This article was taken from the April 2013 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by <span class="s1">subscribing online.
According to the Boston Consulting Group's 2012 report, 'The Connected World', the internet economy's contribution to UK GDP is <span class="s3">at 8.3 percent, higher than any other G20 nation's. The report forecasts that this share will surge to 12.4 per cent by 2016.
By then, almost a quarter of sales in the UK are expected to take place online - more than double the percentage of our projected closest competitor, Germany. "Less than 25 years old,
[the web] is already a platform for more than eight per cent of UK GDP," marvelled Google executive chairman Eric Schmidt last spring in a speech at London's Science Museum. "Congratulations, and by the way you're among -- if not the -- world leader in this," he added.
As the internet evolves, many in business and government see London playing a central role in what comes next. "It has all the great cities of the US wrapped in one," says Joanna Shields, who left the top European job at Facebook to oversee the UK government's Tech City Investment Organisation in December 2012. Like Washington DC, she explains, London has national government. Like New York, it has financial services and thriving art, fashion and media scenes. Like LA, it has creative industries. Like Chicago and New York, it has an advertising world.
And technology is playing an increasingly meaningful role in all of these sectors. Noting that more than a third of London's current population was born outside the UK, Shields says the city is "the most global city in the world. Everything you need is there."
Big US technology companies such as Facebook, Google, Microsoft, Cisco and Intel have begun to take notice. Facebook recently opened its first engineering office outside the US, in Covent Garden. "It's a huge testament to the talent that's available here," says the company's developer-relations manager, Simon Cross. Indeed, outside California, London has the greatest concentration of software developers working on the social giant's platform. "The thing that seems to have changed is [that] London has moved from a community of extremely technically able people, to a community of extremely technically able people building companies," says Cross, who also dealt with startups while a working as a product manager on the BBC iPlayer. "The entrepreneurial streak has definitely accelerated." Google, too, is betting big on the capital's startup potential. In March 2012, it opened Campus, a seven-storey centre in east London that provides workspaces, free Wi-Fi and mentorship opportunities to burgeoning startups. The head of Google Campus, Eze Vidra, says it is intended to provide "rocket fuel" for a thriving community that is showing considerable promise. "Campus London is the first of its kind anywhere in the world," he says. "There couldn't be a more fitting place to break new ground." Just ten months later, the company announced plans for a £1bn UK headquarters in King's Cross.
In December 2012, prime minister David Cameron committed £50 million to regenerate the Old Street roundabout area into Europe's largest indoor "civic space", equipped with state-of-the-art 3D-printing technology. Microsoft has announced that it will establish a technology centre in east London. Amazon has opened a development centre. Cisco and University College London (UCL) are partnering with publisher DC Thomson to establish an innovation hothouse and Intel is working with UCL and Imperial College London to create a new research centre. "London is inexhaustible -- you can drill and drill and drill and eventually get to the Roman ruins," says Santiago Matheus, who in 2011 set up Method Design Lab, a first-of-its-kind design-oriented accelerator programme with London's Central Saint Martins School of Arts and Design. "Even when things are really choppy [London] keeps flying, because you have the government engine, you have the media engine, you have the tech engine, you have the creative engine, you have the finance engine and more. And at any one time, even if two or three of those are struggling, the other two engines keep it going.
That's what makes London, in my mind, the capital of the western world." This echoes the sentiment expressed in July 2012 by Goldman Sachs chairman Jim O'Neill, who coined the acronym "BRIC" for the fast-growing economies Brazil, Russia, India and China. O'Neill described London as "the world's BRIC capital".
[pullquote source="Number of tech companies based in east London in early 2010] "I think that that's a brilliant way of putting it," says Rohan Silva, senior policy adviser to the prime minister, who spoke to Wired at 10 Downing Street. "A lot of the American companies we talk to, part of the reason that they want to be in London is that the workforce here is not just international, but more outward looking. So you can hire people in London and then a year later say: 'Hey, we want to open an office in Beijing.' London people are very likely to be up for moving to Beijing and setting up an office there."
It's one of the characteristics the government is looking to leverage to bolster support for its Tech City initiative, set up by UK Trade & Investment (UKTI) to promote the area's startup cluster. "One of the things we're looking at with UKTI is to say particularly to American companies: 'Right, if you open an office in Tech City we will give you a desk in UKTI -- essentially, government buildings in cities around the world. So you open an office in London, you have offices in Bangalore, Mumbai, Tokyo, Beijing.'"
The current government has made a series of moves to promote London's competitiveness in the technology sector.
Perhaps most importantly, it has established an entrepreneur's visa (before the US, where the issue has long been debated) and also created tax breaks for early-stage investors. It's also worked with investors and the London Stock Exchange to oversee a revamp of the LSE's listing requirements in order to encourage more homegrown companies to go public in London. "I think a tech scene is probably a bit like a fine cheese - there's a moment when it all comes together," says Silva. He rethinks. "I think it's really about to explode."
[Quote"]200[/pullquote]
Sitting in the Mayfair offices of Index Ventures, where he's a partner, Saul Klein is feeling bullish. "London's moment has arrived," he says. "Absolutely. And potentially, London's role in the global economy for the next period. We haven't had this role in 100 to 120 years or more. We're not living in a US internet any more, but we're still living in an internet where English is the most important language. The fact that English is so fundamental but we are not American is crucial, given the nature of the economies that are going to be fundamentally important in the future. Start with BRIC or look at Europe and Africa: every one of those countries has a better, less suspicious trading relationship and cultural <span class="s2">relationship with the UK than it does with the US."
Time, Klein says, is on London's side. Specifically, Greenwich Mean Time. "Geographically, who knows where the centre of the world is? But temporally we are the centre of the world, right?
That's pretty important when you live in a globally connected market. I think we are very well positioned for the future."
For Klein, an entrepreneur turned investor and networker, this represents a 180-degree shift from his position in the mid-90s. After helping to launch Britain's first online newspaper, Telegraph.co.uk, in 1994, Klein was so discouraged by the slow adoption of the internet (the largest ISP then had a paltry 5,000 users) that he moved to Boston. "Because, in my opinion, the UK and Europe was not a place you could be an entrepreneur," he recalls. "You had to go to Boston, San Francisco or Seattle."
He returned to London in 2002 to start the -company that would become LOVEFiLM and found it to be "a different world". Later, he would join Skype which, though built in Estonia and headquartered in Luxembourg with a Swede and a Dane as cofounders, owes a good deal of its success to London, where the commercial team was based. "We sat in the middle of Soho on Lexington Street. Then we moved to Tottenham Court Road. We'd walk out every day and you'd be in a real city with real people surrounded by creative -industries, cutting-edge retailers." Skype would go on to become one of Europe's -biggest tech success stories when it sold to -Microsoft for $8.5 billion (£5.4 billion) in May 2011. "When I compare what the UK looked like 18 years ago to what it looks like today, we've gone from the largest ISP having 5,000 subscribers to eight percent of GDP being <span class="s1">driven by the internet," he says. "And that's remarkable."
London's creative industries have spurred some notable tech successes. Net-A-Porter, launched in a Chelsea apartment by former Tatler journalist Natalie Massenet as the dotcom bubble burst in 2000, has spawned international copycats thanks to its successful business model. Acquired by the Swiss luxury-goods company Richemont for $341 million (£225 million) in 2010, It's one of fashion's most effective e-commerce companies.
When Michael Acton Smith came up with the idea for Moshi Monsters in 2007, his company Mind Candy was on the brink of failure. But with a single drawing of a monster on a napkin, he set about creating a children's online-gaming and merchandising empire that now counts 70 million registered users in 150 territories (see Wired 05.12). Smith's declared ambition to build the Disney of the digital age looks less fanciful all the time, as Moshi Monsters characters start to show up on McDonald's Happy Meals and rise up in the UK album charts.
And then there's Unruly Media. Shut out of David Cameron's Tech City launch in 2010, the viral-video marketers staged an impromptu photo -opportunity while voicing concern that the initiative would push up rents. Two and a half years on, Unruly's main challenge has been keeping pace with growth. It's upgraded its London office twice since then -- it's now based at Habitat's old headquarters -- and has opened offices in New York, San Francisco, Detroit, LA, Chicago, Paris, Berlin, Stockholm, Amsterdam and Sydney. "London is a great for a business like ours -- the -creative and technology sectors are strong and the blend of startups makes it really vibrant," said cofounder Sarah Wood last November after the consultancy Deloitte named Unruly Media as London's fastest-growing technology company.
[pullquote source="Number of incubators in London in 2007] "The statistic that I love is that there are more phones in the UK than there are people," offers Jay Bregman, the American CEO of London-based mobile taxi app service Hailo (see Wired 02.13). His company is competing with a raft of similar -services that allow passengers to book taxis through their smartphones. Bregman says that being London-based is a big advantage: the city's high level of smartphone penetration influenced a decision early on not to supply participating drivers with expensive mobiles, as London -cabbies (three of whom helped to found the company) could be relied on to stay in step with technology. "I often said it was a preview of what North America and the world would be like in 12 to 18 months, and that's turned out to be true," says Bregman. "If you look at other people in this space, they started mostly in San Francisco, which is the size of Leeds. London, New York and Tokyo are probably the three most prestigious metropolises on the planet; if you can make a business like this work in any of those cities, it will work anywhere."
[Quote"]One[/pullquote]
There are many other examples of London's diversity and complexity being reflected in the companies being created in the city. TweetDeck, bought by Twitter for a reported $40 million in 2011, was built by computer software engineer Iain Dodsworth, who previously developed technology systems for banks. Last year, London's fast-growing high-speed-trading specialist Fixnetix sold a 25 per cent stake to NYSE Euronext in a deal valuing the company at £100 million. And Busuu, a 25-million-member online language-instruction service, recently relocated from Madrid to London, choosing the UK capital over Berlin and New York. "We came to the conclusion that, if we wanted to hire the best developers and get access to the best people in education, we need to be in London," says Bernhard Niesner, Busuu's CEO.
[pullquote source="Number of incubators in London in 2013]
Index's Klein is convinced there's a broad shift happening in technology that favours businesses emerging from urban centres rather than suburban complexes. "If you look in the rear-view mirror at companies like Google, Facebook, Amazon and eBay, arguably these are the giants of the first phase of the internet," he says. "I would describe the first phase as the discretionary internet -- an internet that disrupted discretionary things like shopping, news and entertainment. All of which is fun and we love them -- but if they didn't exist, we would still live.
What's interesting about the phase we are moving into, and Skype is a precursor of it, is it's the non-discretionary internet. Startups will disrupt non-discretionary industries which we can't live without, like education and health and security and transportation and food."
In the world Klein describes, the stakes are even bigger. He notes that the global advertising market is worth $100 billion, which sounds like a large number until he relates that education is worth $3.9 trillion, and we spend $1 trillion on telephony. "What makes us think we should be building a Google or a Facebook? We should build companies that reimagine healthcare or energy, because these are orders of magnitude larger," he says.
[Quote"]Nine[/pullquote]
Rohan Silva concedes there are still cultural hurdles to overcome. British humility, for one. "London has, in my view, more going on when it comes to tech than New York, yet New York loves talking about what it's doing," he says. "Tech City is so important as it's about things that are un-British -- saying something awesome is happening here, come and get it."
Still, the view that London's tech scene has reached a definitive "moment" will be -controversial, because the city has yet to produce the billion-pound exit that grabs headlines and excites fortune seekers and the mainstream media. Klein says this is "not problematic at all", urging patience."Be Chinese, stop being American," he says. "We've got to get ourselves out of the New York/Silicon Valley mindset of -everything moving at the speed of light. Great things don't happen overnight."
Matt Cowan wrote about the Samwer brothers in 04.12
Read more about London's moment: https://www.wired.co.uk/article/londons-moment Richard Florida: 'The crash boosted innovation' The origins of Silicon RoundaboutJoanna Shields: 'Students' aspirations have to change'
This article was originally published by WIRED UK
