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Tech City is Five: Episode 3, The Good and Bad

This piece is part of a feature written for the latest issue of Tech City News called: ‘the tech ecosystem formerly known as London’. ‘Tech City’ was first acknowledged by David Cameron in a speech on 4 November 2010, five years ago this week, but we know lots was happening before that. Here’s part three of a three-parter. This post looks at 2010 to the present day, featuring Crowdcube‘s commercial director Matt Cooper and Tripr‘s Alick Dru.

Check out part one with LastFM’s Martin Stiksel here, part two with Huddle CMO Alastair Mitchell here and subscribe to get your free print copy here.

V.3

EY estimates that more than 1,000 international tech investments have been made in London from 2005 to 2014, and those now joining the startup ecosystem certainly have many things to thank their forerunners for.

“I started the business straight after uni,” says Oxford grad and travel app founder Alick Dru. “I was meant to go and work in a bank but the idea of banking was so depressing. Fortunately people loved the idea of Tripr and I already had people offering me money.”

Having raised an £80,000 angel round in November last year, Dru says the company will probably go down the crowdfunding route for its next cash injection. “We’ve heard of some really good success stories on crowdfunding.”

But the nine-person travel outfit is currently working out of a garage in South Kensington, which Dru calls a “very good deal”, and while South Ken is certainly not a northern sink estate, it’s not ideal.

“We found coworking to be very expensive. We were three people and we had to pick: nice office or grow?” Their unusual office dwelling is currently composed of a sink, a bar fridge, a lonely beanbag and a “very powerful router”.

“There are a lot of options for coworking and it makes sense for really small startups, we made good contacts and a talk on R&D tax credit breaks meant the space paid for itself, but it’s not viable for us now. There isn’t really a middle ground: you’re either renting an office or coworking.”

And Tripr also had a “nightmare” few months of hiring. “We had some people who came from The City and said they had lots of experience but they had none. And they didn’t seem to like the hours, or the environment.

“So in the end we went straight to the universities, tracked down the computer science groups at Cambridge, UCL, Imperial and found some absolutely incredible people.”

“We’ve also got a new female director who was one of the founding team of Generator Hostels,” Dru adds, a relationship that no doubt demonstrates the buzz of the startup ecosystem at work.

“Five years ago, people from government would turn up and say ‘we’re not going to get in the way’ and then spent 10 minutes getting in the way,” MMC investment director Simon Menashy adds. “But what’s changed the most for me is that it’s now cool to be an entrepreneur. It’s acceptable to work for a startup and explain that to your mum.”

He points to financial crisis, youth unemployment and changes in the labour market that mean “the jobs our mums and dads had just weren’t available anymore” as key catalysts.

Skills crunch

“Tech is eating its way into the lower skilled jobs on offer,” Angus Knowles-Cutler, senior partner at Deloitte, says. “Because of automation, high-risk jobs make up 30% of London jobs, meaning they’ll likely be gone in 10 to 20 years.”

Outlining the findings of his Agiletown report, he says that from 2001 to 2014, a mere 13 years, half of all secretarial jobs have gone in the city, along with more than a third of travel agents.

“But for the jobs that are disappearing, this is more than made up for – so we end up with net 300,000 more jobs, 200,000 of which are high-skilled. In the league table of global cities London leads in 22 sectors, including theatre, higher education and professional services. In the EU, it is the leading high-skilled city.”

Knowles-Cutler believes that we need a permanent “chief talent officer to pull all of the strands together, working with national government, the Greater London Authority and the boroughs. And something we have to tackle is lobbying for an intelligent visa system. We don’t have the level of supply, so high-tech digital skills have to come from outside the EU.

“But we really have to be thinking five to 10 years out, making sure that schools, colleges, universities are producing people into the workforce who’ve got the skills for the London of tomorrow.” Indeed, in The Entrepreneurs Network’s annual Parliamentary Snapshot, improving the skills of the domestic workforce has been the top cross-party priority for two years running.

In a report for London Technology Week, Boris Johnson said some £1.5m has been invested in computing in schools in the Capital since 2013, but some of Tech City’s biggest failures have been on local education. While there may be coding courses aplenty, the Ada Lovelace Academy failed to get going, the specially-designed Hackney UTC has closed and the STEM Academy has been blasted by Oftsed and taken over by an academy chain.

“The tech sector has been slower than we’d hoped to embrace the Tech City Apprenticeship programme,” says Ian Ashman, principal of Hackney Community College. “This is an example that gives some credence to the criticism that the local population is not benefiting as much from Tech City growth as they might.

“However, we’re developing and shaping the programme all the time to make sure that it meets the needs of tech businesses and we look forward to more companies joining us to bring more new local entrants, from more diverse backgrounds, into the Tech City talent pool.”

Ekaterina Punter, computer science teacher at the STEM Academy, soon to be rebranded under the ‘Tech City’ banner added: “Real involvement of real tech employers is what education in the UK needs. Working in tech is cool and the best way to let young people know about it is to give them work placements in tech companies or invite them over for a career talk. London needs more programmers: help schools to make them.”

Further to this, a proposed civic space to be opened on the Roundabout that City Hall had secured £50m for, and would be used to help get 10,000 people coding, was also scrapped this time last year.

“Tech City has really dissolved,” says Ali Mitchell from Huddle. “The cluster is spreading west, over to Farringdon and King’s Cross. And there isn’t as much community spirit – because everyone is so spread out.”

Housing crisis

“One of the biggest risks we see to London’s future success is the cost of housing,” warns Deloitte’s Knowles-Cutler. “There are lots of young, highly-educated people coming into London but it’s a real struggle as the cost of housing goes up and up and up.

“But who owns the problem? We need a strategy that looks at the availability of housing, making the planning system more efficient, and public and private partnerships.” Although Boris Johnson’s 2020 Vision for London outlined the need to build 40,000 homes per year, earmarking brownfield sites, we’re currently only delivering around half of these.

The London Enterprise Panel, led by the Mayor and bringing together key stakeholders from across the city, likewise identified this problem in its London: 2036 report. The group believes £1trn will need to be spent between now and 2050 to accommodate population growth.

Deloitte has started subsidising deposits and rents for its new young staff via a partnership with the Olympic Park’s Here East project, which, along with long-awaited high-speed broadband, is one of the biggest promises from David Cameron’s 2010 speech that is yet to be realised. “For Tech City firms, housing is hugely important to the growth of the London economy and our approach at Deloitte doesn’t solve their problem,” Knowles-Cutler says.

But entrepreneurs like Lastminute.com’s Brent Hoberman, V.0 headliner, have mixed views on government intervention. “Tech City has a great brand and has been very good internationally to get the message across that government is very serious about leading the world in Europe. But it’s good that growth has gone beyond East London – that was my issue with the whole idea.”

And on future government intervention to address continued gaps, like space, Hoberman says: “Space is key but we have a lot of incubators and more coming, along with advice and mentors. Do we need government to do it? I think that the private sector can address this.”

Tech London

So, the ecosystem that is, or was, Tech City has broken beyond its East London roots, which, just as in the wild, has knock on effects to local and wider interconnected elements. There are now more than 70 coworking spaces and upwards of 30 accelerators across the Capital, which are becoming increasingly specialised to meet more sophisticated startup demands.

UKTI’s Tech City body has expanded too, heading up north, and looks to have stayed within the £15m budget set out by the PM half a decade ago, racking up around £8.9m of spending, largely in salaries.

And building on the devolution to the regions outlined in the Summer Budget, Boris Johnson has now approached communities secretary Greg Clark to ask for greater powers over areas like skills, transport and housing.

Oxford Economics believes that the tech sector will bring in £18bn by the end of this year, demonstrating at least in pure financial terms a success you can’t argue with. Investor GP Bullhound, likewise, has picked out 17 much-mythologised unicorns, largely in fintech, that it thinks will break the $1bn mark.

Questions remain on where we go after fintech. Can we, as Boris Johnson suggests, be the cleantech capital of the world? How can London compete with Asia and the US to back the next big world-changing companies? How do we make sure we have the space, skills and homes that we need to help entrepreneurs get there?

And, finally, although we may be beating Silicon Valley, do we think the tech sector is truly representative of the audiences it serves across class, gender and ability? If not, is it our responsibility to change that?

This is certainly not the end of the tale of Tech City, perhaps the sequel will be called: ‘Tech London: this time we kind of know what we’re doing’?