First came the artists, then came the hackers: The strange history of London's own Silicon Valley

It's a cold drizzly morning in London but it's toasty warm in the packed basement cafe at Google's Campus building.

The whimsical urban decals pasted on the walls and funky soundtrack floating overhead are at odds with the deadly serious furrowed brows and pursed lips of the mostly young, hip clientele. There's a table football game in the centre of the room, but nobody is playing here. Instead, they're plotting to build the future.

This is the primordial startup ooze out of which a billion dollar company could soon crawl.

This cafe, and cafes like it around the area are full of the building blocks necessary to create new startup life: smart people, bright ideas and lots and lots of coffee.

The nascent ideas that do emerge from this ooze only have to crawl up a couple of floors to find cheap shared office space or an accelerator programme to boost its chances of growing up into a tech giant.

SEE: London's 'Tech City' in photos

And it's not just at Google Campus that this is process of startup evolution, this alchemical process of turning ideas into real businesses is happening. Across this swathe of East London an array of digital businesses are emerging which together are creating a startup scene utterly unlike the one which powers Silicon Valley, one with a London flavour as distinct as a cup of tea and which has taken unexpected inspiration from the grimy neighbourhood in which it has taken root.

London startups tube stop
Today's Old Street stop on the London Underground
 Image: Steve Ranger/TechRepublic

For some Tech City really refers to just that small area just north and east of the City of London. But now for others Tech City stretches from Kings Cross (where Google is building a £650m new headquarters to house 5,000 staff by 2017, right across the Canary Wharf, Greenwich and the Olympic Park). If this seems like a big chunk of land, it's worth pointing out that the original Silicon Valley, which covers roughly the San Francisco South Bay area, is an area with a population of about four million.

And just as its geography is ambiguous, it's difficult to find much in the way of hard numbers about the impact of Tech City so far. According to one set of figures, roughly $340m invested was invested in e-commerce startups in London, another $198m in digital media and $66m in software companies last year, while in the first half of this year London start-ups raised $351m. That's still a fraction of the money flowing into Silicon Valley, around 10 percent.

But what's clear is that there is an unprecedented interest and momentum. Google's Campus is just one of many co-working offices, accelerators and other elements of the start-up infrastructure that have emerged in the last few years. The London startup gold rush might not have started quite yet, but the sellers of picks and shovels are in place.

I: In the beginning was the roundabout

Tech City started small. In fact, it started off as "Silicon Roundabout", a term coined in 2008 to refer to a small cluster of tech and design companies working around the unloved and unlovely Old Street Roundabout.

As befits a community so bound to its geography it has been defined, and to a great extent created by, a series of maps.

The original map of Silicon Roundabout, so named because it was centered on the Old Street roundabout, and which first stirred interest in the area back in 2008, had a little more than a dozen companies on it. In January 2010 Wired UK magazine revisited the map and raised that total to 85, and now the Tech City Map, a project which claims to provide a compendium of East London's technology and creative ecosystem, lists 1,381 companies operating in the area (which it takes to include boroughs of Hackney, Tower Hamlets, Newham, Islington and Greenwich).

When the map was first created back in 2011 it listed 819 businesses, although it's worth noting the Tech City Map has been criticised for including a ukulele shop and a hairdressing academy as well as publishers, media agencies and other businesses - not just tech startups - to reach its grand total.

What these different attempts at mapping reflect is that even the geography of Tech City is indistinct, its frontiers fluid, constantly being stretched and redefined, making it as malleable as Sugru, the self-setting silicone rubber made by one of the startups in the neighbourhood.

"What started to emerge was an arts-led culture with an economy around it." Guy Nicholson, local councillor

This part of London's east end - especially the rough arc from the Old Street Roundabout across to Shoreditch has always been a liminal space. Just outside the old city walls until the mid-nineties, it was a shabby, cheap neighbourhood at odds with the gleaming edifices of the City of London just a short walk away.

"There you had a part of our city in central London that had fallen into dereliction, quite literally it was an area where no one really wanted to be. Those who were there had been left behind there," says Guy Nicholson, a local councillor leading efforts to the area.

At this point, lured by cheap rent and large warehouse spaces to work in, artists began to move in, followed by galleries which wanted to show their work, and the cafes and bars for visitors to those galleries. (Of course, if you go back further into history the area has been the location of creative industries for centuries including the Hugenot weavers in Spitalfields in the sixteenth century.)

"What started to emerge was an arts-led culture with an economy around it," said Nicholson.

II: First came the artists, then the hipsters and the geeks

London is always being overwritten and revised. After the artists moved in, media and creative agencies followed. And then the tech startups saw the same benefits, of cheap rent and close proximity to the City, plus the developing artistic community, and moved in too. After the artists came the hipsters, and then the hackers and geeks.

"Certainly this part of east London has been fortunate to have spent almost its entire history with no tube stations because that meant its economy was operating at a different level to areas where you had pieces of infrastructure like," says Nicholson.

Jon Bradshaw, CEO of tech accelerator TechStars puts it a little more bluntly. "It was the worst connected part of London in terms of transportation," he said. That kept it isolated and cheap, even on the edge of the City of London financial district.

Felix Miller and Martin Stiksel moved into the area in when working on LastFM (which was later sold to CBS, parent company of TechRepublic).

"We came in from a music point of view and then east London was just the greatest place for music, all the live venues were there," says Stiksel.

The Google Campus in London
The Google Campus in London is also a hub of the startup scene.
 Image: Steve Ranger/TechRepublic

LastFM was one of the companies on the original Silicon Roundabout map. Miller remembers the excitement of the early companies.

"At Last FM in the early days the first people we hired the deal was we pay you £300 a month you get to pitch a tent on our roof terrace for free so you don't have to pay rent and we cooked lunch every day. And that kind of worked, and that's how we survived."

Stiksel said Tech City is more than just a marketing label: "There are real companies operating there generating real money and producing real jobs, there's no doubt about it. The interesting thing is that there was definitely a critical mass and interesting stories to be told and good stories to be told about the companies there that are growing."

Matt Webb, CEO of Berg, the company which makes the Little Printer, was another of the earliest to move into the area, and was also included on that first Silicon Roundabout list. "Our first office is on the site of the first proper theatre, outside the city walls where there are fewer rules and it's quite nice to think about that as the heritage of the place," he said over tea in his office, a stone's throw from Silicon Roundabout.

"From the perspective of a few years ago when we moved in, it has taken off. We moved to the area in 2008, maybe. There weren't many small tech companies in the area, we were included on that first list," he said.

For Webb, being part of a cluster of tech companies has many benefits, especially creating a support network for small companies.

"You want people around you who have been through the same kind of cycles because they know how you feel. It's easier to think big thoughts when there are people thinking big thoughts around you, which is always my jealousy of places like San Francisco," said Webb. "That's how new ideas happen you meet people who are similar but different. It's a neighbourhood for serendipity and you want that to happen here as well."

"It's easier to think big thoughts when there are people thinking big thoughts around you." Matt Webb, CEO of Berg

While it's far too early to gauge the long term economic impact, Tech City is remaking the Dickensian streets of east London as more cool bars and hip eateries open to encourage those serendipitous meetings and augmenting the dereliction of the Victorian architecture with energetic street art.

For Guy Nicholson of Hackney Council this combination is essential. "You look towards the coffee shops and they are today's version of the coffee houses of the eighteenth century which gave birth to the city of London. Well this is the new economy and what more of a fitting place for this new economy to thrive and prosper than the coffee houses of the twenty-first century," said Nicholson

It's also something the council is keen to promote, keeping the area unique. The giant street art is a hallmark of the area. "The point is that kind of journey through our streets and alleyways is really important and that leads to a sense of excitement and anticipation all of which translates back into triggering ideas."

III: David Cameron's answer to Brit Pop?

But to take east London's tech ecosystem from novelty status to real driver of economic growth took more than just the community spirit shown by these early arrivals. The government also played a role in promoting the idea of east London as hotbed of innovation.

In late 2010 the government put its weight behind the Silicon Roundabout movement, rebadging it "Tech City" and lining up support from companies including Intel, Google, and Facebook to invest the capital, and announced the loosening of visa restrictions for entrepreneurs who want to set up businesses in London. In a speech in east London Prime Minister David Cameron said, "Right now, Silicon Valley is the leading place in the world for high-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. All the elements are here."

"The way I would characterise London's tech scene now as opposed to three to five years ago is 'thriving'. Now it's time to get serious." Eric van der Kliej, Head of Level39

The government also set up the Tech City Investment Organisation to support to the growth of the digital cluster, mostly by attracting new companies and investors to East London, and by helping local companies to expand further.

"The way I would characterise London's tech scene now as opposed to three to five years ago is 'thriving'. Now it's time to get serious," said Eric van der Kliej, formerly CEO of the Tech City Investment Organisation and now running Level 39, an office space for startups in London's other financial district, Canary Wharf. "Following the Tech City initiative and the work to amplify the existing tech sector growth with thousands of young companies starting in London or coming to London we've seen a lot of startups try things and learn lessons, quite a lot of stuff didn't work as well, and now you're starting to see pop out of that some really high growth and high potential opportunities,"

van der Kliej added, "The thing that we did best was shine a light on the companies in the space and that was a really important thing to do because we had to send a clear signal internationally, especially to the investor community that London has an ecosystem now that can and does support high growth tech companies and it wasn't always the case: there was a previous dotcom boom and bust that wasn't sustainable, but to me this looks far more sustainable."

And while some dismiss the government's interest in Tech City as mere dabbling (or even worse, its version of the Labour government's dalliance with Brit Pop and Cool Britannia) the attention focused on the startup scene has given it a credibility and level of recognition that would have been impossible to create otherwise.

IV: We turn pixels into atoms

What's also striking about the companies being developed in east London is that - consciously or not - some seem to draw on the heritage of the area, the design and manufacturing that has been going on in the area for generations.

For Berg's Webb it's the combination of the design and ad agencies with a maker-style culture that's creating a particular type of London startup.

"If you start thinking what makes London different to the approach in Silicon Valley we are definitely creating our own culture here, a slightly different way of doing it," said Webb. He points to companies that are "atomic startups" - more interested in shipping atoms than code, or physical objects and devices and not just software.

The Hoxton-Shoreditch neighbourhood
The Hoxton-Shoreditch neighbourhood is home to startups and street art.
 Image: Steve Ranger/TechRepublic

Examples of this include Berg itself. Its Little Printer device is a desktop printer which is the cute face of the company's ambitions to play a role developing the Internet of things - a bridge between the physical and digital worlds.

Other examples include MindCandy or Formformform which created the Sugru silicon rubber and Makie Labs "we turn pixels into atoms," which allows customers to design and then create their own 3D printed dolls.

Jo Roach, COO of Makie Lab said this was one of the reasons the company moved into the area - the existence of a support network and other companies that were working on digital and physical products (and the cheap office space, of course).

"It just grew organically if you see someone doing something similar to what you are doing you want to be close to it you end up clustering and now there's a weird support network lots of people in the same neighbourhood all trying to do the same thing all furiously working on these crazy digital ideas. There's a definite excitement for making real things," said Roach.

These aren't the only type of startups in Tech City. Indeed, there are a number of classic software companies in the area. But Berg's Webb argues that London's startups can't be directly compared to those in Silicon Valley.

He added, "Because the template in our heads is of the startup in Silicon Valley I think we only celebrate ones that match that model and we need to figure out what it means to be a UK startup or a European startup and celebrate those ones instead."

"This is London's blessing and curse. The blessing is we are finding our own way of doing things, the curse is that the startups we're making here don't look like the startups we're taught to think of as startup. We don't look like Twitter or Facebook or Instagram, these software-only plays."

V: Tech City's blessing and curse

In another way, Tech City's blessing is that publicity has put it on the map. The curse is that popularity is already changing the ecosystem. Anecdotal evidence suggests that rents are increasing as demand for office space in the area increases. As Makie's Jo Roach puts it, "The only problem is now that everyone wants to be here it's expensive."

And Bradshaw of Techstars said, "It's one of the big challenges that London has compared to Berlin where the costs are lower."

Indeed, Stiksel and Miller of LastFM fame are working on a new company, Lumi, but have moved a mile or so north to do it. Miller said that's because they didn't really want to be on the radar for a while.

The basement cafe at Google's Campus
The basement cafe at Google Campus has early stage startups working on the next big thing.
 Image: Google

"We are a bit further afield because Lumi was developed in stealth for quite a long period. We were looking for a location which was still close to all of this but a bit off the beaten track, so London Fields where we are based now. Our developers re-baptised it Silicon Fields," Stiksel added.

And while the local community has welcomed the money that hackers and developers have brought into the area, the local authority is also cautious about the long term impact.

For Hackney's Nicholson one pressure is to make sure that the sudden success of Tech City doesn't overwhelm the area, as larger investors - rather than just small businesses - start to eye the neighbourhood.

"You can kill the goose that lays the golden egg," said Nicholson. "You start to realise that it's a very fragile ecosystem and that ecosystem can quickly unravel. That ecosystem relies on the fact that all these different types of expression are coexisting. They are contributing to each others' ideas. Corporate giants can very quickly sanitise that ecosystem to the degree that you lose the very creative essence.

"Gentrification can indeed be a negative thing when it's imposed on a community but when it's part of a community it can be a very positive thing and that's what the aspiration is, to use this change as a means of bringing about a far great deal of social prosperity and to bring a wider community along with it and that to me is one of most exciting aspects."

VI: Where does Tech City go from here?

Just as Silicon Roundabout became Tech City, a little while back the Tech City Investment Organisation rebranded to Tech City UK - as the scope of London's digital entrepreneurial enclave got stretched further, once again.

Neighbourhood sign
The neighbourhood is making a few moves to celebrate the tech entrepreneurs, such as this street sign.
 Image: Steve Ranger/TechRepublic

And for Jon Bradshaw of TechStars, the question is whether the London startup scene can have a bigger impact, whether that map can be stretched even more. "Can it be more that Old Street? Can it be a broader part of London? In Berlin, tech is everywhere."

Also, despite the excitement and evidence of momentum, it's still early days and there haven't been the huge 'exits', the acquisitions or IPOs that are a hallmark of Silicon Valley's mature ecosystem, which allow entrepreneurs to cash out - and put cash back in to small businesses to start the process all over again.

Tech City is still in its very first startup cycle. The tech accelerators have only pushed the first few waves of companies off their production lines and few companies have reached the point where by floating or acquisition they can release funds to power the next set of startups - a process that has been operating in Silicon Valley for decades.

Tech City is still in its very first startup cycle. The tech accelerators have only pushed the first few waves of companies off their production lines.

"Once we've had one of the original tenants of Old Street or Silicon Roundabout exit and have done the whole five to six year virtuous cycle and money comes to the employees that have options we'll have gone through the cycle and proved that it's possible. That reboots the system and puts money back in," said Bradshaw.

One of the standard criticisms of Tech City is the existence of a glass ceiling - that it's (now) easy to start a business but much harder to find the funding that can turn a company with a team of two or three into a company of hundreds or even thousands. Tech City UK recently launched a programme offering 50 companies access to additional services aimed at encouraging them to float in London rather than heading off to San Francisco for venture funding or New York to list on Wall Street. And the London Stock Exchange has changed its rules to make it more enticing as an option for fast growing companies. This has a knock-on effect by providing work for analysts, public relations and more.

Indeed this is what the lasting impact of Tech City could be - not on property prices in Hoxton or the quality of the coffee in the local cafes, but on the broader economic growth in London. Many see 2014 as the year that Tech City will either breakthrough or begin to fade away again.

But right now it continues to grow in scale and confidence, and even for those that leave Tech City the lure of it remains. While Lumi is out of the area, that might change, said Stiksel. "We are ready - soonish - potentially to move back into that neck of the woods because the whole point of being up here is that nobody could find us, but now that proves a bit annoying."

About

Steve Ranger is the UK editor of TechRepublic, and has been writing about the impact of technology on people, business and culture for more than a decade. Before joining TechRepublic he was the editor of silicon.com.

2 comments
zeitgeist2012
zeitgeist2012

Silicon Valley in London ! Never can it happen . Its not the free market laissez faire that's the spirit of Silicon Valley . Its the individual life- style that's fearless , free and unrestricted by snobbish attire of London bankers' pinstripe suites , high street Savile Row ties and tailoring , but Steve Job style freedom of thought , action and movement that fits sunny Californian weather than the foggy ,

wet windy , wintry and wool wrapper existence in London that makes Silicon Valley spirit . Its that spirit of freedom in dress , thought and action untrammeled by baggage of the "palpably invisible" traditional pomp and show of Royalty marching the streets of London that will put off any professional nerd from the Silicon Valley , visiting London . Perhaps Tory Cameron can propose industrial towns like Manchester or Birmingham to be the IT hub of the UK instead of the Tories and the bankers paradise , London which is anathema to nerds with its formalities and perhaps history too . Or, a better location could be Sussex or Kent where the weather would be more salubrious . Open country sides would cater to the insatiable craving of the nerds for trekking at all odd hours of the day as they keep no regular working hours and prefer physical exercises in the open when they don't sit in front of their computer. Many of them refuse to go and work in megapolis like New York , leaving their dear open country, silicon valley. Besides , if London still wants to host IT sector, then it has to give the same order of precedence in social ranking, pay , perks and bonuses as it offers to the Bankers and the CEOs of banks to the nerds as well. In Silicon Valley every nerd is an emperor unto himself . If a nerd could be made to feel the same way in London , by the British , only then dream of creating a Silicon Valley in London . Otherwise , forget it .

Eamon_Walsh1
Eamon_Walsh1

@zeitgeist2012 - While I've worked in both London and Bay Area - i have to agree, the idea of stiff-upper lip british snobbery is a bit of myth in these times. London is as embracing of new ideas and cosmopolitan business model as any. I don't believe setting up a Silicon valley has anything to do much with weather, else cities like Chicago, Singapore or Hyderabad wouldn't be booming with IT endeavor. What I do agree is that the general culture of the intelligentsia to integrate into innovative industries, encouraging new ideas - it needs to be more unshackled by formalities. That's about it.