A new report commissioned from research giant GfK claims that the growth of the high density cluster of technology companies in East London (dubbed Tech City by the UK government) is being “stunted” by a talent shortage and lack of access to capital. The ‘Tech Futures Report’ – commissioned by publishing company TechCityInsider and sponsored by accountant Grant Thornton, recruitment firm Vitamin T, City University London and the Digital Shoreditch conference is based on 141 interviews of ‘tech’ company senior management. In fact, less than half of these admitted to developing technology products and platforms. It’s simply the latest in a long line of reports that conflate consultants and digital advertising agencies (who charge on the basis of billable clients) with genuine technology companies (that have a Saas or consumer product and often raise venture funding), leading to yet more confusion about the state of the cluster.
When quizzed by TechCrunch, the reports authors admitted that only 41% of those surveyed made “apps” (this was not defined), while 21% did social networking, 17% retailing/ecommerce, 12% publishing, 12% IT consulting and services, 8% data processing/management and 7% were in gaming – though it’s not clear whether than meant games or gambling. And of those 141, only 77% of respondents were the CEO or Founder of the business they represented.
As a result of this over-sight, an important opportunity has been missed to find out more about the needs of genuine high-growth technology companies in the cluster, rather than normal growth advertising agencies that rely on face to face client growth.
But for what it’s worth we present the rest of the reports findings below. Make of them what you will.
Among the report’s key findings:
• Nearly a half of those surveyed (44%) find a shortage of skilled workers is the biggest challenge they face.
• Over three quarters (77%) say a lack of skilled workers is restricting their growth.
• A third (33%) believe a lack of access to capital is hindering their business.
• In terms of the businesses represented, 30% had an annual turnover of <£200k, 34% £200,000-£999,000, 17% £1-£5m, 7% £5-£10m and 12% over £10m. 24% said their main location of business was London, 44% UK, 17% Europe 14% North America and 1% ROW.
The report says the 141 executives surveyed had "mixed feelings" about the the effectiveness of government support, with some liking it, others not. So not exactly ground breaking news then. Tech City has a government-backed PR outfit called the Tech City Investment Organisation which is aimed externally and abroad, and is not designed to represent the local community, even though everyone seems confused by this.
Clearly, despite the 'glass half empty' tone, the situtation is in flux. Ryan Garner, Research Director for GfK said: "Our research shows Tech City is at a tipping point, and hopefully this report will help it find its way in spearheading that economic growth." Indeed, the reports authors could equally have spun the situation as a 'tech hiring boom'.
Unfortunately, the report struggles with some of the common terms of the technology world. The top skills most in demand are said to be "coders and developers" and something called "research and development" leading one to wonder if the report’s authors could possibly be more vague. The others skills said to be in short supply (again, not news) are marketing and PR, business development, web design and user experience specialists. Someone is hiring. Hold the front page…
The report claims that staff retention remains a challenge, though is not clear on whether that is because it's a booming startup market generating more spin-out startups, or if people are leaving for big corporate jobs. It’s just a “challenge”, ok?
As for accessing capital, a third of those surveyed said their businesses are hindered by a lack of capital, whether sourced from investors or banks. Once again, because the report conflates technology businesses that might be fundraising with digital agencies that might just want a bank loan, the picture here is vague. Of course, it's common knowledge that most startups fail to raise external funding anyway.
If there is a gem of new information here it's in the finding – which has been largely anecdotal till now – that there is a growing gap for businesses requiring investment of £500,000 to £2 million. The "Series A gap".
However, the report mistakenly thinks that all startups which can't raise a Series A in London will skip of to bag "the Silicon Valley dollar" when doing so is far from simply buying a plane ticket to SF.
As a result of yet another inept attempt to garner meaningless PR around which is – in fact – a genuinely interesting cluster, TechCrunch is hereby placing a ban on all reports about London's Tech City from now on unless they actually talk to 100% tech companies with an actual product or platform. Not guys coming up with a new hip flash site for Coca Cola or selling ‘switch it on, switch it off again’ tech support to banks.