There are three main issues the UK needs to address if it is going to build a technology company on the scale of Google, according to a group of entrepreneurs.
For the BBC’s recent Tech Talent week we asked why the UK can’t build a company on the scale of Google.
Each day we did a video profile of someone with a stake in the UK tech economy, to get their perspective on the issue.
Our guests were established technology entrepreneurs Alex Depledge and Herman Narula; aspiring start-up founders Ben Stanway and David Kramaley; and start-up mentor Stefano Tresca.
Each person made his or her contribution separately. Nonetheless, three common ideas emerged for plotting a route to UK tech success.
Big breakthrough role models
Success breeds success. You knew this already. But had you considered this can be both psychological and practical?
Ben Stanway, in his twenties, has just started his entrepreneurial journey with his app Moneybox, which is barely a month old in the App Store. It allows you simultaneously to track your personal finances and to invest. He admitted to craving psychological inspiration from entrepreneurial role models in the UK.
“This is a very important thing,” he explained. The more role models there are, the better it is for the whole ecosystem. So it’s great to see companies such as TransferWise and Deliveroo succeed globally.”
For Herman Narula, founder and chief executive of virtual reality company Improbable, these success stories also need to fire up the imagination.
“We need to be comfortable with the idea of setting up a company to find something mind-blowingly important, like electric cars or space travel. We need a single, breakout success.”
Indeed UK entrepreneurs with “megalomaniac” ambitions are what we need, according to Stefano Tresca. He is in close contact with the start-up community, as co-founder of Level 39, an incubator initiative in London.
American entrepreneurs have a natural desire to become the biggest company in the world, he said. “It’s not that European entrepreneurs are lazy, but if you aim the bar low, it’s very hard to build something big.”
“Europeans love to cash out and sell their company, live the good life, and that includes me,” he admitted.
However, success when it comes will bring very practical advantages to everyone, explained entrepreneur Alex Depledge.
“We don’t really have that many people in the UK or even Europe who have captained or been a part of an early stage company as it scales up rapidly.”
She sold her online business for booking domestic cleaners, Hassle, to a German company after three years for £24m. Looking back, she feels a shallow talent pool held back growth.
“It’s like the blind leading the blind.”
For Alex Depledge and fellow seasoned entrepreneur Herman Narula, the issue of Brexit weighed heavily on their minds.
What they feared most was losing access to something that is still emerging: the European Digital Single Market.
This is an initiative by the European Commission to harmonise rules for doing digital business in Europe. It was launched by Jean-Claude Juncker in May last year and covers everything from copyright and data protection to digital business regulation.
“We need to make the Digital European Single Market for e-economy come true,” said Herman Narula. “That would be amazing for companies trying to build successful platforms.”
If the UK wants to match the US in building vast technology companies, said Alex Depledge, matching its consumer base by tapping into Europe makes sense.
“Imagine this, the US has a domestic market of 300 million consumers. In the UK our market is 70 million. But put us in Europe and it’s 500 million. But the cost of us doing business across Europe is so much greater than the cost within the US, where state to state their markets are quite harmonised.
“Unfortunately, for me, the vote for Brexit has just set ourselves back at least four or five steps in that mission to create companies as big as Apple and Google.”
It remains to be seen during Brexit negotiations whether the UK can gain access to any benefits from this emerging Digital Single Market.
Ambition please, investors…
“Too many conservative investors in Europe is a problem,” said Stefano Tresca, “because now it’s a global fight.
“If you don’t have the money to fight the US competition, however good you are, you can lose.”
David Kramaley is on the sharp end of this phenomenon. The American start-up entrepreneur is trying to make it in the UK with his chess app, Chessable.
“European investors treat [you] cautiously and really want to know when they are going to see a return on their investment, [whereas] American investors feel they are part of the team,” he explained.
“Tech start-ups will always be risky ventures,” he pointed out. “So it’s not about lending, it’s about being part of it.”
Moneybox founder Ben Stanway was also struck by this.
“In the US they are very interested in what countries you want to expand into next,” he recalled. “But in the UK we’ve had questions on whether we need to grow the team quite so fast.”
US tech firms raised $39bn (£25bn) last year, while UK ones raised $3.6bn (£2.4bn). But the problem isn’t just down to frigidity among investors.
There are bigger forces at work, according to two of our contributors.
“We don’t have the sophistication in the financial markets,” explained Alex Depledge.
There is funding available for the early stages of growth, she explained, but this starts to dry up when you need sums like £10m or more, to take your company to the next level.
A US tech company can realistically look to float on the stock market, which is why they grow as big as they can, pointed out Stefano Tresca.
Hence in their early days Google refused an offer from Yahoo, and Facebook resisted the charms of Google.
There is less appetite among UK stock-pickers for tech companies, so instead UK tech companies grow to a reasonable size and sell out to a tech giant in a private sale.
Eventually, all these entrepreneurs hope, it won’t be just the ideas and the talent that originate in the UK, but the finance too.