London’s Bid To Become A Global Tech Hub

London’s bid to become a global tech hub has not escaped the attention of its neighbor across the Channel. When Silicon Valley’s technorati visited London this Fall one group was invited to Buckingham Palace by none other than Prince Andrew. Another was invited to 10 Downing Street to rub shoulders with Prime Minister David Cameron.

If imitation is the sincerest form of flattery than London should be feeling pretty proud. Not to be outdone by his British neighbors, French President Nicholas Sarkozy has invited Silicon Valley guests and other speakers at Le Web 2011 Internet conference to the Elysée Palace.

There is a reason why start-ups and venture capitalists are being feted: Across Europe governments are struggling to find growth in a volatile economic climate and entrepreneurship and innovation look like a good alternative to capital-intensive dying industries.

“With the backdrop of challenging economic times it is really important to encourage any potential growth that a country has,” says Eric Van der Kleij, CEO of London’s Tech City Investment Organisation, a group working to help develop Tech City as a magnet for technology-led investment, innovation and talent. ). “The UK government looked around to see what they can do to stimulate growth and they identified naturally growing tech and digital businesses.”

Some accuse the government of taking credit for something it is not responsible for creating.  “Cameron is doing what any good politician does, when he sees a parade he gets in front of it,” one veteran venture capitalist commented wryly, while sipping wine at the10 Downing Street reception.

To be fair, the government is taking concrete steps to help. It has taken an active role in the creation of a technology hub in the East end of the city, between Old Street and the Queen Elizabeth Olympic Park in Stratford, an area now known as Tech City or the Silicon Roundabout, by encouraging Google, Facebook and other companies  to commit to investing in the hub.  That is a helpful because “government nudges bring the corporate world closer to start-ups,” says investor Anil Hansjee, until recently head of corporate development for Google EMEA.

It has also introduced tax breaks for local investors — such as the Enterprise Investment Scheme, which has just been improved to offer investors 50% income tax relief on the first £100,000 investment in start-ups — as a way of encouraging “recyclable wealth” so that more wealthy individuals become angel investors and feed the ecosystem.

And, the government has developed a number of policies to make it easier for young start-ups to do business. [I'm not sure about this; they say they will, but I haven't seen much evidence yet.]

This work is starting to yield results, says Van der Kleij. “The most immediate ones are the number of businesses starting up and the number of jobs being created — on both counts we are absolutely delighted,” he says.  Just a short time ago the  Shoreditch area counted about 200 companies. That number has since grown to 600. “

Another strong indicator of growth is that jobs with good salaries are being advertised.  At a recent job fair known as the Silicon Milk Roundabout some 100 UK start-ups offered 500 technical jobs. More than 1,200 graduates turned up.  “Those 500 jobs that were being advertised were mostly not there 12 months ago so this is very exciting for us,” says Van der Kleij.

The government is also supporting the showcasing of tech city companies to top venture capitalists which usually do not invest in Europe.  “We are trying to attract the world’s early stage investors so there is enough capital for them to grow,” says Van der Kleij. And, it is organizing festivals to attract VC and early stage and angel investors.

“We want to see the creation of a lot more Skypes and Spotifys,” says Van der Kleij. “That is why we are going to make Tech City the most connected cluster we can.”

London’s geographical location and its rich mix of cultures is proving to be a draw, attracting entrepreneurs from as far away as Silicon Valley and even Japan to re-locate and launch new start-ups.

Take the case of Masa Wannabe, the founder of DEnA, a Japanese Internet company that’s now listed on the Tokyo stock exchange with a market cap of $5.3 billion. Wannabe launched his latest venture, Quipper, which provides mobile educational services, in London, because he said neither Tokyo nor Silicon Valley was the right place to build up a global mobile start-up. He’s attracted investment from Atomico, the venture firm founded by Niklas Zennstrom, one of Europe’s best-known serial entrepreneurs.

Dan Crow, chief technology officer at live music website Songkick, the company which organized the Milk Roundabout job fair, says he knows of at least 50 people in the area who have moved over from the U.S. t work at London start-ups. Three of Song-kick’s own 30 employees come from Silicon Valley. Crow himself worked at Apple and co-founded several start-ups in Silicon Valley, then took on a job at Google in New York, before moving to London.

Crow sees lots of potential in Silicon Roundabout companies. “I think that in the next couple of years we are going to see a large number of companies here hit it big,” he says. The British government is betting he is right.

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