How Innovation Happens in Silicon Valley

Last night I was invited to a NESTA debate on “How Innovation Happens in Silicon Valley”. The Keynote was given by the Shadow Chancellor, George Osborne and other eminent panel members included Reid Hoffman, the founder of LinkedIn and Facebook “angel” investor, Megan Smith, VP at Google and James Slavent from Greylock Venture Capital.

Firstly, I guess we were all surprised that George Osborne didn’t cancel due to the HM Government’s ”small IT problem” which erupted yesterday afternoon. But he did and I was greatly impressed by the man. Although he did make me feel rather old when he quipped that the first use of the term “Silicon Valley” was in the Electronics Times of 1971 – the year Osborne was born!

Osborne pointed out that, whereas the UK’s share of the global economy was forecast to decline over the next ten years (due to the advent of the “BRICs”), California’s economy was still set to rise. He put Silicon Valley’s success down to the way it worked with its Universities – Stanford in particular – pointing out that California had three of the top five Science and Tech universities in the world whereas as the UK only had three of the Top 20.

He also made the point that the US Govt had many programmes in place to favour small business. US Federal Govt currently awarded 23% of its contracts (by value) to small business whereas “in the UK all too often small companies are completely locked out of Govt procurement” by, for example, demanding three years of audited accounts before you could even bid! Osborne vowed to “reduce the friction” between small business and the UK Government and, very boldly, said that an incoming Conservative Govt would aim for 25% of business from small companies.

Of course, he also touched on the changes in CGT that dear Darling introduced – seemingly so hurriedly and certainly far from thought-through. He reckoned that there was still a good chance of a U-turn – certainly further major concessions - before the new rules come into force next April. Many of the speakers pointed out the concessions that were introduced in the US many years ago to encourage people to invest their pension funds in start-ups.

The other speakers made the point that other areas of the US had the same envy of Silicon Valley as other countries do. Hoffman pointed out that Mark Zuckerberg relocated Facebook from Boston to Californian to get the Silicon Valley effect. Indeed all the participants stressed the importance of the Silicon Valley “network”. How being close to all those technologists, VCs, serial entrepreneurs, universities etc. and a culture of ‘risk-taking’ was key to their success.

But they all praised what was already happening in the UK around the “Golden Triangle” of Cambridge, Oxford and London. The UK needed to trumpet its successes more. In particular within the UK and to our ‘young people’ so that an entrepreneurial career in tech was seen as something to aspire to – rather than the rather nerdy, boring image that it currently seems to have.

I couldn’t agree more!