United Kingdom Prime Minister David Cameron wants to turn East London into a high-technology industry park matching the likes of Silicon Valley in California. It’s a great idea, and it will change the Conservative Party’s historic attitude toward entrepreneurial technology startups.
Under Margaret Thatcher’s Conservative Government back in the 1970s, the United Kingdom had a burgeoning electronics industry that spawned many exciting and ambitious technology startups Like all fledglings, these startups needed a helping hand to get going—in this case, the required helping hand was funding.
Unfortunately for Britain’s embryonic electronic industry, Thatcher’s government didn’t offer any funding. Financially, startups had to prove themselves capable of standing on their own hind legs. At the same time, on the other side of the world, the South Korean government was implementing a contrasting philosophy and investing substantial capital into one of its growing electronics companies—Samsung.
So that’s history. But we all need to learn its lessons.
Turning East London into a high-tech centre rivaling Silicon Valley is an ambitious plan, but some major technology companies are already buying into it. Intel has agreed to open a research lab in a location near where the 2012 Olympic stadium is being constructed. The idea is that the research lab will be around a long time after the Games have gone. In fact, Cameron has announced the Olympic Legacy Company, which will accelerate this high-tech usage as part of the post-Olympic Games era.
Intel isn’t the only company that has bought into the idea. Cisco, Google, and Facebook all are considering locations there. British Telecom has pledged to extend super-fast broadband into the East London areas involved in the plan. While these are all large and well-established companies, though, what about the startups that will be encouraged to locate there?
Cameron believes that one of the challenges for many startups isn’t finding the right location, it’s being able to access the sort of finance that’s available in the United States for startups. U.S. investors do take bigger risks. They can see a bigger immediate market. And, they often regard past failures as a pass to future success. In the U.K., established and successful businesses find it reasonably easy to raise capital. It’s a very different story for failed businesses looking to start a new venture.
However, easily obtained venture capital can have its downfalls, as experienced by the U.S. electronics industry 10 years ago. Too much readily available venture capital meant companies could go ahead with product development even though there was no recognised customer base for the finished products. Financial collapse and debt quickly followed.
As a Londoner, I welcome Cameron’s high-tech initiative and hope it succeeds. It firmly consigns the unsupportive Thatcher approach to industry innovation to the archives. But for the plan to succeed, there must be adequate and carefully considered funding that finds its way into companies that have sensible technical and marketing strategies. Without that, this initiative also will struggle to get up on its hind legs.