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U.S tech investors tell Boris to “buy British” to grow UK digital economy

Venture capitalists said British enterprises, like BBC, must acquire tech firms

Boris Johnson engaged with heavyweight tech venture capitalists and entrepreneurs from the U.S via his first Google Hangout at London’s InnoTech Summit last week, asking them “why on earth Europe has yet to produce an Internet giant?” While answers ranged from lack of funding and strategic investment to the UK’s risk-averse culture, the resounding conclusion is that British venture capital needs to ‘buy British’.

The Mayor of London was told by Steve Schlenker, a Managing Partner at DN Capital who joined the discussion live from San Francisco, that venture capitalists will be more active when British acquirers, such as “FTSE 100 companies or native British large enterprises”, like the BBC, are more active.

“How many people at the BBC have acquired or bought businesses at prices that were not based on profit and loss? Why did Summly sell to Yahoo instead of selling to the BBC? Because no one wants to pay £20 million to a 17 year old,” he said. “I would say you need to encourage companies in England to buy British.”

Alastair Mitchell, CEO and founder of Huddle (previously London-based), echoed the view, saying that government procurement needs to support UK innovation. “Buying British also comes from the top down. The UK public sector represents 47% of UK public spend and if they’re not buying British, who is?” he asked. Mr. Johnson, although misunderstanding the application of the technology, quickly got the point:
“So you’re saying I shouldn’t open up my homepage and get Google, I should get Huddle, is that right?” he asked.

“An economic opportunity for large companies in Britain”

Seeking solutions to the UK’s heavily debated aversion to risk compared with the U.S, The Mayor was told that British investors need to think long-term. “The reason that disproportionate multiples are paid for young companies like Summly is because they’re being paid on their strategic value to introduce discontinuous innovation,” explained Julie Hanna, Chair of the Board at Kiva.

She continued: “If companies don’t acquire technology to accelerate their own growth and respond to market changes, then they’re going to get left behind. So this is really an economic opportunity for large companies in the UK.”

Ensuring that UK startups are given the tools necessary for longevity, instead of just hype and enthusiasm, Ivan Nikkhoo, Managing Director of Siemer& Associates in Los Angeles said: “There are many countries looking at the startup effect but not necessarily the lifecycle effect. As companies are started they’re going to need access to growth capital, business relationships with other successful companies, particularly around Silicon Valley, and, of course, exit opportunities.”

As demonstrated by his willingness to be the first major UK politician to host a live international Google Hangout, building relationships with firms in U.S tech hubs is certainly something that The Mayor believes is necessary to accelerate the growth of the UK startup scene. A statement that Mr. Johnson issued for the event said:

“London’s home-grown tech talent is attracting attention from around the world. International collaboration, notably with other centres of innovation such as the West Coast, is vitally important to help our native startups become tomorrow’s digital giants. I am pleased to support the InnoTech Summit’s drive to help London’s high tech entrepreneurs forge these important links so we build on the capital’s silicon success.”

Watch the full Google Hangout with Boris Johnson and U.S tech venture capitalists here.