London becoming the new tech mecca
Incentive packages luring start-ups, investors
Although only 26, Kieran O’Neill is what you’d call a grizzled veteran of the London tech scene.
At 15, he sold his video-sharing start-up for $1.25 million, and two years ago, he cashed out of Playfire, a social network for gamers, for an undisclosed sum. His newest venture is Thread, an online shopping concierge for men whose $2.5 million seed round includes investors such as Edgar Bronfman Jr.
But while all that may be very nice, what excites O’Neill the most is simply not being the only entrepreneur around. Once a start-up backwater, London has rocketed into the tech spotlight thanks to a combination of government initiatives, seed capital infusions and profitable IPOs.
“When I got into tech here in 2007, it was dead, a ghost town,” O’Neill says. “Now, it’s on fire. Funding has mushroomed, raw talent is pouring in, and the quality of the ideas and companies is top-notch. If I could have invested in the stock of the London tech scene back then, I’d have a lot of money right now.”
The London tech hit parade includes start-ups such as Mind Candy (makers of popular online game Moshi Monsters), Wonga (short-term loans) and Citymapper (real-time public transportation app). Many of them are camped out in a onceseedy part of east London dubbed Silicon Roundabout, which is now revitalized.
That’s not to mention the growing outposts of U.S.-based Web behemoths such as Google, Amazon and Twitter. They have helped London solidify its top ranking among European cities aiming to make tech a centerpiece of their economy and ethos, including Berlin, Stockholm and Tallinn, Estonia.
“The numbers tell the story,” says Gordon Innes, CEO of London & Partners, which helps start-ups get on their feet as part of a free service sponsored by the mayor’s office.
THREAD
“If I could have invested in the stock of the London tech scene back then (when it was dead), I’d have a lot of money right now.”
Kieran O’Neill
Innes says one in three new London jobs are in the tech sector. The city anticipates 46,000 new tech employees in the next decade for an estimated $20 billion boost to the local economy, according to a recent report by Oxford Economics.
The number of London tech start-ups has skyrocketed from 200 in 2010, now nearing 1,500. So far in 2014, almost 20 companies have had IPOs on the London Stock Exchange. In the past quarter, $1 billion has made its way into various venture funds.
Innes says part of the credit goes to attractive incentives for start-ups and investors alike that started in the office of Prime Minister David Cameron.
“The PM and city officials have been listening to founders as to what can make London the easiest place in Europe to scale up,” he says. That has resulted in everything from a reduction of taxation on patents and incorporation tax to affordable workplaces, he says.
“We may not have the history of Silicon Valley, but we are coming on strong.”
A few other key factors help explain London’s tech surge. One is a shared language with the U.S., and the other is the general globalization of technology, says Saul Klein, a veteran European tech investor and partner at Index Ventures.
“The Bay Area will always be the cradle of tech, but as soon as it was clear that the Internet would be an international phenomenon, you had to bet that great ideas would also, at some point, come out of Europe,” says Klein, whose start-up ventures led him to Boston, San Francisco and Seattle at various points.
“At this point, we’re seeing London being at the center of talent, customers and capital,” he says. “Years back, there was literally no entrepreneurial culture. Now, kids get out of college and want to join a start-up.”
Jon Reynolds started his language technology company in 2008 at age 22. “What people said was, ‘ Oh, that’s a brave thing to do,’ and brave, in this case, meant stupid,” he says with a laugh. “Now, people say it’s cool.”
Reynold’s company is SwiftKey, an Android typing-recognition software that will soon be on all iPhones with the upcoming introduction of iOS8. He says a combination of tax incentives
“I’m increasingly very positive about the (tech) scene here.”
Jon Reynolds
and the number of tech-savvy students flocking to London has helped grow the company without moving it to the U.S.
“I’d say we’re still a bit behind the U.S. in terms of just the sheer energy and pace of things, but overall, I’m increasingly very positive about the scene here,” he says.
For Citymapper, Azmat Yusuf could have chosen any of a number of tech hubs as home base. But he chose modest groundfloor offices in east London for his small team, which last year raised $10 million. The app provides real-time public transportation updates in cities including Paris, Berlin and Washington.
“There was a time I would have thought raising that amount of Series A funding in London would be a huge deal,” says Yusuf, laughing. “But then, last month, (ride-sharing site) BlaBlaCar raised $100 million” from Klein’s Index Ventures, the USA’s Accel Partners and others.
Adds Yusuf, “It just feels like the London tech sector is saying, ‘OK, now we’re here to play.’ ”
A story Friday about the popularity of TV shows on Netflix misstated Julia Lamaison’s last name.