California dreaming: London's hi-tech aspirations

Boris Johnson at London Technology Week launch

London is blowing its tech trumpet in a big way this week.

Boris Johnson, along with former New York mayor Michael Bloomberg and the venture capitalist Sir Michael Moritz, have just launched London Technology Week - a series of events designed to boost the reputation of the capital as a technology cluster. And if you were to believe some startling research commissioned for the week, London is already hitting it out of the park.

A report by Oxford Economics claims there are 34,000 tech businesses in London now, and in the next decade there will be another 11,000, creating 46,000 new jobs. (The fact that TechCity only released one page of the whole report makes it difficult to assess this claim).

Another report by two academics makes an even more startling claim - that there are now more technology and information workers in London and South East England than in the whole of California. So relax everybody, we've got Silicon Valley on the run.

Well, not quite. Some caution needs to be applied, first of all as to what constitutes a technology business or worker. There is some suspicion that all kinds of marketing and PR jobs are being included, and when you ask for examples of really hi-tech businesses in London they are thin on the ground.

Then when you look for London start-ups that have made it big as independent businesses there is still not much to crow about. The biggest UK success story of recent years has been ARM, the microprocessor designer, but it was born and grew up in Cambridge, not London. Asos and Betfair were the two names bandied about at the Technology Week launch, but both were founded long before the whole TechCity project got underway.

When I put it to Boris Johnson that he as a classical scholar might sense a degree of hubris about the claims, he agrees that this is a danger: "There is no reason for hubris when you consider that… we haven't yet produced the kind of knockout multi-billion pound businesses that we see in Silicon Valley." He muses on why that might be the case - is there a British diffidence about making money, is the venture capital industry not as imaginative as it might be?

There is of course one very imaginative venture capitalist at the event, Sequoia's Sir Michael Moritz. Born in Wales, then a journalist in the US, he spotted the potential of Google and Yahoo at an early stage, and so became one of Silicon Valley's wealthiest venture capitalists.

Tech City Silicon Roundabout - the centre of London's tech ambitions

I've always wondered whether London could prosper without better links between TechCity and local universities, but Sir Michael thinks the answer lies in looking at a wider area: "London is beautifully situated, with Oxford and Cambridge being an astonishingly fertile triangle of scientific, engineering and mathematical knowledge," he says. He feels there are also grounds for optimism in the willingness of young people here to take the risk of starting their own business, something that had not been the case when he left the UK.

Start Quote

I think there's now an opportunity... to do something really crazy - to provide wifi internet access, 3G access for free in the whole country”

End Quote Sebastian Siemiatkowski, CEO of Klarna

It does seem to be the case that some technology companies are being started in Oxford or Cambridge, and then moving to London for higher profile and better access to capital - one example is Swiftkey, which uses machine learning to make typing on a mobile easier. But there is still a funding gap - seed finance is plentiful, but there is a scarcity of cash for firms wanting to move to the next stage.

Sir Michael insists that Silicon Valley investors like him will always find a way to detect talent - "people like us are only an email away" - but so far Sequoia has not backed a London tech firm. Sitting alongside him as we speak, is someone he has backed - Sebastian Siemiatkowski of the Swedish payments firm Klarna.

I'd met Mr Siemiatkowski a few weeks ago and been very impressed with technology that makes it far simpler to pay for goods online. Klarna is already taking on PayPal in its home market in Sweden, has a big presence in Germany, and arrives in the UK next month.

He politely joins in with the acclaim for London - he is after all investing a large amount to bring Klarna here - but then explains why his home town Stockholm has been so successful. He says it is all about public investment in infrastructure dating back to the early 1990s, first giving free PCs to poorer households, then providing fast broadband.

He has this advice for London: "I think there's now an opportunity for some tech hub - wherever that might be - to do something really crazy, which is to provide wifi internet access, 3G access for free in the whole country." The first one to do that, he said, would really drive innovation.

There are certainly reasons to be cheerful about London as a technology superstar, and the mere fact that there is so much hype about what are right now quite slender achievements, is helping to draw successful companies like Sweden's Klarna and Cambridge's Swiftkey to the capital.

But consider this when you hear that London is growing faster than Silicon Valley. Last week, one relatively young San Francisco start-up, Uber, received $1.2bn of new funding - that's about £700m. The British Venture Capital Association tells me that in 2012 - the most recent year for which they have figures - £681m was invested in the whole UK technology sector.

So London's tech scene may be growing fast, but it will need a lot more cash if it is to catch up with California.

Rory Cellan-Jones Article written by Rory Cellan-Jones Rory Cellan-Jones Technology correspondent

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  • rate this

    Comment number 167.

    I have yet to see any London hi-tech.

    Not since Mullard disappeared from Torrington Place anyway.
    Technology companies are science and knowledge based and as such they cannot compete in the make believe world espoused by The City.

    The companies described as tech are simply City wannabees.
    Check them out with Duedil. They are all in hock.

    The media love them though. But in reality it's a bubble.

  • rate this

    Comment number 166.

    Robert, I agree with you.

    That is why so many original team members either cash in at 3rd round (certainly pre-IPO). The eventual firm-to-market team can take the actual operation anywhere. Lots of UK webtech patents end up in US or Israeli firms and the original team members start all over again.

    Luckily some of them have yachts by then.

  • rate this

    Comment number 165.

    #164 Brian ".. This initiative is trying to help with that."

    That's all well and good but the problem of getting finance is at least 5 times harder outside the London orbit. And money is only the start of the problems we face.
    Planning permission for building a new and complex business -add another 5 to 10 years plus another heap of money to lawyers. The simple answer is to take it all abroad.

  • rate this

    Comment number 164.

    These are startups. In the tech startups that I know the amount of money the team can each put in their pocket is entirely down to the amounts achieved from the last of round of funding.
    Once they get to 3rd round funding they can cash in (or not) and work anywhere. It is the early stage incubator season that is grim and difficult.

    This initiative is trying to help with that.

  • rate this

    Comment number 163.

    problem with uk tech is that salaries are still same as they were 15 years ago. for tech to go anywhere in uk they need to start paying what they pay in silicon valley. but it will never happen in uk. better off working outside london or uk. as a business it will be hard to find experienced people and it must also be expensive for business rents

  • rate this

    Comment number 162.

    It is amusing to see some HYSers trying to hold two contrary ideas at the same time.
    1) It can’t/won't work. Banksters, evil Tories, back in the 70s, argghhh.
    2) If it does & creates some jobs & wealth it is a GROSS INSULT it wasn’t given on a plate to the Midlands/North (even though we did NOTHING to develop or support it). Evil Tories, horrible London, inequality, Thatcher, aargghh...

  • rate this

    Comment number 161.

    64. thrill_vermilion

    Really rather bored hearing about London all the time. It's really sucking the life out of the rest of the UK. Time we bestowed the title of Capital on another UK city.

    Perhaps move it around every 10 years - so London should get it back in about 10000 yrs.
    Pay peanuts get monkeys - hence no engineers etc.
    Pay Banker's 1m bonus and get stuffed - great idea

  • rate this

    Comment number 160.

    #158 Rater, #154 Robert Lucien

    Was rather hoping no one else would remember or think to look it up. [looks sheepish]
    I guess I always get Next mixed up with the Transputer, and the Atari Transputer Workstation - I guess one was to have used hyper-cubes and the other was called a Cube... well that's my excuse.. :)

  • rate this

    Comment number 159.

    @157: "Maybe what we really lack is the organisational nouse to make the most of them."

    No, what we've lacked *for decades* is "those in charge" understanding that tech is much more than fluff and certainly more than a roundabout in London.

    We have become a nation of inept clueless managers and city spivs.

  • rate this

    Comment number 158.

    154. Robert Lucien.

    Omg, Steve Jobs (who created next step) rejoined apple through next step. There was no robbing about it you dip.

    Go google yourself.

  • rate this

    Comment number 157.

    #155 more_common_sense

    I wouldn't say Britain was a nation of shopkeepers, rather they are a nation where shopkeeping is valued more highly by the powers that be.

    We have some great technical minds, some truly brilliant technical people - its just that we don't invest in them. Maybe what we really lack is the organisational nouse to make the most of them.

  • rate this

    Comment number 156.

    @ 142.manJambo

    Who would want to, if last winters storms are anything to go by.

  • rate this

    Comment number 155.

    That's because, at heart we are a nation of shopkeepers where tech people are marginalised.

    I have heard this setiment from British friends. As an American, this type of thinking seems odd to me. It's as if some Brits are trying to relive the days of the empire.

  • rate this

    Comment number 154.

    #151 Comber, #143 Robert Lucien

    "I would ask if you've heard of the Apple Newton and NeXT Step, but you won't have."

    If your claiming them as the latest products where apple actually innovated anything then I might agree with you.. :D

    Except of course Apple didn't create NeXT Step, they brought out the Next company and robbed its corpse.. Now that's how corporate predators innovate!

  • rate this

    Comment number 153.


    Now see if you can work out where the next extreme weather event will strike and what form it will take.

    Better still an app that highlights what happens with every additional birth on a planet that cannot sustain 50% of our current numbers nor replenish 50% of the resources we are currently devouring.

  • rate this

    Comment number 152.

    My reading is that London is far too expensive to be a startup capital. However it does have valuable links to businesses and it is a great place to advance semi-mature solutions, or to sound out businesses for solutions developed elsewhere.

    Cambridge and Oxford have clear advantages in relatively low cost and concentration of talent. No reason why the likes of Manchester can't follow their lead.

  • rate this

    Comment number 151.

    143. Robert Lucien

    I would ask if you've heard of the Apple Newton and NeXT Step, but you won't have.

  • rate this

    Comment number 150.

    Actually talking about things that stifle innovation and enterprise, especially in the tech sector, we should focus on the real culprits. British and especially EU bureaucracy, far too many rules, far too many pointless stipulations, and complex legal obstructions.
    A lot seem designed to give special dispensation - - and to block any threat of real competition.

    The solution, obvious. ...

  • rate this

    Comment number 149.

    @147 Alan
    The entrepreneurs we see already live here. Most of them went to university here (even if only about half of the ones we see were born in the UK)
    It is the universities that are kicking it all off. Check out my posts at 124 & 132.
    Once they get funded & running they can move anywhere, but they often start off in incubators here.
    There's a Dragons Den next week.

  • rate this

    Comment number 148.

    @147: "you have to pay more to get people to trudge into London each day on the sardine express, often wasting 4+ hours per day of their lives."

    I have successfully avoided working in London for my entire software architecture/development career. I have enjoyed a nicely varied career in and around the south east, and a balanced work/life ratio.

    It can be done (unless you live in London I guess).


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