This study was produced on behalf of the Conservative Technology Forum, a technology interest group attached to the Conservative Party of the United Kingdom. It is a broad-based study that seeks to understand why Britain, with its continuing history of technical innovation, has yet to produce a technology company that achieves the scale of Google. It then seeks to provide policy options designed to assist Britain in developing its own ‘Google’. A shortened version of this presentation was made to the Cass Entrepreneurs Network on December 6, 2011.
Why is there no British "Google"? Presented to the Cass Entrepreneurs Network, 06/12/11
1. Engine Search
Why is there no British “Google”?
James Clark – Cass Entrepreneurs Network – December 6st, 2011
3. British culture is unsuited to
entrepreneurs
United States – 7.6%
United Kingdom – 6.4%
Comparative Ave – 5.6%
Source: Global Entrepreneurship Monitor Global Report 2010
5. Shortage of money for start-ups
Regional Venture Capital Funds UK High Technology Fund
Early Growth Funds
Community Development Venture Funds
Enterprise Capital Funds
UK Innovation Investment Fund
The Aspire Fund
£1 billion
7. Why have a Google?
• Google is an exemplar of VC funded businesses
– Between 1981 and 2001, 0.1% of start-ups employ 10% of
US workforce
– By 2008 that became 11% of the private sector
– 21% of US GDP
– Lower capital costs, higher potential returns, shorter
lifecycle
8. Review and research
• Sponsored by the CTF; academic review by Cass
Business School
• Researched in 3 phases:
– Interviews with industry players
– Extensive literature review
– Limited survey used as confirmation of certain points
10. The Silicon Valley story Wave 6:
World Wide Web
• WWW is created
at Cern by Tim
Wave 5: Berners-Lee
Software • ARPANET
repurposed as
• IBM aligns with
Internet
Microsoft MSDOS
• Internet
Wave 4: • Compaq releases
Hardware commerce arrives
IBM clone;
• Search engines
• Personal hardware market
dominate
computing takes is flooded
• New business
Wave 3: shape • Bad for hardware,
powerhouses
Integrated Circuits • Intel = Memory very good for
• Netscape initiates
• IBM = Databases Microsoft
• Texas Instruments VC boom
• Xerox PARC = GUI, • Yahoo created
and Integrated
Wave 2: Workstations, • Amazon goes
Circuits
Ethernet from $40k
Semiconductors • The Planar
• Altair 8800 investment to
Method
• Shockley and the inspires the $438m IPO in 3
• Intel created by
Traitorous 8 creation of years
Wave 1: members of
• Fairchild Microsoft and • Google created in
Valves Fairchild
Semiconductor Apple 1998
Semiconductor
• Fred Terman • Arthur Rock and a
• Moore’s Law
• Hewlett Packard new financing
• Growth in the
• Stanford outreach model
Valley
• US Military projects
11. The “4 Drivers” of Silicon Valley
Culture Knowledge and Experience
• Determination • Innovation
• Pioneering spirit • Continuous Regeneration
• Calculated Risk Taking • Clustered knowledge-base
• Entrepreneurialism
Finance Networks
• Creation of the VC model • Rapid distribution of knowledge
• Equity structuring • Closely linked community
• Reinvestment of wealth • Ready access to resources
12. Google’s advantages
Culture Knowledge and Experience
• Focus on excellence in product • Page and Brin studied at Stanford
• Willingness to “Go big” • Investors brought with them
• Flexible enough to adapt experience
• Experience meant confidence in
changing
Finance Networks
• Access to Angels • Advantage of Stanford network at
• Buoyant VC market start-up
• Private ownership during Dotcom • Investment through KP and Sequoia
Crash enabled cool heads enabled access to the best networks
• Model generating revenue • Tradition of talent mobility
14. Culture
• British “Reserve”
– More likely to draw attention to failure than success
– Following the “traditional” path
• Misperception of risk
– Stock options; early sales; poor investments by angels; conservatism of GPs and LPs
• Failure
– Less of a factor and can be misleading – GEM: UK vs US vs Israel
• Ambition
– Less desire to go “big”
• Dotcom Hangover
– Investors are highly averse to risk taking
– Financial “Nuclear Winter”
• HOWEVER
– Things are changing
– Risk of losing touch with current generation of start-ups
15. Knowledge and Experience
• Entrepreneurial teams
– Strategy and Operational Experience
– Industry Experience
– Financing Experience
• Investors
– Angels
– VCs
– Institutional investors (LPs)
16. Finance
• Seed/Start-up finance
– Thriving yet inexperienced angel investment
– Government programs
• Growth Finance
– Funding gaps
• US vs Europe/UK
• “Wrong” institutional investors
• Flight from risk
• Misdirected incentives = misdirected investment
– Consequences
• This has nothing to do with debt finance
• Collapse of venture market
• Need to sell before IPO
17. Networks
• Networks as they relate to the other factors
– Culture
– Knowledge and Experience
– Finance
• Stratification of networks
– Poor understanding of the total network
– Who knows what?
18. Summary
Culture Knowledge and Experience
• Some aspects of our culture can act as • Not enough of the “right” kind of
“inhibitors” knowledge
• Behave in a way that makes use of • You can’t do everything, so seek out
cultural activators partners who complement your skills
Finance Networks
• Financing gaps at crucial growth stages • Networks are stratified and
• Know your funding options; information is poorly distributed
understand your investors • Be an open networker – share
information and others will
reciprocate
20. Culture
• Embrace failure
– Learn from it rather than fear it
– Good investors accept the value of failure
• Manage risk
– Accept risk, manage it, mitigate it
21. Knowledge and Experience
• Avoid “Zuckerberg Syndrome”
– One person rarely has all the skills and knowledge to
succeed
– Be willing to use shares to attract staff
– Potential investors will look for a team
• Learn from failure
– Failure is only a waste if you don’t learn lessons
• Be where the action is
– You may be able to find funding locally, don’t take it
22. Finance
• Take an interest
– Business structure
– Keep all financing options on the table
• Know your financier
– Banks, F&F, Angels, VCs
– Investment should be more than just money
– What can they offer you?
– What do they want from you?
23. Networks
• Value your network
– Get out there and grow it
– Maintain it
– Bring others along as well
• Be open
– Share your ideas
– Share your network
– Rewards as well as risks
25. Conclusion
• Recommendations are specific to tech
– Not all start-ups are the same
• Make best use of Britain’s advantages
– Industrial, human, financial
• Yes, but not yet
– Slow process but not 60 years
Alan TuringSir Maurice WilkesTim Berners-LeeLulzsec HackersSteve JobsMark ZuckerbergMike LynchRichard Moross
Saffo from Newsweek in 2002 The valley also recycles its most important resource – people. Observers are quick to lampoon the callow folly of the fallen dot-comers, but they overlook the experience gained by these pioneers. An entire generation of twenty- and thirty-somethings just rocketed through an accelerated business cycle. They got in, shot up, crashed down and now they are out, and 25 | P a g e their careers still lie more before than behind them. Few are rushing to embrace the security of the corporate establishment. Rather, they are busy starting over.
Risk: Mike Lynch, CEO of Autonomy when interviewed for the Wall St Journal: It is all summed up for me in one simple thing. We had someone write a note last year that accused us of running Autonomy with a start-up culture. It was a sell note on that basis. That would be a buy note on an American company. It is just an absolutely beautiful clear-cut case of the different way of thinking. (Rooney 2011)