Over the last few years, London has become an increasingly important startup hub — one of the most vibrant and busy in Europe. But a little over a year ago, what had been an informal network of companies based around the city’s East End was turned into something more official with the creation of “Tech City”, a government initiative aimed at making the British capital one of the world’s great technology centers.
Since then, the Tech City project has been trying to woo investors and pump up the city’s startup scene. Some of it’s been successful, but the organization has also attracted criticism for what some — including me — see as a top-down attempt to overhype a nascent community. Why? Not least to help claw back some of the £9 billion spent on the upcoming Olympic Games.
In the face of a mixed response from the community, I met up with Tech City CEO Eric van der Kleij and asked him a few questions about the organization he leads — and what it’s really doing.
What does Tech City actually do?
First, we’re not a Quango: we sit within a major government department called UK Trade and Investment, whose principle responsibility is inward investment or trade.
We have four main activities. The first is to attract the major corporates in, and work to make sure that they’re fully aware of the advantages of the cluster — companies at the bigger end like Google, Facebook, Cisco, and then companies at the venture-backed end like Airbnb and Yammer… That’s what a majority of the team are doing.
The second part we do is… work to attract entrepreneurs. We have this wonderful opportunity to attract some of the world’s best entrepreneurs to look at the cluster as a great place to expand their business or to base themselves. […] The third thing is around investment, which in my experience is one hell of an important area to work on. We target venture capital investors and angels, because there is — whatever anybody says — there is still a shortage of early stage investors. And there’s a really strong argument for them to invest now, because we have a cluster with the density to support a high-growth business, and we couldn’t say that before.
The last piece of work we do is talent. One part is to attract some of the world’s most capable talent to come and work in Tech City companies — and that works firstly by publicizing Tech City and the successes that are happening here worldwide and specifically across Europe, which is a very important target area for us because there are very little restrictions on travel. The other is supporting things like Silicon Milkroundabout […] and individually working with companies in the Tech City cluster to identify the sort of challenges they face.
We don’t make the policies, but we can help feed it back into the government.
Why do you think Tech City has attracted such criticism?
I think it’s the pace. I know I differ with some people, but I am an entrepreneur, I’m not a civil servant. I know I fluster my colleagues and the community with the pace I demand to get it done. That means the PR, the messaging, the activity program, every single thing we do. I think that’s an approach that’s quite ambitious, and I’m very ambitious for Tech City and I won’t hide that.
The challenge we face is our perception of ourselves: that’s partially because of the way we’re brought up: be humble, don’t be boastful. Look at North America, and it’s different — they’re told it’s OK to be ambitious. There’s a difference between the two, but I don’t think it’s necessary.
If I look at the criticism, it falls into two camps. Overall, it’s quite polarized: the vast majority are very happy with us, 80 or 90 percent. We could just say that’s fine and carry on — but listening to the 20 percent, that falls into two camps: those that are looking for a rational challenge to what we do, and we’re always happy to consider those, and the other, who are actually quite smartly using this initiative to mobilize their own agenda. I understand that, and by the way some of it can be fun. But I listen to all of it, and we do make changes as a result. I’d never say we’ve got it nailed, and one of the things I’ve learned from being an entrepreneur is that you have to iterate.
Some of it is weird, though, and some of it comes from the wrong perspective. There’s this question: why aren’t there more billion dollar plus U.K. business? I believe our entrepreneurs are capable of that, but I think that partially they need to see that it’s possible.
But your statistics have been inflated by changes in your reporting method, not just growth.
What I would say is what we could have done better is been clearer about what we call tech companies.
@bobbiejohnson Yes – does he think that the government’s championing of Tech City is detrimental to startups/clusters outside London?
— Fiona Campbell-Howes (@patroclus) April 10, 2012
There’s a very clear strategy behind this, and what not everyone understands is that the really important thing is to have density in your cluster: a 20, 30 company cluster is nice and it’s an important platform.
But when the government came to power, they were looking for anything that could give them a little bit of growth that could then be amplified. And against the economic climate, I think anything less would have been negligent. One of the first things I did when I took over was ban a map of Tech City that had borders on it… the density of the cluster will immediately start to benefit other areas.
It’s the cluster as a magnet for the whole of the U.K. We don’t mind where people set up, as long as it’s not continental Europe.
You scored a coup by bringing Loic Le Meur’s Le Web conference to London this summer. Did you pay them?
We do work to try and attract things like Le Web to the U.K. — and can I just say that’s not easy to do, people massively underestimate how difficult it is to do. You could get a bunch of conferences just by writing checks for them, but you have to make sure the proposition is right because they have to be convinced that the U.K. can support something like that, and London is right for that.
But did you write any checks?
We did, we are partners with Le Web.
@bobbiejohnson How can London possibly compete with as cheap a city as Berlin? Even just on matters of accommodation London loses out.
— La_Lynne (@La_Lynne) April 10, 2012
The reasons are mainly around access to customers. The U.K. has the biggest e-commerce market in Europe, the biggest financial services sector in Europe, the biggest advertising market in Europe, biggest post-production industry, biggest digital media industry, biggest fashion industry.
And it might be marginally more expensive than Berlin, but when you are internationalizing your business, you reduce the costs by being in the place that’s better connected to the world than anywhere else. And cost is part of why Tech City is based in East London, not the [more expensive] West End.
Google and Amazon have huge U.K. revenues, but are set up outside Britain so that they can use loopholes to avoid tax. So are you really growing the economy by encouraging them in?
Firstly it’s wrong to say that none of the money’s coming back to the exchequer. When you think of the holistic economic impact of a highly-skilled person going to work for a company like Google, the rents they pay, the rates they pay, their salary, all contribute to the UK economy in a very healthy way.
On the question of the domicile of a lot of these companies, and the corporation tax treatment of that — I can’t speak on this topic with the kind of authority that you need from the Chancellor, but this is my view: what I want to see as an entrepreneur is a set of policies that encourage businesses. With the corporation tax, which is what these big companies look at, this government has said that year by year it will cut that tax.
The other thing they did was make some tax breaks for media and creative industries, but the one that’s going to really kick all of that into touch is Patentbox: if you have IP and it sits in a UK company and you make revenues from it, you’ll pay 10 percent corporation tax. As a goal that’s hugely audacious.