Britain: London's tech zone boosted

Google adds its weight to the Tech City.

A report in The Guardian alerts to Google's decision to open a start-up centre in London's rival to Silicon Valley. In November 2010, UK Prime Minister David Cameron announced backing of "£400m in government funding and ... support from technology firms including BT, Cisco, Facebook and Google." 

And Google has honoured its pledge, by establishing a tech workshop in this envisaged Tech City spreading east from 'Silicon Roundabout' at Old Street in London.

Silicon Valley, in California's San Francisco Bay area, sprung out of Stanford University and gravitated towards San Jose. It pioneered the concept of clustering technology firms and related interests to create a business buzz which would generate innovation, employment and wealth at rapid speed. My understanding is that this idea took decades to evolve. But the model has been copied across America and internationally. Bangalore has its Silicon Plateau, Haifa its Silicon Wadi, Glasgow its Silicon Glen, Cambridge its Silicon Fen, Lower Manhattan its Silicon Alley, Portland its Silicon Forest, Dallas its Silicon Prairie, Cape Town its Silicon Cape, Davao its Silicon Gulf and most recently, London its Silicon Roundabout. What, a roundabout, you might ask? 

Evidently yes, the Old Street roundabout area between London's Moorgate and Hoxton was so named by Dopplr's Matt Biddulph, an an expression validated by UK Prime Minister David Cameron.

According to The Economist, Silicon Roundabout is full of small-to-medium sized, highly specialised concerns all with their own niches, everything from a fashion firm to an online dictionary to a hotel comparison site. They're attracted by London's wealth, appeal to global talent and English language. Moorgate is a financial centre. Hoxton is awash with fashion start-ups and innovative designers renting space in inexpensive, pretty Victorian terraces. Silicon Roundabout, reports the global news magazine, is attractive to entrepreneurs seeking a bohemian atmosphere, relatively cheap rents and a draw-card for creative workers. Yet, in supporting and promoting the Roundabout, the UK government risks Silicon Valley “behomoths” gobbling up “plucky” London businesses. The government and locals will watch and wait, but business sense as well as tech knowledge will be needed to know when and when not to sell. Mark Zuckerberg knew to refuse an offer from Facebook for Yahoo! in 2006, for example.

By attracting to the area investment from the likes of Google and Cisco, Cameron et al envisage extending the boundaries of the emerging “Tech City” beyond the Roundabout east to the regenerated area near Stratford where the 2012 Olympics will be held. It's ambitious, yet clearly welcomed by the local tech community.

However, a big constraint is the scarcity of technology venture capital (VC). Therefore, the UK government has enticed Vodafone to migrate its VC arm to London. It's also attracting other big international technology lenders. Sadly, pension funds are reluctant to enter the fray, but if such capital were to be released to the sector, it would grow more swiftly.

On Google's decsion, Chancellor George Osborne told The Guardian: "It shows that we can create the right environment to attract startups and established high-technology businesses, supporting our programme to create new jobs, diversify the economy and create long-term economic growth. This shows that Britain is open for high-tech business."

Not before time, as Britain has sorely lacked its own Bill Gates. Despite Microsoft's Research Unit at Cambridge, and the numerous tech smarts graduating from the university, No great new firm has emerged. the two biggest, search software company Autonomy (recently sold at a premium for £7.1bn (US$11.1bn) to Hewlett Packard) and ARM, an IPhone microchip designer, are niche operators. 

No entrepeneurs have yet created a grand scale tech concern. The rewards to the founders, workforce and UK would be huge, as the economies of scale can be very profitable.

But Tech City has just received a massive shot in the arm from Google, just the sort of business the UK should mimic. It's only a matter of time now before London hums to the sound of tech chatter to rival the chink of cash generated from financial services.

In the mid 1980s, London's 'City' was a small regional player with global connections. It's now the world's pre-eminant non-US$ banking and financial centre. 

Whether Tech City can rival Silicon Valley will depend on the availability of VC funding and the appetite of fund managers for risk. According to The Economist: "In 2010 high-tech firms in Israel attracted $1.3 billion in venture capital, nearly twice as much as in Britain, whose economy is ten times as big."  But that was before Google's latest decision. Now the VC firms will sit up and take notice, and the strangely devised, tight and unhelpful rules about risk, funding and their relationships to tax which had been concocted by the previous Labour administration have been unravelled.

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