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Guest slot: The impact of leaving the EU on London’s technology start up scene

June 13th, 2016

Union Jack

I have never been political. I’ve never joined any party, and my voting record is patchy. What I do is start technology businesses, and I’m on my third right now. Knowing rcs1000 (he’s an investor in my firm), I asked if I could write a piece for politicalbetting about the impact of leaving the EU on London’s technology start up scene.

Let me start by putting London’s tech scene in context. London has the second largest concentration of technology start-ups in the world, behind only the corridor between San Francisco and San Jose (“Silicon Valley”). Some of these start-ups have been enormous successes (Deep Mind, from my friend Demis for example), many are best known outside the UK (Draft Kings in the US), some are in pure technology (Mastodon C), and others are revolutionizing existing industries (like Deliveroo). In some areas, like FinTech, London is the undisputed world number one: the next generation of financial technology – whether in the Bitcoin space, peer-to-peer FX, or in next generation trading networks – is probably being built in a cheap, un-air conditioned office in Shoreditch or even Dalston.

Why are these firms in London? Like most things in life, there is no single reason. London has a combination of cheap office space, a lot of incubators and venture capital firms, and – most importantly – a very deep pool of technology talent. When we started our current firm we were in a large building full of three to five man start-ups near Old Street roundabout.

There were maybe 150 of these little companies, each paying for a few desks in little rabbit warren rooms. Company names would be printed out and stuck on doors, and when you wandered down the corridor, the names regularly changed – firms would get fabled Series A funding, and move to fancy offices of their own (with air conditioning), or would run out of money. Hiring is by happenstance; you’d hear the Twitter mining company down the corridor was running out of money, and you’d make sure their DevOps person knew there was a place at your start up.

Getting the right people is the most difficult part of any start-up. Agencies are shit. The guy you are dealing with has no idea whether Frank from Loughbrough really knows anything about Erlang, he just wants his commission. The London tech start-up scene is probably – outside of the Valley – the best place to get people to work 16 hours a day in the world. It attracts people who want to build things, don’t mind living in shitty apartments, for low wages, because they want to work for exciting companies, building groundbreaking things. It attracts people who want to say “I was there at the beginning of Google.”

And this is why I’m worried about Britain leaving the EU. Trade is an irrelevancy: our customers (like most other tech start-ups) are global, being outside the EU would make little difference. Regulation is a non-issue: what regulation, beyond having a Health & Safety poster hanging on the back of the door, is there for small tech companies?

But people? People is the big one.

Less than 20% of UK graduates have STEM degrees. Of these, fewer than 20,000 graduate with Computer Science degrees each year. And, if I’m going to be honest, we don’t teach CS well in the UK. Yes, there are exceptions (Cambridge, Edinburgh, Imperial) – but by and large the big European universities do a better job of producing programmers than do British ones. There are other problems: Goldman Sachs and Google actively recruit at Imperial, so graduates from there are much less likely to enter the start-up scene. Graduate European developers are also much more likely to have contributed to open source projects, so you can get an idea of code quality more easily.

London has start-ups because it has people. And it has people because it has one of the most exciting start-up scenes in the world. For the brightest and the best of the 250,000 Europeans graduating with Computer Science degrees, London is a cheap flight or a bus ride away. They come in their tens of thousands. And most don’t make it. But a lot stay. At my firm, we have 14 developers, of which three are British, two are Commonwealth, and the rest are European. (In case anyone thinks our hiring policy is racist, I’d point out that all of management, finance, sales and marketing is British!)

Last week, I asked Pablo, our lead Android developer, what he’d have done if he’d have had to get a visa to come work in the UK. He thought for a moment, and said “Started an Android development shop in Spain… or gone to the Valley.”

Of course, I know that many people will ask “But why not train British developers up?” And we train people up every day. A programmer that joins us will almost certainly only know a subset of the technologies we use: perhaps they’ve never used Postgres, Rexx, or Node.js. Or perhaps they’re not used to writing automatic test suites before code. And even if they do know all these, they’ve still got to learn the way the internal systems work – how the servers are organized, the APIs, the database schema, and the tens of thousands of existing lines of production code. I doubt a new developer produces useful code for at least two months, and they certainly don’t have a positive ROI until they’ve been with us four or five.

If someone needs remedial programming training, or has never written object oriented code before, then – even if they are the smartest people in the world – than that time to positive ROI is going to be a year. And that’s simply not going to work for us. Last year I went without salary for five months because a large customer was slow paying, and an investor didn’t meet their commitments on time. We are constantly on a knife edge between success and bankruptcy.

London’s technology start-up scene is among the most vibrant in the world. And it’s the most vibrant because it attracts the brightest and the best developers from across Europe. It’s worth remembering just how recent this success is. Fifteen years ago, there were a fraction of the number of start-ups. We haven’t yet produced the next Google, but it’s only a matter of time.

But that success needs both an entrepreneurial culture and a concentration of young, hungry, raw talent, fresh off the Megabus from Krakow. If we put up barriers to prevent people coming to work in London’s tech industry, then somewhere else will spring up, and we’ll have missed a historic opportunity.

Of course, I know I’m biased. I know that my business depends on being able to find these people. I know that skews my perspective. But I also know that my developers didn’t have to come here. They could have gone to Berlin or Stockholm, or – if they’re going to fill in a visa application form – Sydney or San Francisco.

We are building the world’s second Silicon Valley. I don’t want to lose that, both for personal reasons, but also because tech hubs like London or the Valley are so rare and so wonderful. 

Tech Founder