Could this be London's moment - when the tech scene is really about to explode?

Enough of the Silicon Valley comparisons — Matt Cowan of WIRED says the technology cluster on Old Street roundabout is a new world of talent, ambition and global success.

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Matt Cowan

11 March 2013

According to the Boston Consulting Group’s latest report, The Connected World, the internet economy’s contribution to UK GDP is, at 8.3 per cent, higher than that of any other G20 nation. The report forecasts that this share will surge to 12.4 per cent by 2016.

By then, almost a quarter of sales in the UK are expected to take place online — more than double the percentage of our projected closest competitor, Germany.

“It’s less than 25 years old but the web is already responsible for more than eight per cent of UK GDP,” said Google executive chairman Eric Schmidt in a speech at London’s Science Museum.

As the internet evolves, many in business and government see London playing a central role in what comes next.

“It is all the great cities of the US in one,” says Joanna Shields, who left the top European job at Facebook to oversee our Government’s Tech City Investment Organisation four months ago. Like Washington DC, she explains, London is the seat of national government. Like New York, it has financial services and thriving art, fashion and media scenes. Like LA, it has creative industries. Like Chicago and New York, it has an advertising world. And technology is playing an increasingly meaningful role in all of these sectors.

Noting that more than a third of London’s population was born outside the UK, Shields says the city is “the most global city in the world. Everything you need is there.”

Big US technology companies such as Facebook, Google, Microsoft, Cisco and Intel have begun to take notice. Facebook recently opened its first engineering office outside the US in Covent Garden. “It’s a huge testament to the talent that’s available here,” says the company’s developer-relations manager, Simon Cross. Indeed, outside California, London has the greatest concentration of software developers working on the social networking giant’s platform.

“The thing that seems to have changed is that London has moved from being a community of extremely technically able people to being a community of extremely technically able people building companies,” says Cross. “The entrepreneurial streak has definitely accelerated.”

Google, too, is betting big on the capital’s start-up potential. In March last year it opened Campus, a seven-storey centre in east London that provides workspaces, free wi-fi and mentorship opportunities to burgeoning small businesses. The head of Google Campus, Eze Vidra, says it is intended to provide “rocket fuel” for a thriving community that is showing considerable promise. “Campus London is the first of its kind anywhere in the world,” he says. “There couldn’t be a more fitting place to break new ground.” Just 10 months later, the company announced plans for a £1 billion UK headquarters in King’s Cross.

In December last year, David Cameron committed £50 million to regenerate the Old Street roundabout area into Europe’s largest indoor “civic space”, equipped with state-of-the-art 3D-printing technology. Microsoft has announced that it will establish a technology centre in east London. Amazon has opened a development centre. Cisco and University College London (UCL) are partnering with publisher DC Thomson to establish an innovation hothouse and Intel is working with UCL and Imperial College to create a new research centre.

“London is inexhaustible,” says Santiago Matheus, who in 2011 set up Method Design Lab, a programme run in conjunction with London’s Central Saint Martins School of Arts and Design. “Even when things are really choppy London keeps flying, because you have the government, the media, the creatives, the finance ... At any one time, even if two or three of those are struggling, the others keep the engine going. That’s what makes London the capital of the Western world.”

Rohan Silva, senior policy adviser to the Prime Minister, agrees. “A lot of the US companies we talk to say part of the reason they want to be in London is that the workforce here is not just international, but more outward- looking. So you can hire people in London and then a year later say, ‘Hey, we want to open an office in Beijing’. London people are very likely to be up for moving to Beijing and setting up an office there.”

The Government has made a series of moves to promote London’s competitiveness in the technology sector. Perhaps most importantly, it has established an entrepreneur’s visa (stealing a march on the US, where the issue has long been debated) and also created tax breaks for early-stage investors. It is also working with investors and the London Stock Exchange to oversee a revamp of the exchange’s listing requirements in order to encourage more homegrown companies to go public in London. “I think a tech scene is probably a bit like a fine cheese — there’s a moment when it all comes together,” says Silva. “I think it’s really about to explode.”

Sitting in the Mayfair offices of Index Ventures, where he’s a partner, Saul Klein, an entrepreneur turned investor, is feeling bullish. “London’s moment has arrived,” he says. “Absolutely. And potentially, London’s role in the global economy for the next period. We haven’t had this role in 100 years or more. We’re not living in a US internet any more but we’re still living in an internet where English is the most important language. The fact that English is so fundamental but we are not American is crucial. The BRIC economies [Brazil, Russia, India and China] and those in Europe and Africa have a better, less suspicious trading and cultural relationship with the UK than they do with the US.”

For Klein this position represents a 180-degree shift from his position in the mid-1990s. After helping to launch Britain’s first online newspaper, Telegraph.co.uk, in 1994, Klein was so discouraged by the slow adoption of the internet (the largest service provider then had a paltry 5,000 users) that he moved to Boston.

He returned to London in 2002 to start the company that would become LOVEFiLM and found it to be “a different world”. Later, he joined Skype which, though headquartered in Luxembourg with a Swede and a Dane as co-founders, owes a good deal of its success to London, where the commercial team was based. Skype went on to become one of Europe’s biggest tech success stories when Microsoft bought it for £5.4 billion in May 2011. “When I compare what the UK looked like 18 years ago to what it looks like today, it’s remarkable,” says Klein.

He is convinced there’s a broad shift happening in technology that favours businesses emerging from urban centres rather than suburban complexes. “I would describe the first phase as the discretionary internet — an internet that concentrated on things like shopping, news and entertainment. All of which are fun and we love them — but if they didn’t exist, we would still live. The phase we are moving into will be about industries we can’t live without, like education, health, transport and food.”

In the world Klein describes, the stakes get ever higher. The global advertising market is worth $100 billion, education is worth more than $3.9 trillion, and we spend at least $1 trillion on telephony. “We should build companies that reimagine healthcare or energy, because these businesses are orders of magnitude larger,” he says.

Still, the view that London’s tech scene has reached a definitive moment will be controversial, because the city has yet to produce the billion-pound deals that grab headlines. Klein urges patience. “Be Chinese, stop being American,” he says. “We’ve got to get ourselves out of the New York/Silicon Valley mindset of everything moving at the speed of light. Great things don’t happen overnight.”

See the full version of this feature in the April issue of WIRED, on sale now.

BOOMING LONDON

200 Tech companies in east London three years ago.

1,300 Tech companies in east London in January 2013.

92,000m2 Area acquired by technology, media and communications start-ups in London in the first nine months of last year.

39 Percentage increase last year of City office space rented to tech and media start-ups.

61,300 New businesses launched in London in 2011, up from 51,000 in 2009

Could this be London's moment - when the tech scene is really about to explode?

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