Silicon Roundabout, David Cameron & Political Opportunism

Last year, David Cameron pledged £400m to turn East London into the next Silicon Valley.

Many people, understandably, will conclude that this is A Good Thing.

Exposure for startups, support for small businesses and the promise to help the Brits square up to our American friends – what’s not to like?

They’d be missing the point. Like Vince Cable on a bad day, I’m mad as hell and not going to take it anymore.

Not for the first time, the British government have missed perhaps the single most exciting thing about so many internet companies.

[whisper]They are not location dependent.[/whisper]

Meanwhile, David Cameron, Boris Johnson et al obsess over the location of Twitter’s UK office like star struck school kids.

The Problem

Let’s call the problem ‘not as sexy as Twitter’ syndrome.

The reality is that building any business –whether it is moderately or monstrously successful – is hard work, especially in a recession.

Most startups fail, and even the successful ones are more likely to hit Groupon’s teabag budget, not buyout offers.

Nobody wants to read about the mundane minutiae on sites like TechCrunch or Mashable: dealing with tax red tape, wondering why banks won’t lend profitable businesses money, etc.

That’s fine – it’s not what they do. These do, however, fall well squarely within the Government’s mandate to encourage small businesses, and that is what they should be concerning themselves with.

So why my scepticism of their sudden enthusiasm for internet startups?

Enter The Olympics

In the 2012 Olympics, the government has inherited a white elephant so large that it makes the Millennium Dome feel like a Poundland bargain binge.

The total spend is – forgive me – genuinely Olympic, staggering by any measure, but genuinely appalling given the state of the British economy.

After London was awarded the Games, the Department for Culture, Media and Sport announced a budget of £9.325 billion.

In December, the Spectator put the true cost to the British taxpayer at closer to £12 billion.

For some context, the Coalition’s Comprehensive Spending Review last year introduced £7 billion worth of public sector cuts.

I am not denying that the Olympics brings benefits.

It means jobs, tourism, redevelopment of a deprived part of London and the chance for me to sublet my flat to desperate tourists, for starters.

But I remain to be convinced that this these offer value for money. And I believe that the Coalition Government has come the same conclusion.

Hence the sudden enthusiasm to bring Silicon Valley to, um, Stratford.

What’s This Got to Do With Startups?

The government is committed to hosting the Olympics, which will leave them with a very expensive, very empty Olympic Park afterwards.

If you’ve ever visited the former Olympic sites in cities like Barcelona, you’ll know what to expect.

The Olympic Park will be in Stratford, a part of London that is regretfully better known for deprivation than startups.

And Cameron & Co have pledged £400m to turn this into a Silicon Valley-style success.

This equates to approximately 0.3-0.4% of the Olympic spend, depending on whose figures you believe.

Suddenly, it feels less like backing British business, and more a case of ‘for an extra £50 we can use it for something useful’.

Details remain vague on how exactly the government money will be spent.

Vaguer still are the what exactly the name dropped firms – Intel, FaceBook, Google et al – have to do with it.

Will it work? I have my doubts. Here’s why.

What the Government Should Be Doing

Motivations aside, the things that encourage great execution are not as trivial as shared local boozers, fancy offices, or persuading Google to move their YTS kids in next door.

These distract from the real issues facing small businesses in 2011.

What the government should be doing is taking responsibility for fostering an environment that encourages homegrown entrepreneurs, not chasing the superstars of Silicon Valley.

That means things like encouraging bank lending to profitable small businesses or keeping services like Business Link that help nurture them.

I’ll be the first to admit that these ain’t half as sexy as getting to tweet: ‘Hanging with @Ev at Twitter HQ’.

But they would do rather more to encourage small businesses in the UK.

The Future

I’ll end with a few predictions:

#1. Government involvement with internet startups will be an expensive, ill-conceived disaster. Think ‘Millennium Dome with wifi’.

#2. Those that buy into it will be the American behemoths currently located in the UK burbs (eg, Amazon, eBay etc) – not homegrown startups.

#3. Stratford will continue to host a smaller startup scene than my kitchen.

PPS. Thanks to Flickr user mbiddulph for the photo.