Britain failing to produce global tech companies

A new book on the next tech hotspots investigates why Britain, with its inventiveness and business culture, has a hard time generating tech winners

Late on a lazy spring day in Cambridge, the sun slants through just-budding ancient oaks and old willows, water froths through a weir, and students punt gamely along the river Cam.

Behind the warm red and ochre brick facades of the centuries-old colleges, some of the best technology minds in Britain work in some of the most interesting research labs, both academic and corporate-sponsored, in Europe.

And all through the Cambridge region, excellent technology is produced in some of the finest European start-ups anywhere.

That industry has given this part of the world the nickname of Silicon Fen.

Yet try to name a technology company home-grown in Cambridge. Most people manage three at most - Acorn Computer, ARM and perhaps Sinclair Research for those with long memories - and they would need to be truly au fait with the industry and its history in Britain. Only three companies have reached what the Americans consider the mark of a successful multinational - a $1 billion (€1.12 billion) market capitalisation.

Contrast this situation to Silicon Valley, a region whose technology success stories are so well known globally that grannies and young children can rattle off a set of companies from the area.

British prime minister Tony Blair among others has expressed bafflement and disappointment at the fact that Britain seems to have a hard time pushing out successful technology companies, even though it has brain power, a reputation for inventiveness, a growing entrepreneurial culture and the financial resources of London.

Why should this be the case? American business journalist Mr David Rosenberg has written a highly interesting if occasionally under-informed book that tries to identify the reasons for the Valley's successes.

In Cloning Silicon Valley: The Next Generation High Tech Hotspots (Reuters/Pearson Education, £18.99 sterling), he also selects six regions around the world that are consciously trying to become nouveau valleys through a mix of native capability, government intervention, financial support, and something approximating the unique business culture that exists in the area around Palo Alto and San Jose.

Cambridge, he believes, has a preponderance of "lifestyle companies" - low-key, science-driven technology outfits where the founders (almost always academics or researchers) are happy to achieve modest success. Pleased if they are able to commercialise a product they believe in, while creating new jobs and earning a good salary for themselves, they often have no real interest in global expansion.

This in itself is seen as its own reward. Rosenberg quotes Mr Alex van Someren, the chief executive of Cambridge encryption company nCipher, who says: "I think that there's a very powerful tendency in the UK for businesses to remain quite parochial and still be considered quite successful."

While visiting Cambridge recently, I raised this issue with Dr Hermann Hauser, the Austrian-born Cambridge graduate who now heads Amadeus Venture Capital, one of Europe's larger VC funds targeting tech companies. Dr Hauser is also well-known as a founder of Acorn Computers, ARM and some two dozen other companies - and wrote the introduction to Mr Rosenberg's book.

During a pre-dinner speech, he spoke about Cambridge's growth as a technology centre. "We have now reached a critical mass of successful entrepreneurs," he said, with a corresponding strong VC interest in the region.

I chatted with him over dinner, when he said he felt that tomorrow's successful companies needed strong science and technology foundations.

Many of the dotcoms - a type of company that clustered around the rival London region - failed because they weren't real technology companies, he said. And anyway, not everyone wanted a big-bang US-style success. A lifestyle company seemed to define its own kind of success quite nicely, he said.

True enough. But I found myself thinking about the Irish technology "cluster" - what makes it different or similar to Silicon Valley and the other "hotspots" identified by Rosenberg? And why wasn't the Republic included in the book, along with Cambridge, Helsinki, Tel Aviv, Singapore, Bangalore, India and Hsinchu-Taipei, Taiwan?

Not that the Republic should necessarily have been a preferred choice to the locations highlighted in this study. It's more that I think it would have proved a helpful complement to many of these locations. And on the basis of Mr Rosenberg's overall argument about what makes the Valley tick and helps spark tech growth in newer regions - including government action, management capability, a good educational system and available capital - I think the Republic also has the most balanced mix of elements. I'm definitely not saying we are exemplary in any or all of these areas.

However, we are not as lopsided in strengths and weaknesses as places like Bangalore or Helsinki. And in contrast to Cambridge, we have a far more coherent system of government support and far lower corporate taxes (although Mr Rosenberg claims Britain's, at 30 per cent, is among the lowest in Europe!) The Irish also have a mindset that comes closer to the US entrepreneurial way of thinking, and many senior managers who have spent time in US corporate circles. We don't tend to think in terms of lifestyle companies but of global reach.

We have closer ties to the US and to Silicon Valley than any of Mr Rosenberg's regions, including Tel Aviv (although Israel has a more significant presence in the Valley).

Yet the Republic tends not to think of itself as one of the alternative Silicon Valleys (some 75 regions have dubbed themselves Silicon something).

For those interested in getting a clearer picture of what is on offer here, what we lack, and how we compare to other tech-focused regions, I'd certainly recommend Cloning Silicon Valley. Not because the analysis is always spot-on but it's an extremely useful compare-and-contrast exercise, and throws out plenty of ideas to think about.