3 reasons the London tech scene ISN’T in a bubble, despite what people say

A meeting of tech industry minds was held on Tuesday morning to discuss whether London’s tech scene is in a bubble. The panel overwhelmingly said it wasn’t, which came as a surprise to LondonlovesBusiness.com, since we’ve been hearing for a couple of years that we’re in another 90s-style dotcom bubble. But here are five reasons the tech brains reckon it’s all kosher:

1. Billion-dollar deals don’t represent normal tech businesses

While we’re seeing big money deals in the media, such as Facebook buying Whatsapp for $19bn, those are exceptions, said mergers and acquisitions expert Julie Langley, partner at financial advisor Results International.

“Big deals are not the day-to-day reality for most tech businesses,” she said.

The values of these big deals are not necessarily over-inflated either. “What a buyer can do with a business is what drives the value. They’re always rational but only time will tell if they’re a good deal or not,” said Langley.

2. Investors now know what the internet is

Jamie True, entrepreneur and founder of tech company Monitise Create, said it is much easier for investors to know what will work now that the internet has been around for a couple of decades and different models have been tried and tested. “It’s less risky and easier for angel investors to come in at the early stages,” he said.

Investors are on the whole more tech savvy than they used to be, the panel said, particularly as they have learnt lessons from the dotcom bubble.

3. It’s not as easy to raise finance as people make out

“In London it’s nowhere near as easy to raise finance as in New York or San Francisco,” said tech entrepreneur Tom Leathes, founder of travel site Top10.com.

It’s easier to raise larger sums in the US than in Europe. Businesses in Europe have done well if they raise $5m, while in the States promising tech start-ups can get $60m, the panel said. London should be welcoming venture capitalists from across the pond too, they added.

What else did they talk about?

There’s a shortage of talent and co-operation

In the US, businesses work closely with colleges, buying ideas from students and recent graduates. Places like Silicon Valley are founded on academia, unlike the melting pot of London.

“In New York, universities help start-ups. You wouldn’t think to do that here,” said Ben Cohen, founder of media company PinkNews.co.uk and former tech correspondent at Channel 4 News.

The London tech scene finds it more difficult to attract the best talent and pulls in people from other countries and sectors of business, making it less insular. It’s not just about patents, it’s about the whole package, the panel said.

The biggest opportunities are for start-ups who know their users

In the dotcom bubble, investors were putting money into technology, and hoped to later be able to build a business behind it. However, these days it’s all about knowing what users want and monetising that to grow super-rapidly, the panel said.

The companies that grow quickly in the current climate are tapping into something that is not being offered elsewhere. For example, start-ups can capitalise on developing sites for mobile, while bigger, more established companies struggle to move quickly to take advantage of people’s changing habits, the panel said.

Cohen agreed. “It was easier to raise money with not a very good product in the 90s, but we had no idea how to monetise things. We now know what consumers want and the market is much more established.”

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