When Chancellor Jeremy Hunt declared that the UK was on track to become the next Silicon Valley, UK tech was conflicted. Comparing the UK to the fabled US tech sector is both a help and a hindrance.
There’s no doubting the Valley’s achievements in creating so many of the biggest companies of the last 30 years. This is a worthy benchmark for the UK tech sector to aim for. After all, which aspiring bedroom entrepreneur would not want to be the next Larry Page, Elon Musk or Susan Wojcicki?
Silicon Valley has a formidable entrepreneurial culture and can-do attitude, where failure is part of the journey. The UK doesn’t lack ambition or ideas, but fear of failure is inhibiting. Failure needs to be part of the entrepreneurial experience and many second or third-time founders will attest that it was this that finally helped them find their successful idea.
The other thing the Valley has is the hard and soft ‘infrastructure’ needed to support founders from company creation, right through the startup phase to scaling and beyond. By this, I mean the research and development facilities, the business incubators, accelerators, co-working spaces, programmes and networking organisations. For example, according to The Economist, data from Linkedin suggests that one in five Open AI engineering staff in the US attended Stanford University or UC Berkeley.
Alongside these are coaches, advisors, mentors and operators who have done this before. Its networks are deep due to decades of talent and capital recycling. More investors in the Bay Area have been founders themselves or worked at the high levels of leading tech companies. This gives them a unique perspective on the challenges of building and scaling companies.
Great spinouts aren’t limited to the Valley
Yet while there is much in Palo Alto to admire, there are also many reasons why Silicon Valley is not the right tech ecosystem for the UK to copy wholesale. Not least because of the harsh inequalities the tech industry has produced including California’s rising income disparity, which has contributed to the state having the highest percentage of homelessness in the US. Only now is this being finally addressed.
In Cambridge, we admire Boston’s ecosystem, where institutions including MIT and Harvard have developed a more inclusive ecosystem, with successful spinout and startup companies including Boston Dynamics, Dropbox, Whoop and iRobot.
Here in the UK, there is deep talent emerging from our universities but we must do more to support our best scientists and researchers to become venture scientists building globally impactful companies from the innovations they spend their lives working on.
Universities have a crucial role to play in revitalising Britain’s economy, acting as catalysts for growth. The investment in UK university spinouts surged from £960m to £5bn between 2014 and 2021, but we can and should be doing better than that. The exit rate is impressive: between 2013 to 2022, 10.3% of trackers spinouts achieved exits, either via M&A or IPO. This compares to the general market rate of 3.71% successful exits in the same period, according to Beauhurst data.
There are benefits for communities across the UK if we succeed in building strong tech clusters around our universities. We know from the evidence of startups thriving around Bristol, Oxford, Manchester, Cambridge, Edinburgh and Glasgow that clustering increases economic growth through increased innovation, productivity and competitiveness.
Network effects drive success
The UK’s tech success lies in its ability to harness its network of capabilities: four of the top 10 global universities – Cambridge, Imperial, Oxford and UCL – lie within 50 miles of each other. We have a global financial capital in London to leverage and our language, rule of law and timezone are all factors in our favour.
UK tech has become the pre-eminent ecosystem in Europe in the last 15 years. Now it is the third-largest in the world, behind only the US and China. To borrow gaming language, levelling up is absolutely achievable and politicians are right to aim high.
But we can create our own unique innovation system that is world-leading, rather than simply carbon copy Silicon Valley.
It’s there for the taking, we may just need a dose of that famous Valley confidence and conviction to make the leap and build a world-leading innovation ecosystem that puts rocket fuel in our economic tank.-
Gerard Grech CBE is managing director of Founders at the University of Cambridge and former chief executive of Tech Nation.
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