Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

London woos Silicon Valley firms with its multi-cultural tech community and markets

Posted by Tom Foremski - July 20, 2006

The city of London wants Silicon Valley tech companies. It wants their European headquarters as part of a push to create at least 2500 new jobs this year in emerging technology sectors; and further boost the city's multi-cultural tech community.

I spoke with David Riches, Director of North America for Think London, a semi-private organisation representing the Mayor of London and local businesses. It has the resources to enable companies to set up business operations in London in as little as six weeks.

"California companies are by far the largest US investors in London. It's because we already have a large tech community of developers, with strong ties to our universities. It is a much larger tech and research community than Oxford or Cambridge. Plus we have a great market that is young, urban, and tech savvy," says Mr Riches. In other words, lots of hipsters and first adopters.

Mr Riches says that his team will help companies quickly find offices, places to live, set up the basic infrastructure of bank accounts, etc. Introduce lawyers, accountants, help in recruitment, and introductions into the local business community. He laughed when I asked if an old school tie comes with the package.

Paris is London's largest competitor for European HQs, however, French employment laws raise business costs, says Mr Riches. It should be noted that London based companies have to comply with far stricter employment laws than in the US.

London is expensive, he admits, but then again, so is Silicon Valley. What you get for your money in London is a gateway into Europe, a business culture that is more American than in other countries; and access to a talent pool that is attracting tech firms from around the world, including our own giants, Google, Yahoo, and EBay.

Mr Riches also said that there are large Indian tech firms setting up in London, and tech firms from other countries too.

This might seem like a type of cultural technology melting pot being created by the newly arriving companies--but it is more the other way around. London already has a large, culturally diverse pot on the stove and, unlike in the US, the burners are full on.

The arriving companies become part of one of the world's most ethnically and culturally diverse cities in the world. It is estimated that more than 300 languages are spoken by sizable populations in London. This means unique access to a multi-lingual/multi-cultural workforce; some companies are already using that workforce for multi-lingual call centers.

I can see how there could be many other ways to benefit from such a diverse talent pool. That's because businesses exist within a society, which means that their cultural interface is very important otherwise they, and their products/services, won't be successful. They won't hit their mark.

If you don't understand your communities you will not succeed as a business. That's why Silicon Valley Watcher reports on the business and culture of Silicon Valley. And London potentially offers businesses an understanding of many cultures in one place.

London certainly looks appealing as a business center. And its ambitions to replace its hard hit financial services sector with more enduring and rapidly growing industries is a smart move. What will determine its success will be if it can become a development center that spawns great companies. Right now, its most obvious advantage is as a marketing/sales center for tech companies.

For London to attract Silicon Valley tech companies, the Think London organisation needs to do more work with the venture capital community and stress speed to market. The VCs are the ones that are pushing the startups to outsource as much as they can, and to speed to market by globalising operations as quickly as possible.

For London to attract the emerging Silicon Valley companies, however, there also needs to be more of business environment that doesn't punish success.

For example, a year ago I met with Rob Hull, business development manager at BT, the giant British telecom group. BT is investing about $16 bn in a next generation Internet infrastructure, and it dominates the telco market. BT will help web services companies, provide billing services, etc, and split the revenues giving them 80 percent and BT keeps 20 percent.

However, there's a catch... From SVW: Silicon Valley startups told: Come to London ... BT wants your business

...should your wireless service become hugely popular, BT reserves the right to "port" the service to its machines and reverse a 20 percent / 80 percent revenue split in its favor(!)

Mr Hull says that this provision is rarely implemented. But then why have it? Seems a discouragement to me...

I cannot see how such a business arrangement would be attractive to Silicon Valley's Web 2.0 companies, net neutrality issues pale in comparison. Think London might do well to ask BT to think again on that provision.

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Please also see: Why is there no British Google? A top British politician asks...

Also: Think London case studies.

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