Along with many other locals, we were cautiously optimistic about David Cameron and Boris Johnson's East London Tech City announcement on 4 November. Not only was the Shoreditch tech scene getting recognition and a boost from No. 10 and the Mayor, but £200 million of equity finance was announced, intended to catapult Silicon Roundabout and the East End into serious competition with Silicon Valley and help realise the government's ambition to make the UK "the most attractive country in the developed world for early stage and venture capital investment." Right on!
So when the word went out that TechHub were to host David Willets, the Minister of State for Universities and Science on Monday evening, naturally we (and our friend James from Carbon Voyage) were keen to hear more details straight from the source. Unfortunately, but perhaps not surprisingly, the details were... underwhelming.
Accordingly to Willets, the £200 million is not a new initiative but rather a "topping-up" of the venerable Enterprise Capital Funds programme whereby private venture capital firms invest in companies with both private and public money.
A show of hands amongst the dozens of entrepreneurs at the event made clear that the relevance of these sorts of funds to Silicon Roundabout and the putative Tech City is limited: only a few had even heard of their existence. Simply put, tech start-ups don't need VC millions from the outset, they need seed or angel funding in the tens of thousands to get off the ground. It's never been less capital-intensive to start a company but of course that doesn't remove the need for funding altogether – if just 5% of the £200 million was earmarked for distribution as seed funding 100- 200 new businesses could be launched, many of whom would then feed into the VC deal flow in good time.
Conversely, rising rents & business rates, tightening visa restrictions, ineligibility for other programmes such as National Insurance relief for new employees, and the inevitable brain-drain into the Olympic park campuses of the Silicon Valley giants post-2012 will act to curb tech start-up growth in and around Shoreditch. Nothing we heard on Monday night suggested otherwise.
To his credit the Minister did promise to come back to TechHub in the new year with those running the ECF in tow, to explain the programme and let us know "how the government's backing for venture capital is working." Someone needs to explain to him however that supporting London's start-ups is not the same thing as supporting London's venture capital industry, and that a gated community of VCs, Google, Cisco and McKinsey & Co. does not a Tech City make.