Feature Story

A Silicon Valley in the Heart of London?

by Laurence Cruz

The UK government and a Who's Who of high-tech giants, including Cisco, are working to expand a new kind of innovation cluster in London's East End.

On the face of it, there's zero resemblance between the East London area of Shoreditch and California's famed Silicon Valley. But behind the tight-packed storefronts, restaurants and pubs that line the streets of this trend-setting quarter just north of London's financial heart, something rather special is happening--and it has caught the attention of the British government, the media and global high-tech giants, including Cisco.

Over the past three years, Shoreditch has seen an explosion in high-tech companies. In 2008, the area around the so-called Silicon Roundabout was home to just 15 of them. Today, drawn by cheap rents, good eateries and quick access to the financial district and airports, some 300 to 400 such companies have sprouted in the surrounding square mile. Despite the obvious differences, comparisons between digital Shoreditch and Silicon Valley are inevitable. But can another Silicon Valley really take root in the heart of a city as ancient, dense and complex as London?

Disqus: How will tech hubs around the world evolve in the future?

Some major players are betting big that it can. Prime Minister David Cameron, seeing an opportunity to bolster Britain's struggling economy, announced plans last November for a technology hub named East London Tech City in the area. And a Who's Who of corporate titans including Facebook, Google, Intel, McKinsey and Vodafone have thrown their hats into the investment ring. For its part, Cisco has pledged $500 million over the next five years for Tech City and related initiatives across UK, with special focus on creating two innovation centers, an awards competition and what it calls a "national virtual incubator," company officials say.

A Delicate Balance

The UK government is encouraging the cluster in a number of ways, from stepping up efforts to introduce a new, streamlined "entrepreneur visa," updating intellectual property laws for the Internet age, and introducing an enterprise investment scheme to make it easier for people to invest in small companies.

"They're trying to do lots of things to make it work," says David Bott, director of innovation programs with the Technology Strategy Board, a government-backed UK agency that's trying to expand the hub.

Earlier this year, the board launched a contest to help startups in the area get funding. Attracting some 220 companies that submitted their ideas in the form of video pitches, the Tech City Launchpad competition narrowed the field to a shortlist of 18. Each of these was awarded provisional grants of £100,000 contingent on them securing matching funds within 12 months, then invited them to pitch to leading venture capitalists, business angels and other potential investors.

"There were some brilliant companies in the room," Bott says, adding that the next couple of years will be critical. "If government is too heavy-handed and throws around ‘big government' attitudes, Tech City's growth may stutter," he says. "If they get bored and go away, it will probably go on growing but not as fast, so government has to walk a tightrope. So far, they seem to have the balance right."

Cisco Thinking BIG

Backers hope Tech City will get a turbo charge from the London 2012 Olympic and Paralympic Games, set to take place at a brand-new complex called the Olympic Park a short distance east of Shoreditch. Cisco is sponsoring the Games as official network infrastructure provider, but the company's contribution will continue long after the closing ceremony and will directly affect the Shoreditch cluster, says Russell Craig, a member of the public sector practice of Cisco's Internet Business Solutions Group (IBSG).

Cisco's contribution has two pillars, one being its $500 million, five-yearinvestment program, dubbed "BIG" (British Innovation Gateway). As part of this, Cisco is creating an innovation center in Shoreditch that will open in 2012, and aims to establish another at the Olympic Park to open after the Games, Craig says. The company will also hold five annual open innovation competitions in UK based on its existing iPrize contest, and will build a "national virtual incubator"--think a network of Cisco TelePresence-equipped institutions focused on nurturing innovation.

The second pillar is a major UK-wide education initiative designed to encourage student proficiency in science, technology, engineering and math, Craig says. Both pillars come under Cisco's "Building a Brilliant Future" program, which focuses on the legacy Cisco will leave as a result of its sponsorship of the Games. "We don't want some static legacy of technology that will become outdated," says Craig, who leads BIG. "We want a living legacy."

While Cisco's efforts are designed to support innovation and growth across the UK, a main focus for the networking giant and other high-tech companiesis the East London area. The hope is that the state-of-the-art infrastructure, sports facilities, office space and housing left vacant when the athletes depart the Olympic Park will further boost development of Tech City into one of the top digital clusters in Europe and perhaps the world.

"We think the smart city business is a pretty significant global market and the UK needs to step up and become a player in that marketplace," Craig says, referring to the multi-billion-dollar market for what Cisco calls Smart+Connected Communities.

A New Model for Innovation Clusters

A lot needs to happen for East London Tech City to live up to its promise. Bott says there's not even decent broadband infrastructure--a basic ingredient of any smart community--in Shoreditch. But he predicts there could be as many as 1,000 startups in the area within a few years.

"It will be the place where you go to start a digital media-related company," he says. "The coffee will be the best in town, the restaurants will be chic and it will be a really interesting place to work. I think it's probably unstoppable as a cluster. The question is, can it achieve global status?"

Perhaps Tech City's chances of becoming another Silicon Valley are greater if it extends, post-Games, to include the Olympic Park development. But Craig says comparisons with Silicon Valley, which emerged over a period of 20to 30 years in a pre-globalized world, may be misplaced.

By contrast, he says, innovation clusters today can expand at a greatly accelerated pace due to the digital economy, the network revolution, the rise of a global mindset and the ability of startups to operate globally, among other factors. Underscoring the point, he says Cisco is currently looking at dozens of innovation opportunities around the globe in its efforts to develop high-tech clusters.

"Silicon Valley is not the model for the future--at least not here," he says.

Either way, Cisco has high hopes for Tech City and BIG. Ideally, Craig says, the cluster will produce the first billion-dollar, high-tech company to emerge in the UK and stay there, as well as tremendous new investment opportunities for Cisco, a higher level of innovation in business across the UK and an enhanced profile for Cisco in the UK.

"One thing we're not short of is ambition," Craig says. "It's nice to have the license from the company to really step up and knock one out of the park."

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