January 28, 2011 11:34 pm

East London marked to rival Silicon Valley

Two years ago, “Silicon Roundabout” was nothing more than an in-joke used by those working in the cluster of tech start-ups that had sprung up around London’s Old Street landmark.

But today the area is at the centre of a government initiative and a key part of the 2012 Olympic legacy.

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Silicon Roundabout was coined as a sarcastic response to the accusation that has always hung over British tech start-ups: that the UK has never created an internet group to rival Silicon Valley’s Google or Facebook, in spite of more than a hundred young digital companies setting up shop in east London.

Some of its early successes include Dopplr, the travel site co-founded by the phrase’s originator, Matt Biddulph, and Last.fm, the music site.

Dopplr was acquired by Nokia and Last.fm by CBS, but both companies fortunes have been mixed since their multimillion dollar deals.

It remains to be seen if Lovefilm, the latest British tech firm to be sold to a larger American rival (in this case, Amazon), will fare better in the long term.

Nonetheless, after the Conservatives launched their pre-election technology manifesto on nearby Brick Lane, Silicon Roundabout seems to have caught the attention of David Cameron, George Osborne and Boris Johnson.

As part of the prime minister’s launch of a “world-leading technology city to rival Silicon Valley”, however, the area was renamed “East London Tech City” – and extended from Shoreditch to include the Olympic park in Stratford, some six miles away.

“They’re taking away the name from us, god damn it!,” says Richard Moross, founder of Moo.com, half-joking. “They are rebranding it a little too soon.”

Moo, which prints high-end business cards and other items using photos from the internet, was one of the first to set up offices on Old Street roundabout.

“It’s great that [the government] are building awareness and they have the biggest megaphone around,” says Mr Moross. “But it all seems a little sketchy at this point. There is already a critical mass here.”

In fact, the initial response to the Tech City idea was mixed. While it reeled off supportive quotes from Facebook, Google and Cisco, it recycled an existing pledge made in February 2010 to match £200m of equity financing for “businesses with high-growth potential” and is yet to make concrete promises.

Since November, the government has been in “listening mode”, with McKinsey, the consultancy, holding regular discussions and many partner companies, such as BT and Vodafone, visiting the area before submitting their final proposals next month.

However, just opening that dialogue is a major step forward, says Barry Maloney, founder of Balderton Capital, a leading venture investor.

“This government really understands the difference between venture capital and private equity. Up until now, it was all lumped together and private equity was seen as a systemic risk that must be regulated . . . Mr Cameron has engaged with the venture community to figure out how to make London the centre for European entrepreneurialism.”

Robin Klein, another investor in early-stage companies through the Accelerator Group and Index Ventures, says that the initial tech city announcement was “a really good bit of adrenaline for the start-up scene”.

But some remain cynical about the venture. One senior London property adviser told the FT that the launch conveniently coincided with the marketing of the Olympics site, helping to attract interest from larger media and technology firms previously lacking. Tech clusters already exist around Reading, Oxford and Cambridge, spawning successes such as Arm and Autonomy – both of which have been absent from the Tech City initiative so far. Many in the video-game industry, which has lobbied for years for tax breaks and is spread outside London in areas such as Guildford and Dundee, feel sidelined by the East End focus.

“The Coalition Government’s plans for a ‘Tech City’ in east London are OK as far they go, but they lack ambition,” said Richard Wilson, chief of Tiga, the games developers’ association. Some of those working with the government on other aspects of its digital agenda say Tech City lacks ministerial co-ordination with parallel plans for superfast broadband, open data sharing and online public-service delivery.

The feeling of a rushed November announcement was compounded by the fact that some of the people it mentioned were surprised to find themselves part of such an initiative.

Facebook, for instance, said that it would create a “permanent home” for an association of external developers who use its services, but failed to consult the established Facebook Developer Garage London.

“We knew nothing about this” before it was launched, said Dave Nattriss, a freelance web developer on the FDGL committee.

“It was surprising to hear that Facebook seemed to have promised the government to invest in our events . . .  A nice surprise in some ways, but also one that had no involvement from us, so we definitely felt out of the loop, and to some extent that the government was trying to cash in on [or] gain kudos for something we have been doing for years without any involvement from them.”

But it is clear that the big Silicon Valley companies are committed to the project. “We were really endorsing the idea without defining our exact participation,” says Joanna Shields, Facebook’s vice-president for Europe, Middle East and Africa. “I really commend the initiative to create a focal point.”

Ms Shields has also been inspired by the government’s plan to create KidsCode.org, an initiative to teach 11- to 16-year-olds how to write software and create technology products .

Eric Schmidt, Google’s chief executive, discussed Tech City with Mr Cameron this week and as well as a promised “Innovation Hub” in the area, Mr Schmidt said Google plans to hire a further 1,000 people in Europe this year, boosting headcount by a fifth.

So while some accuse the government of jumping on the bandwagon already driving around Silicon Roundabout, others say it is no bad thing.

“It’s good that they have looked at something that is actually happening, rather than trying to force something,” says Ian Hogarth, co-founder of Songkick, a live music site.

“London has a shot at being the number two place in the world to build a start-up.”

Next week: Tech entrepreneurs explain the appeal of clustering around Silicon Roundabout

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