News, — November 29, 2011 14:48 — 0 Comments
A busy junction in east London surrounded by low-rent offices doesn’t look as if it could rival Silicon Valley. But there is a definite buzz around it
It’s Friday evening, it has just gone seven, and I am walking towards a lift with the Bloodhound Gang’s Adam Perry. "Do it now!" he sings as he bangs some imaginary drums, and launches into The Bad Touch, the Gang’s most famous track. "You and me, baby," he posits, "ain’t nothing but mammals."
We are in the heart of Shoreditch, east London, a few blocks away from the traffic junction that joins Old Street with City Road. For decades, this was just the ugly Old Street roundabout. Since 2009, it has been coined the Silicon Roundabout, supposedly Britain’s answer to California’s tech-centric Silicon Valley. Three years ago, the area housed only a dozen digital startups. Now there are at least 300 – and that’s a conservative estimate. Last.fm is based here, as are SoundCloud and TweetDeck, which was recently bought by Twitter for £25m. It was a sale that made the tech world sit up and listen.
While the rest of the economy flatlines, Silicon Roundabout – or Tech City, as the government recently branded it – is booming, with new companies arriving nearly every week. "So let’s do it like they do on the Discovery Channel." Perry and I are on our way to the Silicon Drinkabout, a get-together for anyone connected to the tech scene, hosted every week by a different local bar. Perry is here because he has just founded his own startup, BandApp, which creates app-building software for aspiring musicians. As a rocker-turned-techie, his presence seems apt. Everyone here is keen to tell me how the CEO of a tech startup is today’s equivalent of a 60s rock star. So keen, in fact, that it becomes the cliche of the evening.
"Tech is the new rock’n'roll," says Richard Moross, who became one of the Roundabout’s founding fathers when his online printing company Moo.com arrived in 2008. "Tech City is a bit like Kings Road was in the 60s." On the other side of the bar, Perry’s twin brother Jason is nearly as gung-ho. "Tech is almost the new rock’n'roll," says Perry, J, longtime McFly producer, and now music director at Mind Candy, the doyen of the new Tech City outfits. "Steve Jobs and Mark Zuckerberg – they’re the new rock stars. They’ve had a lot more to offer and say than most people in bands. And I’d include Michael in that."
The Michael concerned is Michael Acton-Smith, Jason’s boss at Mind Candy. One broadsheet called him the "rock-star version of Willy Wonka", and not just because it is obligatory to shoehorn a nod to rock into every article about Tech City. Acton-Smith is the founder of Moshi Monsters, a hugely popular website that lets 50 million children worldwide tend to their own virtual pet monster. In the UK alone, Moshi claims to have 12 million account holders. With its rapidly expanding social network, it is sometimes described as Facebook for seven-year-olds. "I knew about Michael even before I got my job," says Jason Perry. "My kids used to watch him on YouTube. They called him Mr Moshi."
Mind Candy is the high watermark for companies at the Roundabout. In summer 2009, it was in the last-chance saloon after a series of online commercial failures. Then came Moshi Monsters. This year, it expects to make £60m from merchandise alone. A few months ago, it had a staff of 40. By the end of year, that figure will have doubled. Moshi’s success is partly due to the way it is set out to harness and re-invent physical media, rather than simply driving it out of business. For example: children’s magazines. Like much of the print industry, children’s mags are dying. Or at least, mostly dying. Moshi’s new magazine is an exception. Launched this year, it already has a circulation of 110,000, around 35,000 more than its nearest competitor. Why is it working? Because Moshi already has a captive 50 million-strong audience. Moshi might turn out to be a fad, but at the moment it has the platform to prolong its success.
It is a model Mind Candy hopes to apply to the ailing music industry – which is where new music director Jason Perry comes in. "It would be really easy," he says, "to think of Moshi’s music as just part of the game." But, as with the magazines, Perry wants to take Moshi’s music into the real world by creating spin-off albums and gigs, all featuring music "played" by the characters in the online game. "There is nothing to say physical albums can’t sell," says Claire Wiggins, a Moshi executive. "You just need a means of distributing it." With its 50 million users, Moshi theoretically has that means and, what’s more, it is not ruling out using them to outmuscle conventional record labels, and release real-life bands. "Working at a record label right now is like being in California after the gold rush," says Perry. "There are no more ideas. All the ideas are over here."
And how did they get here in the first place? Moross helped get the ball rolling. When his Moo.com moved here in 2008, its office on Old Street had more space than the company then needed, so Moross invited some other startups to move in too. A year later, they all moved to larger offices nearby, and more startups took their place. Then, in July 2010, came the opening of TechHub, which provides low-rent, low-commitment workspace for hundreds of entrepreneurs. All of a sudden, a trend was born.
"It’s tricky to say exactly why it took off," says Acton-Smith, who moved his company to Shoreditch earlier this year into offices quickly furnished with a treehouse, lashings of ivy and bright murals of monsters. When I visit, late on a Friday, the air is heavy with the fug of popcorn. "There’s good transport links," he suggests. "It’s quite a bohemian area, the rent’s not too high." Back at the Drinkabout, the entrepreneurs broadly agree – but in the main they just love the fact they are around like-minded people.
"I actually wanted to buck the trend and move to Soho, but then I realised the rent’s cheaper here," says Simon Prockter, who arrived in January to set up HouseBites, a gourmet takeaway service for people who want a quick, cheap meal cooked and hand-delivered by local chefs. "But it’s not just about cost. Round here, you’re always running into friends from other companies. It’s just good to walk out of an office and see people in the same position as you. It’s an emotional thing you wouldn’t get in west London."
It is not simply a tech thing, either. Chatting with Moross is Charlie Morgan, head of PR at Firebox, an online toy company that moved from Brixton in October. "I know we’re in retail, but tech is changing retail so much," she says, citing how Facebook recommendations have altered the way consumers buy products online. "Having all this on our doorstep is giving us a real boost."
Almost exactly a year ago, the government started taking a real interest in Silicon Roundabout. "Right now," said David Cameron in a speech last year, "Silicon Valley is the leading place in the world for hi-tech growth and innovation. But there’s no reason why it has to be so predominant. Question is: where will its challengers be? Bangalore? Hefei? Moscow? My argument today is that if we have the confidence to really go for it and the understanding of what it takes, London could be one of them." It was then that Cameron first introduced the concept of Tech City – a theoretical space sprawling across east London, from Old Street’s Silicon Roundabout to the Olympic Park five miles away in Stratford. He spoke of providing support for the Roundabout’s existing startups, as well as getting big tech companies to move to the well-equipped Olympic facilities after the end of the Games. Barclay’s, he said, would provide tech-centric banking services, while BT would bring ultra high-speed broadband.
It is early days, but Cameron’s dream is getting somewhere. No tech giant is yet committed to a Stratford move, but several are investing in Old Street. Google will open a support centre for startups next year, providing office space for firms that otherwise could not afford a year-long lease. Cisco plans five years’ worth of investment, while Intel has promised serious hardware for the area’s smaller firms. March saw the founding of a government sub-department called the Tech City Investment Organisation (TCIO), and last week it released a long list of its successes so far. For instance: BT’s high-speed broadband will arrive in spring 2012. Or: there are now up to 600 tech firms in Tech City.
I speak to the head of TCIO, Eric Van Der Kleij, AKA Britain’s "entrepreneur-in-residence", after he has spent the day hosting last week’s Entrepreneurs Festival. He is justifiably proud of the way he has got 300 entrepreneurs in a room, sharing ideas with each other. "This is, for me, one of the most important things we can do."
Nonetheless, some still feel the government’s involvement is partly just hype. When TCIO released a map of all the startups in the area, people pointed out that some of the businesses weren’t anything to do with tech at all. Others are even more blunt: "All this Tech City stuff," says Prockter, "it’s the government riding on something that’s actually happening anyway."
Moross is slightly more measured. "Look at what people do," he says, "not what people say they do. They’ve done a good job so far – but these companies need more help. The government has got to make it easier to be here than other countries." He is talking specifically about tax breaks, and deregulation. He thinks it is good that corporation tax has been cut, and that small businesses get capital gains tax breaks for their first £10m of profit. But he points out that the government still doesn’t make life easy for his employees. Some of them may invest in Moross’s projects and therefore take a great risk when deciding to work for him. "The government doesn’t give my employees anything. I pay only 10% capital gains tax on my first £10m of profit, but my employees still pay 28%. They’re paying the same as bankers."
Funding is another issue. "The big problem in tech is getting finance," says Steve Kennedy, who has just set up an initiative called City Meets Tech, which aims to get bankers investing their bonuses in the Silicon Roundabout. He has got his work cut out: when Adam Perry wanted to find investment for BandApp, he had to go all the way to Berlin. And then there’s the argument about exactly what we should be investing in. Tamlin Magee, news editor of the technology website TechEye.net, says it is all very well to be investing in companies, but if we want to produce more engineers, and create long-term innovation, we should be funding more academic research, and more tech teaching in schools. "There’s a huge lack of developers, both to make apps, and to understand their social effect," agrees Gi Fernando, founder of Techlightenment, social media developers based in Shoreditch. Fernando argues we need more initiatives such as Apps for Good, a course – part-developed by Techlightenment – that teaches inner-city youngsters to code their own apps. "There are lots of 18-year-olds," he explains, "some from very deprived areas, who understand apps’ social effect, but don’t know how to build them."
Finally, there are the geographic concerns. Why the focus on north-east London, asks Magee. We already have Silicon Fen – a world-class tech hub in Cambridge – and up in Scotland there’s Silicon Glen. Van Der Kleij doesn’t deny these are issues to be addressed, but he points out that a lot of the work has already begun. He cites the £2m investment fund raised by TCIO. Then he reels off a list of deregulation measures recently taken by the government, specifically to help entrepreneurs: the small business rate relief, the R&D tax credit, and the entrepreneurs visa that has already seen a 90% rise in the number of visas granted to overseas investors. As for Tech City’s London-centric focus, Van Der Kleij claims the whole country will benefit from the attention Silicon Roundabout is getting, mentioning a Newcastle-based video production firm, Aframe, that has already developed connections with Tech City. All this remains to be seen.
But back at the Drinkabout, I feel energised, and not just by the Bloodhound Gang. It’s refreshing to visit a world where, for once, something seems to be going right. It does, admittedly, seem a myopic world, and I feel uncomfortable about companies demanding more of the state and the City at a time when both institutions are failing so many other, more vulnerable members of society. That said, Silicon Roundabout could provide one solution to the crisis that the City has got us into: jobs. When Jason Perry arrived at Mind Candy last week, he was one of four starters that day. Some weeks, it’s as many as seven. "Companies like mine are key to the recovery," says Moross. "We’re selling things internationally at an incredible rate. We’re hiring people when other people are making them redundant. This isn’t bullshit. This isn’t the dotcom bubble. There is a lot of hope."
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