Geeks and startup types are again gathering today in Billingsgate for TechCrunch’s Disrupt conference, a celebration of London’s tech sector. There’s a lot to celebrate: the sector hasn’t been this hot since the days of the dot-com boom. Investors are toasting two billion-dollar exits this year: games designers Natural Motion and artificial intelligence wizards Deep Mind.
A government charm offensive has helped build the sector’s international brand, nudging titans like Google and Facebook to make big investments in London.
But not everyone is so sanguine. Just as some people doubted the last tech boom would last, there are plenty of latter-day sceptics asking whether Silicon Roundabout is the real deal. If London is so great, they ask, where is Britain’s Google?
UK venture capital-backed (VC) exits last year totalled roughly $4bn (£2.47bn). Israel’s tech cluster managed nearly $8bn, and the US VC sector over $40bn. Even its partisans wouldn’t claim Tech City is a rival to Silicon Valley in the way the City of London is to Wall Street. And London faces stiff competition from Cambridge, which saw its own $2.5bn exit last week in the form of chip designers CSR.
While it’s true that London is not Palo Alto or Tel Aviv, this criticism of Tech City seems overblown. What has been achieved in London in the past decade is critical mass. It has crossed a threshold in terms of capital, talent and reputation such that it will continue to thrive, even if it may not be the biggest cluster in the world. The infrastructure needed for a buzzing startup scene – from cashed-out entrepreneurs willing to invest in the next big thing, to effective accelerators and startup-friendly neighbourhoods – is here in a way it wasn’t in 2004.
The real challenge for the UK’s tech sector is not whether London will be the next Silicon Valley, but something much more important. The real benefit of technologies is not that they give rise to dot-com billionaires, but that they change the way we live our lives and make society more prosperous.
Economists point out that America’s unexpected productivity explosion in the 1990s wasn’t the result of the IT sector, but rather the result of companies like Walmart using technology to transform the way they did business. As Tech City maestro Saul Klein likes to remark, 8 per cent of the UK is currently enabled by the internet. This is good going by global standards, but it could be higher. The real benefits will come when the internet transforms the rest of the economy.
There are signs it is beginning to happen in all sorts of sectors. Zopa, FundingCircle and others are transforming consumer and business banking. Spend Network and the Government Digital Service are trying to drag government into the twenty-first century. And any hotelier or taxi driver will tell you that firms like OneFineStay and Uber are changing their business.
The moral of this story is that sceptics of Tech City are barking up the wrong tree. The real challenge is not whether it can become a worthy rival to Silicon Valley, but whether it can transform the economy of the UK.