Will the UK be able to create something to rival Silicon Valley?

With the Olympics about to get underway, the Cabinet is starting to look towards and plan for the months ahead. One of these plans, led by Jeremy Hunt, involves expanding the current “Silicon Roundabout” in a bid to create our very own rival to Silicon Valley right in London. Hoping to bring together ambition, creativity and energy in one place, the government hopes to grow East London so that we can benefit from the same sort of success that has been seen in California; jobs, tax revenue, highly skilled workers and takeovers. If it works, the country would massively benefit, with something to rival other established industries.

Located in California in the United States, Silicon Valley was born out of the founding of various technology firms in the area, such as Hewlett Packard. Since then, the area has seen the birth of companies such as Netflix, and the world’s biggest publicly traded company, Apple Inc. Breeding success has become a key part of the area, with one employee’s bright idea at one company one minute, turning into a startup the next. This has happened time and time again, with Facebook becoming the world’s third largest IPO, valued at over $100 billion, as well as Kevin Systrom’s idea at Google turning into Instagram, recently brought by Facebook for $1 billion. It’s this sort of success that the valley has become renowned for, and certainly something that the UK would love to recreate. With an estimated GDP of $200 billion, it is a similar size to the whole economy of Ireland.

The Valley’s success hasn’t grown overnight. Infrastructure which is key to this has evolved over the years, with the area now full of lawyer’s, education, venture capitalists and also a big community of entrepreneurs for which to gain advice and support. It is common to see second and third generation entrepreneurs giving back to the Valley, with people such as Steve Jobs and Larry Ellison all helping to breed the next generation of startups.  Many companies have credited this environment to the reason for their success, with Zuckerberg citing this as the reason to why he moved Facebook from Harvard to Pato Alto.

The British government is taking certain steps to help East London achieve this goal. Many have claimed that the area will need access to finance; talented teams and a supportive group of successful entrepreneurs.

To tackle the finance issue, the UK is taking the correct steps. The government has invited the Silicon Valley Investment Bank to open up in London, as well as inviting venture capitalist firms into the area. However, it is yet to be seen if these schemes will actually be good enough to recreate the success of the Valley, which is home to one third of all venture capitalist investment in the United States. Access to funding is vital, because without this, the startups will not be able to evolve into fully fledged companies. In the past, the  UK’s startups haven’t been able to access this, mainly because the banks aren’t willing to take risks, so instead, these companies have gone West, creating more success for the Valley.

Talented teams are needed to turn the ideas into reality. With University of California at Berkley and Stanford University, the Valley has exactly what it needs right on its doorstep. Hundreds of engineers, some with the next great idea, are all ready and willing to work hard. The UK has the support of University College London and Imperial, but students in California are always looking towards success, whereas it is yet to be seen if this same success can be seen in the UK. Every analyst and executive in the Valley looks towards Stanford, so it’s crucial for this to be seen in the UK. We need the next user interface designers, the next software engineers, and crucially, the next Page and Brin, who met at Stanford, eventually creating Google, showing that Stanford university is key to the area’s success. Without these teams, an idea will be just that, an idea.

It’s also tackling the lack of experienced entrepreneurs who know exactly how to succeed, by inviting companies such as Facebook, Amazon and Google into the area. Brining with them experience, they will also help to create a large number of the right jobs, of which new innovations grow, new companies are born, exits are made and investments are re-cycled back. With the addition of some home-grown companies, such as Yammer, Huddle and Moo, the area is starting to look like a place with true potential.

Yet, there is one thing you cannot recreate; the culture. As part of this, I believe that two things are key, success and failure.

Throughout the valley’s history, failure has been key. People who fail at one company have the opportunity to see what goes wrong, so next time, they can correct it, and create something that will be a success. In fact, companies like Twitter failed at first, only to completely change course and grow into the company that we know today. As part of this, some venture capitalists will only invest in people who have experienced failure, so that they know what it’s like.  Some VC’s want their investments to have experienced failure at two startups in the past. This is part of the area’s ability to take risks like nowhere else in the world. However, if this was the UK, this wouldn’t happen. Instead, the investors would reject the entrepreneur, giving their idea no hope. The best talent never fails to find work in the area, with some of the top people working for lots of failures before finding the right company.

With so many VC’s in the area, one of them is bound to listen. Something like this is difficult to change, unless the renowned investors, such as Andreeseen Horowitz, move to the UK, which is unlikely to happen. Investing in companies such as Instagram, Skype and Groupon, the Valley owes a lot of its success to investors like them. It takes a different mindset to the current world of banks in the UK, with the Valley becoming a way of life for most. That is a crucial ingredient to success.

At the same time, in the UK, we also seem to lack ambition and tend to scare away success. In the US, for the most part, everyone is chasing the American Dream, as they all seek to reach their goal and create the next big company. Usually, the people who do create these companies, such as Steve Jobs, Zuckerberg and Ellison, people look up to them. Even with Ellison’s demonstration of wealth, such as buying cars, jets and yachts, people still look up to him. This is also seen in other areas, with the minority Occupy movement being an exception, people like Romney were applauded, as people looked up to the 1%, wanting to be like them. Yet, in the UK, this culture lacking. For many years people have been complaining about the wealthy, displaying a hatred towards them, almost discouraging people to become the next Zuckerberg.

The Valley encourages people from the day they are born, and this is important, because that person who doesn’t turn their idea into a startup could be the next Larry Page. By extension, the UK also lacks ambition. People in the US, with the American Dream, always want to be the next success, and are always working towards that. People believe that no matter their situation, they can better themselves. However, most people in the UK are happy staying in entry level jobs and carrying on with the status quo. If they have an idea, they are most likely to dismiss it, rather than taking the risk, and leaving their stable job like they would in the Valley. If Systrom hadn’t have done this at Google, we wouldn’t have Instagram. If three PayPal employees hadn’t have left PayPal in 2005, we wouldn’t have YouTube. Without wide scale ambition we can’t have anything like the Valley.

Almost every other ingredient can be created, but culture cannot, at least in the short term. The United States, and the Valley, are built on the American Dream, something that we seem to lack in the UK.

Even with the current technology companies that are operating in the UK, we still lack the big cores companies, such as Google and Apple that can keep the area running. There are no UK equivalents to HP, Microsoft, Oracle or IBM, and the scale of these players means that they have the resources to acquire any UK-based companies that do emerge, such as when HP recently purchased the UK software firm Autonomy.

In conclusion, the government is trying hard to put most of the ingredients together, trying to solve the issues with finance, talent and the support network needed to succeed. Although, despite how hard the government tries, the UK cannot replicate the great American culture which has been so vital to the Valley. The UK is likely to reject past failures that thrive in the Valley, and lacks the ambition that has contributed to its success. Without those factors, it’s still likely that a lot of startups will head to the Valley rather than opting to the stay in the UK. Can we really build a rival? The fact is we shouldn’t be rivalling the Valley, we should be learning from it and replicating it.

6 responses to “Will the UK be able to create something to rival Silicon Valley?”

  1. […] As Thomas Aldred recently wrote, this part of London is beginning to thrive; ‘Silicon Roundabout’ is growing in the area, and the Olympics could serve to be the spark plug for further investment in such industries in the east, which is quickly becoming the cutting edge, fashionable and modern epicenter of this great city. […]

  2. Command and control won’t work. You cannot plan an economy, you can’t transplant memes from California to East London. Foolish and wasteful to try.

    British IT was traduced by Labour government. Rates are low, morale is low. Wages are low. Some of that talent could have scraped enough money together to plant something. But now it lives hand-to-mouth. Just like government’s corporate sponsors wanted. Innovation requires freedom to operate. But politicians want to be there in every bedroom and at every birth. It’s abhorrent.

  3. I work in the Silicon Roundabout area, sharing an office with a well established design company. I tried to source them a replacement internet link. The options are pitiful, and BT have no plans to get fibre installed. As a result, we have designers who go home to upload large projects, because they can get far better internet connectivity elsewhere.

    If that’s the best we can do in our flagship tech hub, it doesn’t bode well. Whilst having big names like Google involved is great, there are basic things we need to catch up on.

    In a similar line, the funding and investment going on is highly geared around accelerators and startup incubators. Surely part of what makes Silicon Valley great is the wider community and culture they have there. I don’t think we’re making huge in-roads on that. Actually, I’m of the growing opinion that university towns like Edinburgh or Cambridge are much better candidates to be looking at.

  4. mw says:

    “Command and control won’t work. You cannot plan an economy,”

    SV was started by defense contract money. that libertarian schitck is a heroic myth that misses half the picture.

  5. London has not as much sun as California.

    Barcelona area is more similar then London. Also they made a bet on health, becasue it is a bigger industry.

    Stick to finances and insurances with all the supporting industries around it.

  6. […] I wrote about how difficult it would be for the UK to emulate Silicon Valley last July, time has passed and […]