November 9, 2011 10:11 pm

Tale of two tech cities

Many of the entrepreneurs in east London’s “Silicon Roundabout” were suspicious a year ago when David Cameron stood up on Brick Lane to announce a new growth initiative in the region between Shoreditch and Stratford, which he renamed “Tech City”.

Local geeks feared the government might try to take credit for the “organic” blossoming of a tech cluster.

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Twelve months later, the prime minister is likely to receive a warm reception when he returns to Shoreditch on Thursday to announce a fresh package of measures designed to help start-ups, including a “crowd-sourced” deregulation drive for “disruptive” young companies.

Most of the tech entrepreneurs spread around Old Street and Bethnal Green have welcomed the government’s spotlight on their area and industry.

“It helps to validate [tech start-ups] as a career choice for young people who would otherwise go into a bank,” says Ian Hogarth, chief of live music site Songkick.

“I think things have changed,” says Michael Birch, the British entrepreneur behind Bebo and other innovations, when he visited from San Francisco recently. “It has reached a point now where people are saying, ‘I need to be there’.”

Glenn Shoosmith, chief executive of BookingBug, an online reservation platform, believes Number 10’s backing for start-ups has directly benefited his firm.

“I complained last year about a couple of major things [including] that for small software suppliers to sell to government was immensely difficult,” he said. “Less than six months later they threw away a lot of the procurement framework… On that front the government has done a lot.”

Shoreditch entrepreneurs have been impressed that the government has maintained its interest in the area, holding regular meetings at Number 10, providing a dedicated wing of the UK Trade and Industry group led by Eric van der Kleij, and even arranging a party last month at Buckingham Palace.

“They work best when they do lots of stuff quietly in the background and don’t take any credit for it - which doesn’t always sit very well with politicians,” Mr Shoosmith added.

But in spite of the introduction of tax relief for early-stage investors and an “entrepreneur visa”, London’s start-ups hope the government will go further.

Policy suggestions include capital-gains-tax breaks for early employees, as well as founders; “developer visas” to allow the best technical talent to enter the UK; faster broadband; and better links to universities.

To become the “Silicon Valley of Europe”, London faces tough competition from the likes of Berlin, Paris and Dublin, where the Irish president and rock star Bono charmed tech entrepreneurs last month.

Thus far, none of the large tech firms involved in Tech City - such as Google, Intel and Cisco - has committed to being an “anchor tenant” in Stratford after the Olympics, as the government envisaged when it announced its scheme.

The Olympic Park Legacy Company boasts that the games’ broadcast and press centres, in the north-west corner of the park, border what has been “tipped by Vogue to become ‘the centre of the cultural universe’” – also known as Hackney Wick.

Cultural capital is a vital component of Tech City policymaking, which draws on the work of urbanist Richard Florida, who believes a “creative class” of artists and media folk is vital for regenerating an area.

But Andrew Boff, the Conservatives’ Olympic spokesman on the London Assembly, warns that the broadcast and press centres may become the “weak link in Tech City”, due to poor internal transport links and a vast 1m square-foot area.

Number 10 officials working on Tech City say it is too early to expect much progress, with the OPLC only launching a tender for the centres last month.

However, the government rejected a £1bn proposal by the Wellcome Trust to takeover the whole park and turn the venues into a life sciences centre, because they said it didn’t offer taxpayers sufficient value for money. Talks for the BBC to move into the space broke down in September.

“At the moment we have this centre of gravity at Shoreditch and nothing at the Stratford end,” said Richard Moross, chief executive of Moo, an innovative printing firm. “There needs to be something at the other end to stretch out the talent between the two or Stratford will be a very poor relation.”

BACKGROUND NEWS

David Cameron will today announce that he has struck a “ground-breaking” deal with two big banks to provide up to £500m of funding for small and medium-sized businesses in the regions as part of attempts to help entrepreneurs access loans, write Tim Bradshaw and Elizabeth Rigby.

The pot of lending is being leveraged off the back of £95m of funds already allocated to SMEs through the government’s £1.4bn regional growth fund. RBS and HSBC will oversee distribution of the money as well as providing the additional lending. Mr Cameron says the money will create at least 4,000 jobs in the regions.

“I’ve lost count of the number of times people working in our small businesses have told me they just can’t get a loan for that new investment,” Mr Cameron will say. “That’s got to change – and we’re going to use the regional growth fund to change it.”

But the funding is a drop in the ocean of the £76bn of gross lending to SMEs that five banks – Barclays, Lloyds, RBS, HSBC, Santander – agreed to release this year as part
of Project Merlin, the agreement designed to
ease access to credit.

At East London Tech City in Shoreditch, Mr Cameron will also announce plans to cut red tape for innovative companies. Silicon Roundabout start-ups and would-be entrepreneurs around the UK will be asked for their contribution to a “radical deregulation process” for companies with “disruptive” business models.

The attempt to use crowd-sourcing [sourcing tasks usually performed by individuals to a group, or crowd, via an open call], is part of the Red Tape Challenge website, and is pioneered by Beth Noveck, a former US chief technology officer under Barack Obama. She is now an adviser to Downing Street on digital governance.

The plans are designed to help tech companies whose innovations cannot be implemented because of regulations from “another era”. These include Wonga and Zopa, lending services, and People Per Hour, a recruitment site.

Mr Cameron will unveil an interactive online map of east London, which is now home to more than 600 digital start-ups. The map is intended to make it easier for the hundreds of companies who have approached UK Trade and Industry about partnering and investing in the area to identify local entrepreneurs.

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