London’s Flat White Economy
On Thursday I attended a lunchtime panel discussion on the history, growth and prospects for London’s Silicon Roundabout, held at Bloomberg’s very smart Finsbury Square office. The event followed on from the publication of an in-depth feature on this growth sector entitled ‘Hipsters Flocking to Silicon Roundabout as Bankers Fade’ in the June issue of the Bloomberg Markets magazine.
The following post is a summary of some of the main points raised by the panel that I picked up on. The panel comprised Ben Southworth, Deputy CEO of the government Tech City Investment Organisation (TCIO), Divinia Knowles, COO of Mind Candy, Bindi Karia, Vice President of the Silicon Vallley Bank Accelerator in the UK, Eze Vidra, Head of Google’s London Campus, Jeremy Kahn, Senior Writer of Bloomberg Markets Magazine and Guy Johnson, a presenter at Bloomberg Television (chair).
Ben, the omnipresent quangocrat-preneur at TCIO, started by listing all the great benefits London has as a nascent technology startup cluster (largely the factors that already make London a global financial centre), but drawing attention to how London’s high property prices are a significant drawback for young businesses and that the British education system is very poor at helping to produce skilled engineers. Jeremy Kahn agreed and said that rising real estate prices will drive people further east away from Old Street, spreading out the technology area in a similar way that Silicon Valley has extended itself to accommodate more businesses.
Jeremy also highlighted the significant funding gap that still exists in the UK for initial investment. Bindi Karia agreed, but said that crowdfunding and the government SEIS tax breaks were helping very early stage equity finance raising, while the real problem is further down the line when companies need to raise rounds of between 250,000 and £1 million and find there is a lack of smart investors in the UK with an understanding of technology and risk. Eze Vidra stated that only 10 per cent of residents at Google’s Campus co-working space were even looking for VC funding (presumably because they see the process as too time consuming and uncertain when they could be building their business), while those that are prefer to go to Silicon Valley where there are more opportunities and higher valuations. Eze said the Campus residents prefer crowdfunding platforms and that in the long term crowdfunding will inject a lot more money into the startup economy. Ben added that contrary to popular belief investors will find lots of relatively low risk startup opportunities in their sector.
Bindi claimed that the Silicon Valley Bank spent significant resources fighting for their UK banking licence because the management could foresee that there is a lot of promise in London’s young East End technology community. Given London’s financial services sector and the number of great coders who work at banks, Bhindi sees fintech as an especially interesting area to watch, while advertising is another industry where there are lots of technology opportunities in London.
Eze Vidra highlighted how less than 50% of the residents at Campus are British, as talented and ambitious entrepreneurs are being drawn to London from all over Europe and further afield. Those who work at Campus particularly like the network effect of having so many peers in one building. Eze also noted how over 850 events had been held at Campus in its first year, demonstrating how badly needed event space was and continues to be in the area. Eze mentioned how the UK’s startup culture is still quite undeveloped, compared to Israel where startups and innovation have become a national preoccupation in the same way that the British are obsessed with football. Also, less people go to university in Israel and instead gain technology and general life skills from their military service (between the ages of 18 and 21) which makes it common for the young to start their own business when they are released.
The panel agreed that kids need to be educated through school about entrepreneurship, as at the moment they don’t realise it’s an option. It was also agreed that IT education is failing kids at school and there is a massive tech skills shortage in the UK, with Ben adding that people fail to understand that ‘the geek shall inherit the earth’. My own view is that people need to realise that government led formal education, whether at school or university, will never provide up-to-date and relevant learning opportunities and they should instead take responsibility themselves to acquire the right skills.