Megabuyte, July 2012. Original article here (£).
Letter from the West Coast
The view to Britain
While the Silicon Valley startup ecosystem is the biggest in the world, this does not mean it is the only place capable of growing good technology companies. The West Coast scene is 4.5 times bigger than London, according to research from Startup Genome, but the UK capital is still the third biggest technology hub in the world, just behind New York and ahead of Toronto and Tel Aviv. But how is Britain’s technology scene viewed from the West Coast?
While the gap between the Valley and London is closing, the sheer size of the former is a factor that smaller startup cities really struggle to compete with. The vast amount of talent, history and knowledge present in the area attracts more of the same, perpetuating the trend. This also translates into better access to funding and nurturing for new companies; Startup Genome found that Silicon Valley has 54% more companies reaching a stage of aggressive growth than London; furthermore, Valley companies raise on average 2x or 3x times more money in their first three stages of development.
The ‘cool’ factor
These are all practical elements, but for a UK technology journalist visiting the Bay Area, one of the main elements that sets the West Coast apart in a distinct way is a “can do” attitude – there is a pushiness about it that is just not very British!
“There is such an enthusiasm out here for what we do,” says Suranga Chandratillake, the founder of video search group Blinkx, who has recently been promoted from CEO to president and Chief Strategy Officer. Blinkx started out in Cambridge, but Chandratillake was already in San Francisco from the beginning and now the operations are split between the UK and US. “Technology and engineering, and the sciences in general, is looked down on a bit in the UK, as if it is something very difficult that you only do if you are a boffin with no friends,” says Chandratillake, when asked about the attitude to technology in the UK. He explains how his peers at Cambridge University would view tech chatter as a bit un-cool: “But out here [in San Francisco] it is very cool to talk about technology. And those who are really good at it are treated a bit like rock stars.”
Still, the UK connection has been good for Aim-listed Blinkx. Cambridge’s contribution to the world of technology is not to be dismissed, as the town has nurtured some of the greats such as ARM Holdings and Autonomy. More recently, the town has provided plenty of raw materials for Blinkx in the form of people: “It is much easier to find and retain talent in Cambridge, whereas in the Valley, talent is constantly flowing. Where Cambridge came up short for us was on the business and marketing side. Your partners are here [on the West Coast]. The startup press is here. The venture capitalists are all here. […] From a technology point of view you can start businesses in lots of different places, but the connections you get out here are unique.”
For similar reasons, Blinkx often brings members from its Cambridge development team over to San Francisco for a month at a time, so they can tap into this buzz. “It is a particular Californian optimism, what you get out here,” says Chandratillake when asked whether the West Coast cheer is just a reflection of Americans’ generally more optimistic, less self-deprecating outlook. But no, says Chandratillake, in New York you will find a similar scepticism as you do in London. The Startup Genome data supports this assessment: Silicon Valley has 30% more founders wanting to change the world than London or New York, where founders are more focused on financial rewards. This translates into vastly different attitudes to risk and failure.
West goes East
How to export the Silicon Valley attitude once the company expands abroad is now a challenge faced by Yammer, he enterprise social network company focusing on its push into London. Lately, news around Yammer has circled mainly on the Microsoft acquisitions, however the company is hiring at its London offices. And Yammer co-founder and CTO Adam Pisoni thinks it is possible to export the vibe that makes the Valley such an efficient incubator.
“You can export this in as far as our company embodies these principles. We believe we can set up offices that will also embody these principles, so hopefully if enough companies like us do that in a place like London, you get a critical mass that has a life of its own,” says Pisoni. Still, the process is not without challenges: “When we interview engineers from Europe, the way we work and how we think is super foreign to them. They have never been in an environment where they have had this much autonomy to do their jobs.” Pisoni explains how Yammer’s engineers are not just handed a task, but they are expected to play an active role in determining the direction of the product. Providing staff with equity in the company is one way which Yammer keeps everyone’s interests aligned: “There is a different mentality [in Europe], there is more of a hierarchy. Or course we have that here too, but Silicon Valley is the centre of an attitude where you hire smart people and you throw away their job descriptions. Their job description is to use their talents as best they can to further the mission of the company.“
Pisoni says he is excited about the opportunities in the UK, even if it may be a more cautious business environment. “The best way to articulate that pain point is how companies used to value predictability above everything else. And predictability is the thing you have to trade if you want to become more innovative and and adaptable. Companies are now making that transition without knowing it, because they are expressing a wish to become more innovative and adaptable but they do not want to give up predictability. Those are incompatible.”
While London may currently be at the centre of attention for technology expansion, Bill Burns, the American CEO of UK-listed technology testing group Spirent, is quick to point out that the more established technology hubs are probably outside the capital: in places like Slough and Reading, plus CSR and Imagination Technologies in Cambridge and Hertfordshire respectively.
“It is hard to compare London and Silicon Valley, as they are so different. Everyone wants to be Silicon Valley: there was talk of Russia building a Silicon Valley lookalike, and Michigan wanted to start one up and advertised a job fair appealing to laid-off Yahoo-engineers,” says Burns in Sunnyvale. “There is a lot of initiative around trying to encourage more patents and intellectual property in the UK, but it is hard for anybody to rival Silicon Valley, simply because it is here already. […] It is hard for anyone to form that same dynamic anywhere in the world. But that does not mean that the city, the people or the service providers are any further or less advanced.”
After all, the UK competes just fine with the US when it comes to appetite for actually using technology, both in terms of business customers like BT, Vodafone and RBS, and in regular consumers’ hunger for new gadgets and intelligent software. And there are plenty of examples where London is ahead of San Francisco, which lags a decade behind London by implementing electronic public transport tickets only this year.
“Look at the London Congestion Charge. No-one called it that then, but what they were trying to drive was a smart city: ‘How do I control congestion in a downtown area by using technology to read licence plates?’ Ten years ago that was pretty advanced. Lots of cities are now trying to control and limit traffic on highways by charging. These are simple things we all overlook,” says Burns. Another example is CCTV, where London is the world’s most advanced city.
So while London, and the UK in general, is a different environment to Silicon Valley for operating a technology company, this does not necessarily mean it is inferior. While this is the last of the Letters from the West Coast, we are keen to further explore the UK startup scene; we are planning a spin around the Silicon Roundabout startup circuit to further explore how the UK is developing as a startup incubator. We will come back with ‘The Early View’ in the autumn.