News: A Facebook or Uber type tech giant won’t be built in the UK without big changes to investment culture says digital economy minister.
The capital investment culture in the UK cannot match that of Silicon Valley when it comes to scaling companies to the size of an Uber or Facebook.
Ed Vaizey, MP, the UK minister for the Digital economy told CBR that the UK tech sector capital investment culture and philosophy is part of the difference between the US and the UK.
Asked if the UK has the capital investment culture to get tech firms to scale to the size of an Airbnb or an Uber Mr Vaizey said: "No, not yet. This is what is at the heart of the issue…The big problem we have in tech is finance. And that’s a cultural problem. You look at a Facebook, yes, Mark Zuckerberg takes deserved credit for the great innovations and success but the untold story is the people who financed Facebook in the early stages. This wall of money that hits small tech companies in the US combined with the Silicon Valley philosophy that you back one hundred and one big success pays for your other 99 is real."
The UK has a great reputation for attracting investment for incubating and first stage growth and in the first six months of 2015 a record £2.2bn was invested in the UK tech sector according to KPMG.
But the UK has yet to produce a truly global scale tech player or starting valuations in the $25bn range (Airbnb) or $40-$50bn (Uber) despite the success of firms such as Sophos which was the UK’s biggest ever tech IPO at just over $1bn in July 2015, the success of Autonomy in selling out to hp or the growth ARM.
"At the moment finance is part of the difference between the US and the UK. It is not a difference in skills, it is not a difference in entrepreneurial zeal."
Mr Vaizey says the UK is becoming a more attractive place for start-up companies thanks to initiatives such as Tech City and Government moves on tax incentives for start-up investors and the recently announced relaxation of Visa rules to help attract technically qualified people to firms in northern English cities and to tech hot spots.
The digital economy minister said there are some things the government can’t legislate for and ‘the biggest change that will happen when we get the capital investment going.’
"The more people who make their capital in tech and invest it in the next wave will create a virtuous circle. British people don’t have a problem with making fortunes. So people like Mike Lynch [founder of Autonomy] goes on to invest in next wave it is good. We need active venture capital companies in partnership with successful tech entrepreneurs who invest personal wealth and actively engage with the companies they invest in."
Mr Vaizey pointed to the success of London’s Tech City and the equivalent Norther Tech initiative as evidence for how the UK will continue to grow tech businesses. "Look at the Tech City Future Fifty whether it is Nomad, Skyscanner or Shazam. We will be very active in keeping them in the UK."