Rise of mobile computing fosters new tech hubs

January 2, 2014 12:12 pm

Rise of mobile computing fosters new tech hubs

By Richard Waters in San Francisco and Richard Milne in Oslo

The rise of mobile computing has fostered a fresh round of tech start-ups around the world, turning cities like Stockholm, Tel Aviv and Berlin into magnets for entrepreneurs hoping to cash in on the boom in smartphone and tablet computing.But even amid the biggest wave of global interest in new consumer technology start-ups since the dotcom bubble at the end of the 1990s, Silicon Valley still retains a huge lead when it comes to cultivating the next generation of online leaders, according to many of the entrepreneurs and venture capitalists involved.

The rise of mobile computing – along with the “cloud”, or back-end infrastructure, that supports the swarm of new computing devices – has created big new tech markets for international entrepreneurs, while also freeing them from some of the constraints that once made it hard to build freestanding businesses.

“Now the app stores have come along and all of a sudden it is possible to reach a billion consumers by just submitting your game to the app store,” said Ilkka Paananen, chief executive of Supercell, the Finnish games company.

In one of the most dramatic demonstrations of the instant fortunes now possible, the three-year-old Supercell recently sold a 51 per cent stake in itself for $1.5bn to Japanese investors SoftBank and GungHo Online Entertainment. Other Scandinavian start-ups to ride the mobile boom include music subscription service Spotify, which was recently valued at $4bn, and Rovio, maker of Angry Birds, leading to hopes that a new generation of companies will emerge to replace fading handset maker Nokia.

Israel’s well established start-up sector was also given a big lift in 2013 from the rise of mobile, with Googlepaying $1bn for mobile traffic app Waze. The acquisitions extended to the new technologies needed to support mobile computing, such as Facebook’s purchase of data compression company Onavo and Apple’sacquisition of Primesense, whose sensors are used to control computers by gesture.

Highly visible successes like these, and the low costs of creating apps for mobile platforms, have brought entrepreneurs to the world’s start-up hubs, echoing the surge of enthusiasm in consumer internet companies during the dotcom boom. The earlier bubble quickly popped, however, after the dotcom groups failed to live up to their high valuations.

Since then, cities like London and New York have made concerted efforts to build more durable start-up ecosystems. In part, that has involved turning to entrenched local industries like fashion, retail and finance to foster internet companies that can draw on skills beyond pure technology.

However, entrepreneurs and investors in some of these centres say that the hottest prospects are still often drawn to Silicon Valley or sell out before they can realise much of their potential. A shortage of finance to support fast growing companies beyond their early seed stages, along with the lack of a deep labour pool, are the most common reasons cited.

“All these markets have the potential, they have the infrastructure – but they never seem to capture it the way the Valley does,” said Dave Zilberman of Comcast Ventures, the investment arm of the US cable TV company, who left New York and joined the brain-drain to California in 2013 to be closer to the action.

Long-running attempts around the world to build tech hubs to rival Silicon Valley have failed to make a dent in the lead enjoyed by California, added John Hennessy, president of Stanford University and a director of Google. “If anything, the gap has actually opened. The fact is that this is the core of the technology world.”