Opinion – Berlin beats London (in tech) – POLITICO

The Bank of England in Threadneedle Street, Lo...

The Bank of England in Threadneedle Street, London. Deutsch: Sitz der Bank von England in der Londoner Threadneedle Street. (Photo credit: Wikipedia)

This is a truly amazing, must read article published by the US paper Politico. Check it out!

via Berlin beats London (in tech) – POLITICO.

For years there has been a prevailing view that the Anglo-Saxon model is better for startups and innovation, as demonstrated by the evidence in the US and the UK.

But now it seems that Berlin is overtaking London in terms of nurturing start-ups. Hang on a minute, don’t they have more rules in Germany?

Well it seems that Germany has taken a strategic approach to startups and innovation and its paying off. Also Germany’s giant businesses are ready to invest in fledgling businesses.

There was a time in my life when I knew the UK’s venture capital industry really well but that was when it functioned effectively. Even then, the were hangers-on and parasites, like professional firms looking to take their cuts. But many of the people who were responsible for investment decisions had never actually run a small business themselves. Actually, I felt that the players were typically risk averse and looking for financial returns that were eye-watering – there was enormous inefficiency.

But there are two overall reasons why London is losing out to Berlin. Firstly, the UK does not have an effective strategy to promote startups and innovation. Secondly, the UK banks prefer to lend to individuals on credit scores, rather than support real innovation. UK banks have become over-centralized and staffed by bureaucrats with zero skills as bankers, so startups and innovation have been strangled.

Here are my strawman suggestions:

  1. George Osborne needs to promote massive fiscal stimulus for small-businesses, startups, innovation and more widely investment.
  2. UK banks need to cull the bureaucrats and those without experience outside financial services – probably a fifty percent cull is required to remind bank employees that customers come first.
  3. The Bank of England should strongly encourage major banks to set up new divisions to service small-businesses and startups, run by professionals with real relevant practical experience outside financial services.

Thoughts?

One response

  1. I agree with Dr Alf’s prognosis fully but more needs to be done with UK venture capitalists and business angels.

    The St John’s Innovation Centre, in Cambridge, UK, and even the Herman Hauser Centre in Cavendish Road, Cambridge, close to Bill Gates’s Microsoft Research Centre are both responsible for nurturing and then financing high tech spin-outs yet VCs only finance about 1% of them. The comparable figures for Silicon Valley and MIT based businesses are 5%.

    The UK Government does nothing about this or providing tax breaks for R&D in anything like the right quantities. This is why Sir James Dyson and others have essentially moved themselves offshore.

    Business Angels, operating below the £1 million gbp turnover mark, are similarly risk averse so the UK “Anglo Saxon ” model does not work whereas the American one does. As Dr Alf has highlighted, the latest news is that Berlin has surpassed London in attraction for startups.

    The Chinese who visited the St John’s Innovation Centre about 10 years ago proceeded to build 10 versions of their own each 10 times the size of the one in Cambridge. I saw for myself what was going on in Wuxi in 2011, where their new High Tech centres were replacing the old pottery and brewing industries and the Wuxi Regional Government was injecting money into startups some of which had gone global and one of which was doing business with Marks and Spencer PLC.

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