January 2, 2014 12:12 pm

Rise of mobile computing fosters new tech hubs

This photo illustration shows the website of Swedish music streaming service Spotify on March 7, 2013 in Stockholm, Sweden. Sweden is at the forefront of a global recovery in music sales driven by streaming music services such as Spotify©Getty

The shift to streaming is putting digital downloads on a downward trajectory

The rise of mobile computing is fostering a fresh round of tech start-ups around the world, turning cities such as New York, Tel Aviv and Berlin into magnets for entrepreneurs hoping to cash in on the boom in smartphones and tablets.

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A swarm of new mobile devices and the “cloud” that is needed to support them have together created big tech markets for international entrepreneurs, while also making it cheaper and easier to build freestanding businesses.

“Now the app stores have come along and all of a sudden it is possible to reach a billion consumers by just submitting your game to the app store,” said Ilkka Paananen, chief executive of Supercell, the Finnish games company.

Many entrepreneurs are scrambling to replicate the success of companies like Supercell which recently sold a 51 per cent stake in itself for $1.5bn to Japanese investors SoftBank and GungHo Online Entertainment. Spotify, another Scandinavian start-up, was recently valued at $4bn .

Israel’s well established start-up sector is also on a roll after Google paid $1bn last year for mobile traffic app Waze. The new technologies needed to support mobile computing were also hot targets in 2013; Facebook purchased data-compression company Onavo, while Apple bought Primesense, which makes sensors that control computers using gestures.

Highly visible successes such as these, and the low costs of creating apps for mobile platforms, have brought entrepreneurs to the world’s fledgling start-up hubs, echoing the surge of enthusiasm in consumer internet companies during the dotcom boom. The earlier bubble quickly popped, however, after the dotcom groups failed to live up to their high valuations.

Since then, cities such as London and New York have made concerted efforts to build more durable start-up ecosystems. In part, that has involved turning to entrenched local industries such as fashion, retail and finance to foster internet companies that draw on skills beyond technology.

But even amid the biggest wave of interest in new consumer tech start-ups since the dotcom bubble at the end of the 1990s, Silicon Valley still retains a huge lead when it comes to cultivating the next generation of online leaders, according to many entrepreneurs and venture capitalists.

A shortage of finance to support fast-growing companies beyond their early seed stages elsewhere, along with problems finding the enough talented staff, are the most common reasons cited.

“All these markets have the potential, they have the infrastructure – but they never seem to capture it the way the Valley does,” said Dave Zilberman of Comcast Ventures, the investment arm of the US cable TV company, who left New York and joined the brain-drain to California in 2013 to be closer to the action.

Long-running attempts around the world to build tech hubs to rival Silicon Valley have failed to make a dent in the lead enjoyed by California, said John Hennessy, president of Stanford University and a director of Google. “If anything, the gap has actually opened. The fact is that this is the core of the technology world.”

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