involved, particularly at a time when we’re all meant to be in it together.
Obviously the most popular thing for companies to do would be to re-organise their tax affairs so that they meet the spirit as well as the letter of the law. But that’s not likely to happen given the enormous sums at stake. Instead expect increased calls for global tax reform (so that the organisations involved don’t have to operate the way they are currently ‘forced’ to) and a slew of feel good announcements that demonstrate the level of investment and support for the UK economy by the companies concerned. Being ultra cynical perhaps the whole tax situation explains the huge support by big tech companies for Tech City – it is simply an elaborate way of diverting attention from their financial affairs…………..
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.