UK startups facing too many challenges, say entrepreneurs

Startups need more support if London’s digital economy is to develop, according to business leaders at Westminster Policy Forum

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The UK’s digital startups are up against a number of challenges if the country is to develop London’s digital economy, business leaders said at a recent Westminster Policy Forum for London Keynote Seminar.

The seminar, called Developing London’s tech sector: infrastructure, finance, skills and support for startups, saw entrepreneurs share their opinions on what is holding London’s digital economy back in becoming a thriving tech cluster and how it can be addressed.

Policy Exchange head of technology policy Eddie Copeland said building a thriving tech cluster is like running a successful business. He opened with: “Hi, my name’s Eddie and I’m a failed entrepreneur.

“If your business fails in the US I’m told it’s a badge of honour; it’s that mark of credibility that may even help get you funding for your next amazing startup idea. But when it happens here in the UK, you end up working in a think tank. At least I assume my career progression is typical of the wider sector.”

Copeland said he left the safety and security of a good job with a good salary because he had an idea.

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“It was an idea that caused me to lay awake at night thinking about it, refining it, reshaping it until I knew I couldn’t put it off any longer," he said. "So I handed in my notice and I started building. I asked for help and I sought finance. I tried to persuade potential customers that my product could improve their lives. I worked and I worked, and then it failed.

“Looking back, I realise that starting a company is a lot like having a wedding: you’re left with some great memories and a lot less money in your savings account. For the record, I don’t regret a moment of it. It was the best professional learning experience I’ve ever had,” he added.

According to Copeland, if London is to become a successful tech cluster, the UK needs to make sure as many people as possible have a chance to develop their ideas.

“Because among all those who, like me, missed one or more of the crucial success factors of right idea, right business, right team, right time, there are those critical few who have the right combination to make it," he said. "They are the ones on whom Britain’s economic future depends.”

Government support crucial

The government has an important role to play in boosting London’s digital economy, said Copeland.

“To my mind, government has just one simple role to play: removing every artificial obstacle that stands in the way of someone trying their idea, and of industry supporting them in doing so," he said.

“How should it go about it? Well here’s my advice: government clearly wants to support tech and digital entrepreneurs – but it must learn from them, too.”

Copeland stressed that a cluster needs access to finance to be able to thrive. “Like a startup, a cluster needs finance," he said. "I was once asked to name a brilliant business with a brilliant idea and brilliant team that had not managed to secure finance and I struggled.

But when countries from Israel to Finland are working to address the funding gaps that do exist from early research and development to startup, to scale‐up and to IPO [initial public offering], government surely has a role to play in making sure that good ideas do not die for lack of money.”

Copeland added that sometimes that role can be as simple as pointing out where the existing funds are already available.

Harnessing the strengths of tech clusters around Britain

According to Copeland, like a startup, a cluster needs a place to set up shop and pointed to the success of London's Silicon Roundabout.

“Silicon Roundabout was successful because it had cheap rents and a critical mass of people could come together. Innovation happens when – to paraphrase Matt Ridley – ideas can have sex," he said.

“Small businesses outgrow their offices. In the same way, London needs to make sure it does not become a victim of its own success as growing numbers place greater demands on office space.”

Copeland said the future success of London’s digital economy will depend on harnessing and encouraging the strengths of tech clusters around the rest of Britain.

“Cities such as Cambridge, Bristol, Manchester, Sheffield, Leeds, Newcastle, Sunderland, Belfast, Cardiff and Edinburgh all have capabilities that can augment what the UK can offer the rest of the world," he said. “London should be shouting about its connection to those other centres of tech innovation.”

Protecting intellectual property

At the seminar, Mintz Levin Cohn Ferris Glovsky and Popeo patent attorney Anne Campbell discussed intellectual property (IP) and startups.

She said IP is a vehicle for delivering value to business: “And why is that? Because it enables businesses to make money from their innovation. There are several ways that this can happen. The main and traditional reason for protecting IP, particularly by way of patent, is to obtain a return on the investment. In other words, it’s to assist in commercialising innovation. 

“This is especially true of research and development, which is expensive, it requires skilled manpower, expensive equipment and premises, and the reality is that a lot of the great work that’s done here in the UK couldn’t be afforded unless the result was that you could sell a product at a higher price, or more of a similar product due to patented advantages.”

Campbell said it is vital to the UK’s competitiveness that IP is protected.

“Things are improving but we still have a low patent application-filing rate with respect to gross domestic product as compared with many other countries, such as the US, Germany and China, and it’s really important we ensure we protect our innovation at least as well,” she said.

Campbell's advice for startups was that they need to understand the importance of seeking advice from a patent attorney.

“That, of course, means they need some money for IP, and the government has initiatives in place to help people – the IP audit programme, for example, which provides a grant to have an IP audit and some starting advice," she said.

“That can help them identify the type of IP that’s important, for example, whether it’s patents, designs, trademarks and so on – but I think where there’s a gap is the funding to act on the advice.”

Infrastructure stress

According to Optimity founder and managing director Anthony Impey, London has been successful in growing its digital economy and that has put pressure on the city's infrastructure.

“If you look at the investment in digital infrastructure in London and across the UK it has been fairly steady," he said.

“The government’s super-connected cities initiative and its wider Broadband Delivery UK initiative amounts to £1.5bn of investment, while Virgin has announced £3bn going into digital infrastructure and the mayor’s 2050 infrastructure plan spoke about £8bn going into infrastructure.

"However, those numbers have got to be considered in context – the £8bn the mayor has committed to between now and 2050 represents 1% of the total infrastructure spend in London, and I think it's strange to have such a small percentage in such a critical part of our infrastructure.”

Impey said infrastructure needs to be more readily available so people don’t have to wait so long for fast connections.

“It has to be much, much faster than it is at the moment, it has to be much more flexible, and these three things are causing huge problems for existing business models to adapt," he said.

“And this is very, very important because London is in a race, and it is a race against other cities around the world that are vying for this position of global leadership in the digital economy.”

A recent report from Tech London Advocates revealed that infrastructure issues – such as broadband, office space and transport links – are the biggest obstacles holding back the growth of digital startups in London. 

The Joining the dots: building the infrastructure for London tech report showed that broadband speeds, transport links and access to property must improve if the growth of London’s technology sector is to continue. Of those questioned, 48% said broadband speeds were damaging London’s domestic and international reputation.

Lack of skills a threat to digital economy

Impey also referred to skills and said he believes they are fundamentally important to the long‐term viability of London and the UK’s digital economy.

“There’s a report out from the UK Commission for Employment and Skills that says the digital sector will need 300,000 new jobs in the next five years, and that is a staggering number of jobs," he said.

“We are already experiencing a crunch in the available skills that we have, and so there’s a lot of pressure on easing the visa restrictions to bring skills into the country, but we need to have a long‐term solution for skills, because bringing talent into the country will only fix our short‐term issues.”

The Coalition for a Digital Economy (Coadec) executive director Guy Levin said to get access to talent you need to reform immigration and make it much easier to hire, particularly from outside the European Union.

“One idea that’s been mooted in a London setting is maybe even having a London-specific visa. I’m not convinced by that, but it’s one of the ideas that’s being thrown around.”

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