'The Magic Roundabout', The Sunday Times Magazine

Sunday, November 06, 2011

Send to a friend
Crisis? What crisis? These entrepreneurs are awash with investment, running niche technology businesses in a London area called the Silicon Roundabout. By James Silver.

It’s Friday evening in the Biscuit Building, a revamped warehouse in Shoreditch, east London. “MiniBar”, as it’s called, is a weekly meet-and-greet event for startup entrepreneurs, software developers and “angel” investors who never imagined they’d be faced with so many new best friends.

About 300 people shuffle around the room. The developers are not natural small-talkers, but they are confident multi-taskers: sipping beer, swapping business cards and tapping purposefully at smartphones. What they lack in social skills is eclipsed by their extraordinary reserves of get-up-and-go: the very spirit that is powering a new generation of technological startups in this tiny area.

“The energy in Shoreditch right now is immense,” says John Slinn, MD of clipDO,a service that enables users to send online articles they don’t have time to read to their Kindles. The organiser of the event, Christian Ahlert, says: “People here feel that they can really change things. In most other parts of the economy, it’s exactly the opposite right now.”

The buzz around Shoreditch’s rapidly evolving technology scene is concentrated around Old Street roundabout, Brick Lane and Hoxton Square. Once a rundown pocket of the East End, the area is one of the world’s fastest-growing digital “hubs”, drawing in entrepreneurs and — crucially — investors.

While the rest of the city lurches from one financial crisis to the next, Silicon Roundabout, as it is nicknamed, thrives. The area has already spawned some astonishing successes — among them the social-media application TweetDeck, sold to Twitter for £25m earlier this year, and the phenomenally successful music website Last.fm, snapped up by CBS for £140m. Many of these were conceived in small backroom offices in the shadow of the Old Street roundabout by hungry entrepreneurs with disruptive business ideas that were genuinely new and capable of attracting the all-important seed capital.

The energy in Shoreditch right now is immense. People here feel that they can really change things
Their success has convinced a new generation of entrepreneurs that a creative idea scrawled on the back of a damp beer mat today might just make them £100m tomorrow.

Last November, the prime minister gave a speech in east London, pledging to transform the area stretching from Old Street to the Olympic Park in Stratford into a world-class technology hub, fit to take on San Francisco’s better-known (and more financially secure) Silicon Valley. Two-hundred million pounds of government money was promised, and private investment also guaranteed. Google has just signed a lease on a seven-storey office block close to Old Street that will function as a finishing school for software coders.

“We’re now the largest tech cluster in Europe,” says Eric van der Kleij, CEO of the government’s Tech City UK initiative and “entrepreneur in residence” with UK Trade & Investment. “There are more than 500 tech and digital-media companies in the Shoreditch area. At the start of this year there were 200.”

Van der Kleij’s primary function is to sell the area to investors; he’d hardly say things are slowing down. But what do the investors think? “We feel very strongly that there are opportunities in London,” says Adam Valkin of the venture-capital firm Accel Partners. “I don’t think it’s hype. It takes time to build a large, durable, sustainable company. And for every successful business there are another hundred startups that don’t make it.”

This might sound familiar. The last dotcom bubble exploded in March 2000, swallowing up hundreds of millions of pounds of investors’ capital. So what’s to stop it happening again?

Reshma Sohoni, a partner at the investment company Seedcamp, which backs young innovative businesses, says: “In 2000, everything was extremely overvalued, with no revenue and no profits. Not so now.”

There are material differences, too: a decade ago, smartphones, wireless broadband and social-networking sites such as Facebook and Twitter didn’t exist. Thanks to these innovations more people use the internet more often. Back then, web-based business models were entirely unproven. “Ten years ago, people were selling a vision of the future,” says Valkin. “Now that vision is reality.”

Despite the hype — and the occasional multimillion-pound success, such as Last.fm — the Shoreditch boom is a low-key, terribly British affair. At the moment it might offer very little to get Sergey and Larry from Google quivering in their sneakers, but who knows? These young entrepreneurs are determined to give it a go. Just don’t call them geeks.

***
Michael Acton Smith: Mind Candy

Once described by a colleague as “a cross between a rock star and Willy Wonka”, Michael Acton Smith cuts an unlikely figure for a boss of a company valued at $200m. Smith, the CEO of the entertainment company Mind Candy, is now one of the biggest beasts spinning around Silicon Roundabout. In web terms, he’s near-geriatric — he launched his career in 1998, setting up Firebox.com, a gadgets-for-geeks website, with a £1,000 loan from his mum.

In 2003, he stepped back from Firebox to found Mind Candy. His first game, Perspex City, a global treasure hunt, was well-reviewed but flopped. He then turned his attention to kids’ online entertainment, which he saw as “the next massive frontier, like Disney in the 1920s, Jim Henson in the 1970s and Pixar in the 1990s”. Moshi Monsters was born in 2008.

Mind Candy is becoming a Dreamworks-style entertainment studio, which has seen Moshi Monsters turned into a franchise with merchandising, live events, a magazine, TV and film spin-offs. “We are pioneering a new type of entertainment,” says Smith, who moved his business to Shoreditch this year. “There’s enough amazing talent in London to do that.”

http://mindcandy.com

Michelle You and Ian Hogarth: Songkick

In a speech a year ago about east London’s technology scene David Cameron mentioned the live-music startup Songkick. The site’s co-founder, Ian Hogarth, looks back on that moment and winces slightly. Ever since Noel Gallagher was snapped quaffing champagne at Number 10 with an ingratiating Tony Blair, prime ministers and rock’n’roll have been uneasy bedfellows.

“Cameron’s speech was a thrill for my granny,” says the 29-year-old entrepreneur diplomatically. “She’s moved out of Britain and lives in the Florida Keys now. She probably got about 25 free dinners out of that.”

Hogarth — an affable, scruffy and highly articulate former choirboy turned DJ — and his business partners, Michelle You and Pete Smith, came up with the idea for Songkick when they were sharing a dingy flat in Whitechapel.

In the very early days, the small team were barely scraping together enough to eat. One day, a bemused investor called round to hear their pitch for funding — only for a software developer to emerge dripping from the shower halfway through, dressed in a towel.

A move to premises near Hoxton Square followed, where the friends took possession of the top floor of a warehouse on a street so down-at-heel that it took two years to persuade BT that it was worthwhile installing a broadband connection. “We weren’t aware of other talent here in Shoreditch at the time,” says 30-year old You, an unusually glamorous (for the tech scene) American. “We just picked it as an interesting place to be — and the rent was cheap.”

By the end of 2010, Songkick had reportedly secured $4m in funding. The team has opted to stay in London — taking advantage of Shoreditch’s talent pool. “Two months ago we hired great guys from Google and Facebook. In Silicon Valley we’d have been fighting 25 different companies for them.”

www.songkick.com

Julia Fowler and Geoff Watts: Editd

Fashion enthusiasts Geoff Watts and Julia Fowler met when they were racing cars in Perth, Australia. At Editd’s HQ near Old Street roundabout, Watts acknowledges that Perth is “not exactly a fashion hub”. He says: “We realised we had to be in either London or New York. We chose London because fashion trends that are cutting-edge in New York are often already mainstream in London.”

While 35-year-old Watts freelanced, Fowler, 29, set about developing their idea, which delivers “live” market intelligence to fashion-industry subscribers, by crawling the web for sales data and consumer chatter, measuring 2m products and 300,000 opinions every day.

“Information about what consumers are talking about and how they are behaving is very important to the fashion industry,” explains Fowler. “Monitoring this kind of data can help gauge demand around styles, trends, colours, pricing and sizing.” Watts adds: “We’re like a Bloomberg for fashion.”

Initial funding (€50,000) and mentoring came in 2010 from Shoreditch-based early-stage investor Seedcamp. Editd had launched in 2009, growing rapidly through the downturn. Last summer it announced a further $1.6m in funding from investors.

The pair describe the startup culture in Europe as “risk averse”. “In Silicon Valley you can probably raise funds with a plan on the back of a cigarette packet, if you have proven people on your team,” says Watts. “Here, investors do like to see a customer or two first. They also expect you to put all your savings into the business. That means startups are less willing to step on the gas. There’s more social stigma around failure. It can end your career. In the US, failure is seen as a rite of passage.”

www.editd.com

Reshma Sohoni: Seedcamp

The co-founder of Seedcamp is used to fending off the advances of over-eager entrepreneurs. “You’re constantly getting business ideas thrown at you the minute they find out you are from Seedcamp,” she smiles. Seedcamp’s well-established application process means only the most “disruptive and innovative” ideas will be developed, says Sohoni, who co-founded the fund in 2007. “What we’re all looking for, as investors,” she says, “is the next Facebook.” Seedcamp’s own figures reveal the underlying health of Silicon Roundabout, she claims. “We released some numbers around the first set of companies we invested in and a third of them were generating more than £1m in revenue annually.”

Tom Allason: Shutl

When he was a student in America, Tom Allason, founder of Shutl, ran a thriving business making fake IDs. “Students needed them to be able to drink [under 21],” he recalls. “However, it got me into a lot of trouble and I had to drop out of university.”

He moved back to Britain in 2002 and founded eCourier after a “nightmare experience” with a courier firm. Courier companies typically rely on an old-fashioned process of phone bookings relayed by a dispatcher to available drivers. Allason’s idea was to put the system online, enabling customers to track their parcel’s journey live.

In 2008, however, Allason quit to develop Shutl, which launched in 2009. Backed by £1.65m in investment, Shutl now counts Argos among its clients — the only Argos products it doesn’t deliver are anything requiring installation, and age-restricted items such as knives. Having worked in Shoreditch for eight years, Allason, 31, has witnessed the tech scene splutter to life: “We started in an office that didn’t have electricity. Things were happening here long before anyone noticed.”

www.shutl.co.uk

(The Sunday Times Magazine, Sunday 6th November 2011)

Posted by James Silver - On Sunday, November 06, 2011

Send to a friend

SITE MAP