You’d think that working in one of the world’s largest cities — especially one with a global rep for innovation and excellence — would make it pretty easy to get some traction. But that misses a vital point: London’s tech ecosystem is in its infancy.
There’s a definite feeling here that working for a tech startup is cool — but that doesn’t mean this city (or this government) has a handle on what’s needed to make a new tech company a success.
The problem is that London wants to be the next Silicon Valley — but it hasn’t grasped the fact that it’s got 20 years of catching up to do. It’s not so much a lack of talent or commitment that’s the problem. It has more to do with attitudes to risk and understanding the difference between bricks-and-mortar and online.
The other thing is that, although London is a huge city, its tech ecosystem is pretty small. That’s both good and bad. The good part is that you soon get to know the other players. The bad part is that you can rapidly run out of new people to meet.
Londoners keep trying to reinvent the wheel — they just don’t realize how much has already been done in Silicon Valley (or, just as important, what has been tried and found not to work). That means heading west could save you a lot of time and money (and maybe even some heartbreak), because you won’t have to do everything from scratch. (Ignoring fintech, of course; those guys seem to be cleaning up over here.)
The problem is that London wants to be the next Silicon Valley.
Like most people new to the scene, I started my journey at a networking event. The city is awash with them — so many, in fact, that I know of at least half a dozen startups whose business focus is helping entrepreneurs discover them.
You’ll meet the full gamut of “characters” at them. One to beware of is the snake-oil salesman who masquerades as an investor but then tries to charge you a consultancy fee. Yet, you’ll also meet real professionals who are seeking new clients.
Then again, with the big firms in town all creating their own “startup” divisions, it’s hard to move these days in Shoreditch without tripping over lawyers or accountants.
As one who has fallen prey to their charms in the past, I’d advise you to do your due diligence before you hire. For instance, they aren’t all fully up to speed on the tax relief available to tech entrepreneurs — I had to tell my own accountant about R&D tax credits (a government scheme designed to provide substantial tax relief on research and development costs).
There’s a lot of advice to be had in London. Trouble is, while some of it is good, a lot of it is bad. That’s mostly because very few people over here have built, scaled and sold a tech business of any size… so how much can all the mentors, advisors and investors you’ll meet really know? And that’s the well-intentioned ones…
Ageism and sexism are rife here, too. Coming from the world of PR, where female company directors are well represented, I wasn’t expecting it. As an example, a male investor told me, “You’re not the usual type we go for.” And a young female entrepreneur told me that once, after a pitch, an investor said to her, “I’m not sure if I should ask you for your business plan or a date.” It turns out that desirability, or the lack thereof, is a problem either way if you’re a woman who wants to work in tech in London.
Older guys are not immune to ageism, but at least they usually have stronger networks. Even if this bias is unconscious, it has to change. Those handing out the money have had their heads turned by watching The Social Network, and believe the only entrepreneurs with a good idea must look like Mark Zuckerberg (or rather, Mark Zuckerberg as played by Jesse Eisenberg). They need to get over it. It’s 2016, and it’s time to have a broader perspective.
With no history of successful tech exits behind us, we lack a community of sophisticated investors who have made money in tech.
After my initial networking, my next stop was going on a part-time accelerator programme. London is full of accelerators and incubators, which sounds great. One or two of them are genuinely good, but — big surprise! — they’re massively oversubscribed. The rest are mediocre to very poor, and may take equity or stock options out of all proportion to what you get in return. Why? Mainly, there just aren’t enough been-there-done-that people around to run all the incubators and accelerators that London offers.
Once I’d done the accelerator, I launched the MVP version of Frugl. I soon realized I was going to need more money if I wanted to scale it up quickly. It can be incredibly hard to raise funding here unless you have a background in the city, or you have a close connection to someone who does. You may be out of luck unless you can say you once worked at Goldman’s or Deloitte’s.
I got what I needed, but not from where I expected. Instead, I tapped into a small group of people who, perhaps unsurprisingly, were somewhat like myself: a little older, and who were working (or had worked) in the creative industries.
London is an expensive city at the best of times. Add the very obvious talent shortage, and you have a recipe for spiraling costs. If I learned one thing in 2015, it was that surrounding myself with good people who want to work hard is paramount, yet I ended up contracting outside the U.K. based on recommendations.
If there’s one reason London is awash with so many one- and two-man bands, it’s that the cost of finding and hiring a team is so high. Sure, you can go to Lithuania or Pakistan or Timbuktu and find someone who can get the job done, but that’s no replacement for in-house talent — and without a good team, you’re basically nowhere. The government’s plan to loosen up visa requirements for suitably qualified candidates should help in the short and medium term, but only a greater emphasis on training will sort out the problem in the long term.
And to top it all off, there’s the government’s woefully under-publicized initiative: the SEIS (Seed Enterprise Investment Scheme). This provides investors in early stage businesses with 50 percent tax relief on their investment, together with other longer-term benefits. The scheme has created a tech ecosystem that focuses on early stage revenue over innovation. It’s also capped at £150,000.
Nothing quite beats a healthy dose of cynicism to make me want to kick some serious butt.
Compare that to Silicon Valley, where the “average” early stage investment is $1 million, and you can see the dilemma we face here. With no history of successful tech exits behind us, we lack a community of sophisticated investors who have made money in tech. As a result, we are left with, for the most part, individuals seeking tax relief or those who are willing to take a small punt on early stage businesses. Until we see more sophisticated investors coming to the U.K., pre-revenue businesses will struggle to achieve scale.
Closing an SEIS round (as it’s commonly called) may be relatively easy, but the funding gap that exists between £250,000 and £1 million is a real worry — one that doesn’t look like it will be solved anytime soon, even with incentives such as the London Co-Investment Fund. With early stage investment based around tax relief, businesses struggle to find follow-on funding. There just isn’t the money to go around at that crucial time when most businesses need it to grow and achieve critical mass.
A friend of mine recently returned from a two-week programme she attended in Silicon Valley that was aimed at introducing a selection of international businesses to investors and influencers. She spoke about the SV culture of “giving back.” Here, it’s about finding out what works for oneself.
There are many urban legends flying around London about the startup that got 20,000 downloads in their first month through their amazing growth hacking skills, or the one that had a million views in a week.
But nobody — and I mean NOBODY — will tell you exactly how they did it. The best marketeers in London keep their tricks to themselves (and if you try to hire them, they’ll charge you a fortune), so you’ll only discover the perfect formula for growing your business through trial and error. As a result, over the course of the past 12 months, I’ve taught myself a lot about digital marketing. I’ve come a long way, but I know there’s a long road still ahead of me.
If 2015 was about gaining perspective, 2016 is definitely going to be about using the knowledge and experience I acquired to move forward. Nothing quite beats a healthy dose of cynicism — combined with a reality check — to make me want to kick some serious butt — and that’s what I intend to do this year. See you around the Silicon Roundabout.