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Tech City area around the Old Street roundabout in London. (Alamy)
Tech City area around the Old Street roundabout in London. (Alamy)

Canada Competes

London a bustling hub for digital startups, but later stage ventures face hurdles Add to ...

For digital media startups, London and Berlin are regarded as the two dominant hubs in Europe. London is often referred to as Tech City, and the activity is concentrated in the Shoreditch area. It is also sometimes called Silicon Roundabout, after the cluster of offices that sprung up near the busy traffic roundabout at Old Street.

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A number of urban campuses and accelerators have been established in London to spark interactions and the exchange of ideas.

In March of 2012, Google opened its campus on Bonhill Street, a short walk from the Old Street roundabout. A renovated seven-storey office block provides office space to startups, and is open seven days a week for events and networking. And tech startup program The Accelerator Academy provides early stage entrepreneurs with training and mentoring. It has already helped companies such as mobile and Web promotion and sales platform Zaawi, and business expertise market place KnowHowMart.com.

Meanwhile, General Assembly connects up entrepreneurial innovation by offering classes, events, talks and workshops on subjects such as business fundamentals, data analysis, digital marketing, and mobile and Web development. Tutorials might, for example, offer an introduction to Adobe Photoshop, or how to break into the digital music industry.

General Assembly is a New York-based global education network, which opened its first London campus in 2012. It has similar ventures in New York, Boston, San Francisco, Los Angeles, Sydney, Hong Kong and Berlin.

“What makes the U.K. particularly attractive as a tech hub is its strong infrastructure as well as its legacy across multiple industries,” comments Matt Cynamon, director of General Assembly in Europe. “As a result, the talent being attracted to the entrepreneurship community possesses a strong knowledge base in fields like finance, fashion, media, advertising and design.”

General Assembly has been co-operating with UK Trade and Investment to showcase Britain’s startup scene and attract investment. The British government, which underwent a generational change when David Cameron (then just 43) entered 10 Downing Street as Prime Minister in May of 2010, is highly aware of the potential of the startup scene.

In April, London Mayor Boris Johnson played host to a Google Hangout streamed live from the InnoTech Summit held at Level39, Canary Wharf, which included participation from venture capital firms in the United States.

And last May, the Million Pound Startup was launched, offering a £1-million prize (about $1.6-million Canadian) to a promising young company. The award is part of the Digital Shoreditch 2013 festival, and has been publicly backed by Mr. Johnson, with funding coming from the Tech City Investment Organisation (TCIO), KPMG and crowdfunding platform seeders. TCIO was set up by the national government in March of 2011, and operates as a subsidiary of UK Trade and Investment.

Somewhat ironically, given its status as a global financial centre, one of the bottlenecks for the development of London is getting finance. Early-stage money is there via angel investors, but later funding rounds can prove tricky, and accessing U.S. money is particularly difficult, say observers.

Songkick, which delivers news about live music events, has raised about $17.8-million (remaining figures in Canadian dollars) to date, including about $10.2-million from U.S. venture capital firm Sequoia Capital LLP in March of 2012, in what was Sequoia’s first investment in a London startup. But initial public offerings from London tech startups are almost non-existent. WANdisco, a leading provider of global collaboration software dually based in Sheffield, England, and San Ramon, Calif., listed on AIM, the London Stock Exchange international market for smaller growing companies, in June, 2012. Since then, only one came along in late May: Outsourcery, a cloud based IT company.

“I formed our advocacy group to address the issue that, though London has good early-stage capital provided by angel investors, for the really successful startups, late-stage capital, and the type of management talent to run their businesses, is not as a strong as it needs to be,” says Russ Shaw, founder at Tech London Advocates.

In rough terms, seed money might total anywhere between about $80,000 and $800,000, with Series A first-round funding then coming in with between about $800,000 and $3-million.

“Getting £3-, £5- or even £10-million from investors in London can be very difficult, and if a company decides to look for capital from the United States, they may find that the Silicon Valley [venture capitalists] are looking for $20-million or $30-million investment opportunities, so there is a mismatch,” Mr. Shaw says. “We would like to tap into FTSE 250 businesses, hedge funds and institutional investors, and get them to step in more, along the lines of Reed Elsevier Ventures, which is a good example of a venture capital portfolio.”

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