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BAMM In-Depth: Circling The Silicon Roundabout

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A welcome return to our monthly series of in-depth articles from Zakia Uddin, all of which explore contemporary issues within the fields of digital, music and media culture. This time around, we take a look at London’s ‘Silicon Roundabout’ – a new development in the ultra-trendy area of Shoreditch which is hyped as a counterpart to America’s Silicon Valley. What’s the deal?

 

1. Shoreditch grows up

If Nathan Barley – the often-cited comedy about Shoreditch life – was made now, it would undoubtedly be set in a dot.com business. That the show was already dated by the time of its release (Nathan Barley, main character and emblem of vacuous Shoreditch life, had existed on the web for a good five years previously) was testament to the fast-changing nature of the area.

Five or six years on, the part of East London that was a cool in-joke has become the centre of a government growth strategy. In November, David Cameron launched the Tech City map of the Silicon Roundabout – a name coined by the head of Dopplr, one of the first start-ups resident in the area. The roundabout is at the junction between the City and Old Street, at which there is a high concentration of digital start-ups.

The map has been swelled by over 400 businesses, since its unveiling. Currently, 1073 companies of different sizes operate in the area. The launch was timed with several announcements of government collaborations with big business to support growth and technical innovation, which is intended to impact on digital start-ups stretching from the Roundabout to Stratford. These include Google setting up a development centre that gives office space to new companies, as well as Intel’s introduction of optic fibre internet to the area.

The socio-cultural sway of the EC1 postcode seemed to have peaked in 2001. Any club-goer stumbling out of a club at 4am would have been given a copy of ‘Shoreditch Twat’, an old-fashioned zine with hand-drawn cartoons depicting the lives of the city’s hipster nightlife, ironic mullets and all.

Though the area has lost its intimidating fashionable image, the continuing availability of cheap unused warehouse space made it an attractive location for start-ups. Unsurprisingly, a left-field influence is still evident in the kind of start-ups the roundabout has attracted, though this has also diversified in recent years.

While the days of the Shoreditch Twat are over (the ‘twats’ have moved to nearby Dalston now, if Vice is to be believed), artists and designers still congregate to Brick Lane, and the area has several important music venues including the Macbeth, the Vice-owned Old Blue Last and CAMP, a relatively new venture on the City side of the roundabout. Though many locals would be loath to spend a weekend night in Shoreditch now, creativity still abounds whether it be in fashion, visual art, media – or computer coding.

The collaborative spirit of the arts scene has extended to the ways in which businesses have nurtured each other since their early days. At the map launch David Cameron told attendees: “One year ago we made a major commitment to helping the tech cluster in east London grow. The successful growth we see today is thanks to the talented, creative entrepreneurs who have decided to set up there.”

The TechHub is one such project that began with an investment made into Moo, one of the bigger companies in the area. While Google and Financial Times owner Pearson gave the investment, the project itself is the kind that could only be initiated by a company that knows the unique needs of the Shoreditch working environment. The TechHub has served as home to several start-ups, offering both a communal space and an ideas network which arguably would have been harder to develop organically.

Other developments begun by companies in the area include digital music firm Songkick‘s Silicon Milkroundabout which aims to pair investors together with start-ups for funding. So … with this much initiative, what has been the impact of the government’s announcements?

Charles Armstrong of social analytics firm Trampoline Systems, the designers of the interactive Tech City map, told Bamm.tv that there is a new “self-consciousness” about the unique mix of technological and creative talent in the area, which has been crucial to the growth rate. The company created the map in order to monitor the growth and interactions of the businesses in the area now designated ‘Tech City’, using its unique SONAR technology.

Armstrong cites the statistic from the Organisation for Economic Co-operation and Development that even naming a cluster can result in a 25 per cent growth in business creation. He commented: “It might seem an unimportant thing, but a name being attached to it and official recognition and policies have definitely changed the mentality.” Another tangible change he notes has been the introduction of big businesses in what Armstrong describes as the  “eco-system”.

There is still a great deal to come, including a regional growth fund of £95 million for small and medium-sized firms struggling to get access to commercial funding. In addition, the government is planning to get a branch of Silicon Valley Bank (with its extensive experience of working with the digital economy) to open up in the City. Google’s new office, which will open in September 2012, will give space to new businesses, all of whom will get the opportunity to interact with world-class developers. In February, Cisco pledged that it would invest hundreds of millions of dollars into businesses in the area.

Many see this intermingling of big and small firms as an opportunity to expand skill-sets – on both sides of the equation. Speaking at November’s Internet Week Europe, Rebecca Quinn of the social media software company Wildfire Interactive said: “I think both components – big and small companies – are essential. Bringing big companies into East London means you’re introducing a certain level of expertise in development, product management and such like.” A similar debate at London’s Hospital Club saw a general agreement among the panellists that the entrance of big businesses would benefit all parties.

Innovation was cited as the biggest benefit for larger companies, which can be often be less flexible when it comes to taking risks with new ideas. Investor Sherry Couto said at Internet Week Europe: “On the innovation side, there is a lot more ambition from the smaller companies.” She described a recent gathering where nine companies that had less than 20 employees each managed to demonstrate that they can save £10 million in contrast to larger companies.

It is not just about savings – investors also recognise that it is important to be hands-off in their approach and nurture the qualities that attracted them to the growing business in the first place. Carlos Espinal of accelerator Seed Camp, who was also present on the panel, commented in response that investors are likely to have little impact on the creativity of smaller organisations – other than encouraging a greater flow of ideas. “The bigger the networks,” he said, “the bigger collisions of ideas you can have. With the larger players coming in, with their APIs being the backbone of the internet, it provides the way for the communities that develop to have closer access to the engineers that are actually making stuff.

“It creates for more social events where ideas can be shared, closer and faster exchange of ideas. From a creative point of view, it will be a more supplemental thing.” The best evidence of this? The digital music start-ups that can be counted as some of the biggest successes of the Silicon Roundabout.

 

2. Success stories

Last FM, Songkick, Music Metric and Rjdj are just four of the most notable names in the area. Arguably, these businesses have shown traditional music companies that there are alternative revenue streams, while bolstering existing ones for the struggling industry.

While Songkick has benefited from the rise in gig-going, its web and mobile applications have also worked to increase the awareness of live events. According to the company, its users go to 70 per cent more gigs at the end of a year using the site than they did at the start. The company is also used as an example of how start-ups and small London businesses have successfully managed reverse poaching – or rather luring US developers from behemoths such as Google and Apple.

In February, Dan Crow, a former developer at both companies, became head of technology at Songkick, and told TechCrunch that the live music site had “immediately stood out” from the many “exciting new start-ups” he had noticed on his return to London in 2008.

The emphasis on enabling people to find out about new music and events has also motivated other digital music companies. Music recommendation site Last FM began with founder Matt Stiksel asking how it was that people discovered new music that they don’t yet know about.

Launched in the fading light of the dot com boom, the company’s early years were especially difficult. Being bought by CBS changed the scope of what was possible by the company. Founder Martin Stiksel told Net Magazine: “Before the acquisition, we had to run everything at arm’s length. The focus was on making sure the money was there at the end of the month to pay everybody. We had about 45 employees and there was quite a bit of responsibility. Now we can go back, look at the bigger picture, and dust off some off our whiteboards full of ideas that we had collected over the last couple of years and thought we’d never get around to doing.”

While RJDJ comes from a slightly different angle, it is also about personalising the music experience and allowing people to experience it in new and novel ways, rather than seeing it as a holy experience only accessible to those listening by themselves.

The company, which has just relocated to an office that it calls The Mission, specialises in augmented reality and smart music, which enable interactivity. A beneficiary of iPod culture, it takes the idea of sound-tracking one’s every moment a step further. In addition, it allows music lovers to experiment with tracks themselves, and most importantly share the results almost instantaneously with friends. One of its most successful apps allows fans to remix parts of “controllerist” Moldover’s track Toast and then share their unique version with friends.

Its neighbour Music Metric is a company that tracks all the activity by artists across the web. For example, it recently produced a playlist showing which artists were being played the most in a single hour. WhoSampled also supplies another service which is responsive to the wider availability of music on the web. It specialises in identifying samples used in music, and has compiled a ranking of the artists who use the most samples (Dr Dre, for your information, with over 1000). There is also a comprehensive database of covers, built from user knowledge.

While some of the sites seem to serve niche functions, all of them are faced with the same challenges in the digital environment. Digital start-ups working with music are among those that have called for overhauls on intellectual property laws. As well as promising funding, the government has pledged that it will support the digital economy in other ways to become more competitive.

Minister Ed Vaizey said at the Tech City talks held at Imperial College that it was the role of the government to implement the recommendations of the Hargreaves review. The findings of the review, published this year, highlighted the economic benefits of relaxing IP laws and how investors were deterred by the UK’s outmoded framework on copyright.

3. London as a hub of ideation?

So - at this early stage of government involvement – how far does the analogy between Silicon Valley and the Silicon Roundabout really stretch? Silicon Valley has developed over four decades, while the oldest companies in the Old Street area are barely in their teens. In addition, there are fewer hard-tech companies in the area, in comparison to its Californian counterpart.

The firms in Old Street work within a broader range of industries, including the service sector and the transport industry. While there are the big names like Last FM and the design agency Poke, there are also companies such as the hotel recommendation site Sletoh.com and the gift shop Firebox.

It is much more diverse than other tech centers, which adds to the unique feel of the area. Many of the companies have also turned to traditional media to capitalize on digital success. Mind Candy is responsible for Moshi Monsters, which is a “virtual world and online” game which allows children to look after their pet – Tamagotchis for the 21st century. An estimated 34 million children use the site globally, with one in two British children adopting one of the virtual pets. It also spawned a magazine in February 2011, with Mind Candy CEO Michael Acton Smith saying on its publication: “It’s an unusual step launching a print-based magazine to support an established online community, but we think our audience is going to love it. Much of the content and ideas for the magazine was generated by our players, so it should feel very different to other kids’ magazines. Print definitely isn’t dead!”

The diversity of businesses is just one of the things that make the Silicon Roundabout different from Silicon Valley. Many feel that the recent announcements could paradoxically give the East London area the chance to shed misleading comparisons to Silicon Valley.

Among them is Charles Armstrong who comments that “one of the things that has been quite positive” has been hearing the comparison between the two places being used less often in recent months, indicating that East London is being understood as its own “living” and “creative” community. In particular, he cited the unique business and residential patterns which make up the Shoreditch area.

There are other parts of the country where arguably the analogy is far more sustainable. For example, there is Cambridge, which has been home to hard-tech companies for more than a decade now. The point of making London the hub has been because of its unique global connections – the city’s diversity and its ability to attract people from every part of the globe, despite the considerable expense of living here.

Dan Crow told TechCrunch: “The [start-ups] are driven by people who understand the value of technology and, most importantly, the value of building great products that users love.” Secondly, the university system has also been a massive draw, providing a pool of world-class graduates who are impressive to investors. Rebecca Quinn of Wildfire backed this up at Internet Week Europe: “You have so many great universities here: undergraduate and graduate programmes bring people together from all over the world. When you look at that combined with the recent focus from government on Tech City, and a decent hub of venture capitalists in the city, you get this – a hub of ideation.”

Arguably, the government is also hoping to take advantage of the credibility conferred by promoting Shoreditch as a growth area. On the City side of the roundabout, protesters have set up camp in Finsbury Square and UBS Bank in protest against the banking bail-outs and cuts imposed by the government. The Occupy movement’s support has cut across a wide swathe of the public. A recent poll in the Daily Mail found that 91 per cent of its readers believe that it would be wrong for legal action to be taken against the St Paul’s protesters, showing that support has only grown now that the occupiers have delivered their manifesto.

So – while discussing the City in a positive light is becoming harder and harder, the Silicon Roundabout is relatively untarnished and projects an image of the government as forward-thinking and engaged with the new digital economy.

 

4. Too much, too soon?

Some are critical of the project and believe that the terms used by the Tech City plan show that the government does not really understand the unique nature of the area. One developer, who did not want to be named, commented that the term ‘start-ups’ was being used to describe companies that were actually of very different sizes. He added that big-scale projects such as the “pop-up” mall Boxpark suggest that the local planners also want to bring high street brands to an area that has traditionally thrived on small businesses, digital and otherwise.

There are voices of dissent who believe that the arrival of money could lead to some companies acting prematurely, before they are ready to go to market with their best ideas. Tom Hume, of design firm Ideo, said at Internet Week Europe’s ‘Bootstrapping Your Start-Up’ panel:   “There’s more investment cash floating around London in the past year that I’ve seen in the past four or five years. But it’s encouraging exactly the wrong kind of behaviour.

“The right kind of money to raise is the right amount that guarantees that you get to the next value inflection point. You could argue there’s actually a supply problem [in London]. If we are in a bubble, one of the impacts will be that people will be less lean.”

He added that the over-supply problem was more acute in London because digital start-ups here need less money to get going. There is little speculation about the possibility of a bubble among those resident in the Roundabout, if the recent effusive commentary from various entrepreneurs and company founders is to be believed.

The ambitions expressed by the government for the area seemed to be shared by those businesses it is targeting for growth. However, it is undeniable that the more investment will change the collaborative culture to some extent. Arguably, the government’s initiatives have inspired some recent developments such as the Silicon Milkroundabout but there is a general hunger for big-scale success in the area, after stories such as that of Mind Candy and Last FM. Is it possible for the collaborative spirit of the place to be sustained under this pressure?

One entrepreneur believes that companies should look to new models of working as coming from the starting point of competition can waste much human endeavor. Speaking on the same panel as Hume, Sarah Szalavitz of new media consultancy 7 Robot argued that the process of making multiple investments at once, only to buy the fastest-growing company, is an inefficient way of working.

Sarah Szalavitz commented: “I’m less interested in the Davids and Goaliths and considering the possibility that collaborative could be better than competitive. I think a lot of these cases, especially that we’ve seen in the US is that, there have been 50 start-ups that have been funded in the messaging space. Was that an efficient way to invest nearly a billion of dollars for one outcome? Maybe we can think of ways these companies could build on top of each other rather than compete against each other.”

Her fears are not unfounded, as Cisco and Google are known as two of the quickest buyers of potentially lucrative start-ups – raising the prospect of the best start-ups being lured to Silicon Valley. Estate agents have also jumped on the bandwagon, with property services promoting the Silicon Roundabout to companies of all types. This could mean that sectors such as law and accountancy that traditionally pride themselves on the expense and exclusivity of their rented space could move in, changing the character of the area.

However, the excitement about new developments remains palpable among entrepreneurs and developers. While some are concerned about the amount of cash available, there have already been enough recent success stories to show that these businesses are capable of generating huge amounts of cash, rather than just burning through it like their forebears in the dot.com boom.

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