Silicon Britain: How the UK can rival Silicon Valley
Shalini Khemka, founder & CEO, E2Exchange on how the UK can replicate the successes of Silicon Valley
The UK is the most entrepreneurial it has ever been and start-ups are rushing to embrace the digital revolution. There are, however, still significant barriers preventing UK tech entrepreneurs from establishing and achieving substantial business growth. The government and the private sector need to support these businesses and to ensure the UK becomes a true competitor in the global tech race.
Technology has fundamentally transformed the way that SMEs and start-ups do business and it is encouraging to see that UK entrepreneurs have recognised this shift to digital and are adapting their business models accordingly. Last year the internet economy represented more than 8% of UK GDP and is forecast to grow to 12.4% by 2016, injecting around £225 billion into our economy. This growth is by SMEs and start-ups and it is vitally important that we make our tech companies competitive so we can continue to enjoy the prosperity they bring to the UK.
Despite the growth in the digital economy and steps made in attracting technology companies to the UK, Silicon Roundabout still lingers behind Silicon Valley. Aside from other factors, two important reasons for this stand out.
Silicon Valley has culture and a particular mind-set on its side. During the past 75 years it has nurtured entrepreneurship, risk taking and business mentoring which has attracted significant talent and business investment to the area. This is not something that can be replicated at Silicon Roundabout overnight, but in the UK we are learning from the Valley’s successes and working hard to implement these characteristics into our own business culture.
The significantly higher valuation of companies in the US is the other factor, and one of the key challenges to replicating this is the relative difficulty in rapidly scaling up growth companies in the UK. The vast size of the US lends itself to higher growth and gives SMEs access to a significantly larger potential marketplace, enabling entrepreneurs to expand their businesses in a way that is not possible in the UK and Europe. Meanwhile the depth of the capital markets and the investor base in the US makes it very difficult for UK companies to achieve similarly high valuations.
So what more can we do on this side of the Atlantic? As information around access to funding remains the single largest barrier to SME growth, educating SMEs about the 800 government supported schemes that are available to growth businesses is important. Nick Linney, the sixth generation of his family to be involved in marketing services business Linney Group said: “There is plenty funding about, we just need to publicise how better to access the range of schemes available and ensure we are communicating this effectively.”
The government also has a role to play in further developing links between large companies and SMEs and tax breaks for large companies that invest in start-ups are a way for SMEs to secure that crucial cash injection while also potentially providing them with advice and new market opportunities that will truly allow to flourish.
One of the largest obstacles facing SMEs is lack of talent. To encourage talent in the UK the government must strive to maintain the freedom of movement of people within Europe and counter the UK’s backlash against immigration. 52% of entrepreneurs in Silicon Valley were not born in the US. In order to accelerate the growth of start-ups, the UK must realise that the best companies are those with the best people.
Entrepreneurial talent must also be encouraged from a young age. The Department for Business, Innovation and Skills in its report, ‘Enterprise for all’ outlines how to improve entrepreneurial education in primary and secondary schools, which is a significant step in the right direction. It is only by engraining technological learning, such as coding, that has been introduced in the national curriculum, that the UK will nurture the talent to help it compete in the global technology market. One in five adults lack digital skills. If we fail to position our SMEs at the forefront of the digital revolution, the UK and UK businesses will be left behind.
These pragmatic approaches cannot be successful unless the UK fundamentally changes its attitude towards success, however and this fear of failure, endemic to the UK, is discouraging businesses to take the risks which could ultimately result in their success. A recent survey conducted by E2Exchange found that 78% of entrepreneurs believe that the UK’s risk averse attitude and fear of failure is constraining the growth of SMEs. It is only by shrugging off this fear and emulating the spirit of Silicon Valley through mentoring and supporting the business community, that the UK can develop the infrastructure of investment and talent it needs to embrace Silicon Britain.
Shalini Khemka is the founder/CEO of E2Exchange, one of the UK’s fastest-growing entrepreneur networks which she formed to provide a powerful voice for entrepreneurs nationally. Shalini, a former senior director at Deutsche Bank Securities, is a successful entrepreneur in her own right – established the first online bank trade finance company with three Deutsche Bank colleagues, which they subsequently sold. Shalini was previously an Investment Director at LDC, the private equity arm of Lloyds Banking Group, and remains closely affiliated to LDC through LDC’s headline sponsorship of E2Exchange.
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