Starting up in London

The Silicon Roundabout, a newly dubbed area in east London, wants you to know it is open for all your hi-tech needs.

By AMY SPIRO
Start up London (photo credit: amy spiro)
Start up London
(photo credit: amy spiro)
LONDON – Move over, Silicon Valley and Silicon Wadi. The Silicon Roundabout, a newly dubbed area in east London, wants you to know it is open for all your hi-tech needs.
For the past couple of years, the UK government has been touting the Shoreditch area of London – a now gentrified, former working-class neighborhood – as the newest home for start-ups, hi-tech giants and creative media firms. It has been working to convince international companies to set up shop in the area, heralding it as the heart of hi-tech in Europe. The press has followed suit, declaring the region the hottest new destination for digital innovation worldwide.
But is this enough to convince Israeli companies to branch out of the tech hub of Tel Aviv? At the end of 2010, when British Prime Minister David Cameron visited the east London area to declare the Tech City government initiative, which was established to aid the area’s growth and development as a digital hub, there were an estimated few dozen hi-tech companies doing business there. In October 2011, Tech City cheerfully approximated more than 800 such organizations working in the area.
Earlier this month, the UK-based Demos think tank released a report detailing an estimated 3,200 businesses in the digital, technology and creative sector operating in the neighborhood, employing more than 45,000 people. However, the report raised concerns about the continuing availability of affordable workspace, a shortage of adequately skilled workers and the quality of the area’s infrastructure. Demos also noted that Tech City’s encouragement to extend the area toward Olympic Park after the 2012 games seemed unrealistic.
Originally people were gravitating to the area “because it was cheap but close to the City of London [financial district],” according to Eric Van der Kliej, the outgoing CEO of Tech City, which is a subsidiary of the UK Trade and Investment group (UKTI). “People want to work together in an area that’s cool, that’s fun, that’s low-cost and has really great coffee.” Today the growing sector is attracting entrepreneurs and start-ups from around the world that are eager to break into the UK market and connect with people who can aid their growth. In addition, about four months ago, Google opened a seven-story building in the heart of the Shoreditch neighborhood, designed as a hub for young digital and creative companies to gain their footing, and a way for the tech giant to give back to its roots.
“This is a very important hub to go to,” Yosi Turkaspa, the director of UKTI at the British Embassy in Tel Aviv, tells The Jerusalem Post. “It’s in Europe, close to a lot of funds... London is one of the places to look for funding now.”
In fact, he says, there are a lot of places throughout Britain – not just in Tech City – “that [are a good] fit for Israeli technology companies in an expanded stage to establish a subsidiary in the UK with minimum expenses in the first year.”
In an effort to nurture the east London area as a destination for hi-tech entrepreneurs, the government has adopted a goal of “trying to not get in the way of this natural growth,” says Van der Kliej, with policies including eased visa restrictions for entrepreneurs, a 10-percent cap on taxes for the first £10 million earned, and significant tax breaks for investors in start-ups.
In April 2011, a new entrepreneur visa category was created, and investors can now attain residency faster depending on how much capital they inject into the economy.
Entrepreneurs can also reduce the time it takes to attain residency by the number of jobs they create or the amount of money they make.
In its own report in May, Tech City said that after two years in operation it had attracted 37 companies to the area against an initial target of 26, and now has a target of 50 for 2013. The organization has also claimed commitments from Cisco, Vodafone and Google to develop their interests in the area.
SOME INVESTORS and entrepreneurs from the Holy Land may be wary of setting up shop in London. Over the past year, the UK has seemed a less-than-friendly place for Israeli corporations.
Advocates of boycott, divestment and sanctions (BDS) movements have waged strong and often successful campaigns against UK companies seen as having ties to Israel. An Ahava branch in central London closed last September after struggling with repeated protests that pro-Palestinian activists held outside, urging shoppers to boycott the store.
A few months ago, the Co-op supermarket chain, the UK’s fifth-largest food retailer, announced it would no longer work with any produce suppliers that had ties to West Bank settlements. And earlier this month, UK minister Alistair Burt, who is responsible for Middle East affairs, said in response to a question that “the issue of settlement produce and financing is under active consideration in London and in Brussels.”
But many BDS campaigns in the UK have failed miserably. Activists tried unsuccessfully in March to prevent Israel’s Habimah Theater from performing at the Globe to Globe World Shakespeare Festival, which took place throughout England. And repeated protests against Veolia, a French transportation company that operates bus lines throughout Israel and has a part ownership of the Jerusalem Light Rail, have failed to have any impact on its government contracts.
In addition, figures released early this year show that Israel is the UK’s largest trade partner in the Middle East, with business between the two countries reaching a record-setting £3.75 billion (about $6b.) – £1.57b. in UK exports and £2.18b. in Israeli exports in 2011 – up 34 percent from the preceding year. Bilateral trade in the first third of 2012 was up 42% from the same period in 2011. UKTI has estimated the trade between the two nations should hit £5b. by 2015.
Besides this, UKTI has been actively stressing its strong ties with Israel and seeking to reassure potential entrepreneurs and investors that their business is welcome.
Van der Kliej traveled to Israel in March, visiting several start-ups in Tel Aviv and meeting with Mayor Ron Huldai “to send just that message,” he says. During his trip, he stressed that he was keen to encourage more cooperation among UK and Israeli start-up companies.
“The UK is absolutely open to business, it doesn’t matter where you’re from,” he tells the Post. “There will always be people who have different agendas, but ours is growth.”
Matthew Gould, the British ambassador to Israel, established the UK-Israel Technologies Hub in October of last year to promote cooperation in technology-related fields.
The initiative, headed by former Finance Ministry director-general Haim Shani, aims to enhance the partnerships between Israel and the UK in technology and innovation.
And Industry, Trade and Labor Minister Shalom Simhon was in London last month for the Innovate Israel 2012 event, which hosted more than 50 Israeli companies and start-ups. The companies showcased their products for interested investors and their British counterparts, setting up meetings for joint ventures, development and funding opportunities.
FOR THOSE Israeli companies mulling an expansion to London, the British Embassy would like to help.
“We would like to help Israeli companies get to the conclusion that they have to expand out of Israel, mainly to Europe,” says Turkaspa. “We would like to give them all the opportunity and information they need in order for them to make the decision that the UK is right for them.”
He estimates there are 250 Israeli businesses with offices in London, about 50 of which have established themselves there over the past four years.
“We are always following Israeli companies that decided to establish a facility in the UK,” he says. “We’ll be with them at their side.”
A British Embassy spokesman stresses that any Israeli company looking to expand to the UK should talk to UKTI in Tel Aviv, which can supply guidance and contacts free of charge.
Tech City is working actively to attract not just start-ups in their early growth stage, but also large hi-tech corporations and big-time investors, to the region.
“We focus on talent, we focus on showcasing the area to some of the world’s most capable people,” says Van der Kliej. “If you were an actor or actress, you’d want to go to Hollywood; if you work in a tech company, you’ll want to come here.”
Tech City also runs monthly mentoring programs for young start-ups, matching them up with more established advisers.
“The thing about Tech City... is the government did not create it,” says the outgoing CEO. “It is a natural, organic cluster that has grown up with companies that have to sell a service in order to eat. That is the bedrock of the foundation of this cluster, which is hundreds of businesses making a living selling a product or service to London’s business community. That is a far stronger platform to build your community than just a venture capital-fueled growth.
“Our message to start-ups is, if you come to Tech City and set up in the area, you are more likely to be more successful than other places because of the density of talent,” he continues. “You’ll bump into people: investors, product managers, designers, potential customers... much more effortlessly than anywhere else.”
And if you don’t happen upon potential funding sources or fellow designers, programmers and businessmen at the local supermarket, a trip to the so-called Google Campus building is likely to bring you into contact with hundreds of up-and-comers in the tech sectors.
“We see this as an opportunity to give back to the community,” says Eze Vidra, the head of the Google Campus initiative, and the only employee of the company who works in the building. “Google started in a garage... it still sees itself as a funder-led start-up.”
Vidra, an Argentinean native who grew up in Israel, got his start founding the hi-tech start-up Dasur in Tel Aviv, and later moved on to positions in New York, San Francisco and London at companies like AOL and Ask.com. He also founded and runs the popular VCCafe blog, which looks at the world of Israeli start-ups. Vidra oversees the activities, mentoring programs and speaker series at the London building.
The basement of the Google Campus is an informal café where anyone can register online to work for free in the bustling space.
Food and drink at the café are sourced from three local culinary start-ups, and handwritten notes on the communal corkboard range from “Wanted: graphic designers” to “Looking to meet with someone in the travel sector.”
Two floors of the east London structure are dedicated to TechHub, which rents desk space to companies in their early stages that are looking to work alongside similar businesses.
Another floor houses Springboard, an incubator program that puts start-ups through a 13-week boot camp to prepare them to pitch to investors. The top floor is home to Seedcamp, an investment fund and early-stage mentoring program that engages start-ups by holding events worldwide before announcing the winners – those in which the company has decided to invest.
A long waiting list already exists for the chance to work out of the building, which is equipped with bike racks, showers, a pool table, event rooms and, of course, free highspeed Wi-Fi. There’s even a rooftop terrace to which employees have access throughout the year. Before the building even opened to the public, there were 800 initial applications for workspace.
“Campus is a great opportunity to help young start-ups get some help from Google on what made us successful and bring the [start-up] community together in a common place,” says Vidra. “If there is an equivalent between real estate and software, campus is like an open-source building.”
He adds that Google has set a goal of helping 10,000 small businesses grow over the next 10 years, the period for which the company has leased the building.
Aside from providing space to young companies, he says, “the other problem we’re trying to tackle is community. The cluster [in east London] is fairly fragmented, and it’s new.”
He notes that although it has only been a few months, “we’re starting to see stories that are the reason we’re here – like a team who met here in the café, started a company, has raised funding and gotten customers.”
For Rich Wilson, who started his cloudbased data company Import.io from home, moving to TechHub has been a dream come true.
“We went from working at home to being immersed in businesses,” he says. “It’s great for what we’re doing: The kind of people we want to get started using our technology are the kind of people building businesses here.”
He asserts that “there’s a lot of value in us being here. There are loads of other work spaces, but we’re really happy here and have no plans to move out.”
The writer was a guest of UK Trade & Investment and the Tech City Investment Organization.