Flattening investment levels, imploding unicorns, employees worried about the future of their visa status. These are not the characteristics of a thriving, successful tech ecosystem, but they are becoming the new reality for London’s digital community.
For the past few years, the story of London tech has been one of record levels of investment, scaleup successes and rapid job creation. After years of speculation about the city’s ability to create world-beating tech companies, we had been building solid momentum to become a globally competitive digital ecosystem.
For the first time since Tech London Advocates started surveying its community of 4,600 tech experts, however, a shortage of talent is no longer perceived as the single biggest challenge facing the capital’s digital businesses. Market uncertainty is now what keeps many tech entrepreneurs awake at night.
This could spark a crisis of confidence among the very people who provide the fuel for the industry’s growth, the investors, as they question the sector’s ability to overcome the challenges of a re-negotiated regulatory, trade and employment landscape.
This isn’t showing up in the actual investment figures – yet. Last year, more than £6.7bn was invested in UK tech firms, with London businesses accounting for over a third of that total. A culture of incubation and acceleration has provided a platform for strong, sustainable growth for the capital’s tech companies.
But as the UK begins the process of exiting the EU, in order to avoid the crisis that so many fear, the tech and digital sector in London and the rest of the world will need encouragement from the government and industry leaders on the two pillars that support any successful tech ecosystem – people and future growth potential.
It is predicted that London’s tech companies will need to fill hundreds of thousands of extra jobs by 2020. The solution is pretty straightforward – grassroots initiatives to cultivate home-grown digital talent need to scale across the country, and policy-makers in government need to make a clear statement that Brexit Britain involves borders open to world-class talent and visa routes open to the rest of the world.
Reassuring investors about the continued promise of London as a place for companies to grow and deliver returns, however, has two sides to it.
On the one hand, tech entrepreneurs need to understand better what is driving the current atmosphere of nervousness. Many of the best investors base their decisions on gut instinct, personal connections, growth potential and market dynamics.
This is why Tech London Advocates is gathering the biggest European tech VCs, from Balderton Capital to Atomico, BGF Ventures to Octopus Ventures, today for an Investor Showcase at Here East. Over 800 representatives from tech companies will be listening to their views on the future of London tech and understanding how to win over the most influential gatekeepers of growth capital in London.
On the other, the tech industry needs to highlight the growth potential of the emerging technologies in which London specialises. The community has identified Artificial Intelligence (AI) as the sector set to attract the highest levels of investment in the next 12 months.
Indeed, Maggie Rodriguez-Piza, the influential chief executive of Funding London, told me that “despite lingering political uncertainty, London continues to attract investment far in excess of European counterparts, with the shift towards deep tech investment representing confidence in London’s long-term ability to produce class-leading tech companies.”
AI and deep tech sit alongside fintech, retailtech, creativetech and software development as verticals that London does better than just about anywhere else in the world. These are the stories that need to be amplified again and again to remind the international investor community that the city’s tech industry is far from over, but only really beginning to gain traction and momentum as a world-leading technology hub.
This year will be a crucial one for London’s tech community. The ecosystem must prove its ability to produce, fund and scale world-beating tech businesses, banking on the emergence of new subsectors and the growth of existing ones.
But if any city is capable of securing opportunity in the face of adversity, it is London. By reinforcing investor confidence to power the growth of London’s startups and scaleups, the capital’s tech community can itself be confident that the sector will prosper to become a global tech hub.
Do not underestimate the scale of the challenge – London tech needs to realise its potential and silence the critics. If the sector speaks with a consistent voice and presents a confident face to the wider financial community, momentum can be sustained and market certainty can return.