London’s tech sector remains in the Valley’s shadows, but is in rude health.
Few facts about London’s technology sector are as emblematic of the city’s ambition than the drab name it chose for itself in "Silicon Roundabout".
Whilst California’s Silicon Valley conjures up images of sunshine, optimism and fun, the Old Street junction that the UK’s technology firms are situated around has all the romance of an industrial estate in Slough.
Yet the sense of being in Silicon Valley’s shadow is one that dominates discussion about London’s technology scene. San Francisco and its neighbours are now churning out so many billion-dollar "unicorns" the wags will soon need to find a more common animal to name the club.
On this side of the Atlantic such firms are becoming more common, but are rare enough to justify the term. According to GP Bullhound, a deal-making consultancy for tech entrepreneurs, Europe now has 40 tech unicorns, 17 of which are in the UK.
As Rob Kniaz, former Valley resident and partner of London’s Hoxton Ventures puts it: "Europe has always had a tech scene, but it’s always been smaller because it’s hard to build big companies here."
Despite the lionizing of the lean start-up, economies of scale matter to technology companies. The US, a market of 320 million people with one currency and (mostly) one language, is far friendlier in this regard than the smorgasbord of member states under the EU.
Even with that in mind, London appears in rude health. The City’s storied past in finance has made the place an enticing prospect for fintech start-ups, with the likes of Barclays, HSBC and RBS repeatedly backing accelerator schemes throughout the city.
Unlike the American government, which has often taken a hands-off approach to investment in Silicon Valley, the British government has also rolled out the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) in the past few years, both of which use tax relief to try and entice investment in small companies.
More than that, back in 2010 the British government made a big push around "Tech City", a limp name for the cluster around the Silicon Roundabout. Since the drive the area has attracted the hackathons, investors and networking events that built the Valley.
Limeys trailing Yanks
One thing that often strikes those travelling between London and California is the exuberance and optimism of the Americans in comparison to the Brits, a distinction that has not gone unnoticed technologists.
"I think here investors might look at numbers and projections and accounts, while in America they look at the bigger picture," said Julian Carter, a founder of EC1 Capital.
Yet he added that one of the benefits of London, and by extension Europe, is that lack of maturity in the investment market. Competition for deals, Carter says, is less ferocious than in Silicon Valley.
London, with its proximity to Oxford and Cambridge and own clutch of universities, is also not lacking for its equivalent to Stanford. Salaries are also a lot lower. By Kniaz’s estimate a starter software engineering role in the UK commands a salary of between £32,000 and £38,000, at least half what one might earn in the Valley.
Those smaller salaries are also reflected in the value of the companies. Whilst Silicon Valley boasts the likes of Uber, which earlier this year claimed a $50bn value, the UK has yet to achieve a "decacorn", the crude new term for a $10bn firm.
For the venture capitalists CBR spoke to such a milestone is not too far away. According to Kniaz, the more money pours in the more talent moves in, the more start-ups are created, and so on. "I see it as a self-reinforcing thing," he said.
Perhaps by the time the first decacorn is born £25m plans to convert Silicon Roundabout into a glamorous square will have come to fruition. Whether "Silicon Square" will take off as a nickname is less certain.
Image Credit – Jack Torcello