Silicon Valley is no longer the only game in town

January 7, 2014 12:03 pm

Silicon Valley is no longer the only game in town

By Niklas Zennström

In the tech hubs war, it is not where you come from that counts, writes Niklas Zennstrom

The technology world loves a good battle, and in recent years there has been plenty of excitement about the war of the technology hubs. Silicon Valley is being challenged by cities from London to Berlin and Beijing – and, as a proud European entrepreneur, there is part of me that is tremendously excited by this. In fact, 10 years ago when we were building Skype from Sweden, one potential investor told me that he would invest on condition I moved to Silicon Valley. I did not move and he did not invest.But while this geographic battle for supremacy is compelling, its effect is actually to make location less, not more, important. For instance, thanks largely to the internet itself almost everyone has access to the same information; for most people, the days of having to be close to a data centre are long gone; and investors such as us are looking globally for promising companies we can help.

While every location has its opportunities and disadvantages – it is easier to find top computer scientists in San Francisco, for instance, but easier to hold on to them in Helsinki – where you start out is no longer a helpful predictor of your chances of success. Today, the simple truth is that great companies can come from anywhere.

In a way, we have the wrong obsession with geography. In technology, as in life, it is not where you come from – it is where you are going that counts. Take Supercell, a remarkable online gaming company in which our investment firm, Atomico, invested last year. Supercell was born in Helsinki three years ago, and only released its hit games, Clash of Clans and Hay Day, in 2012.

Very quickly the company built a highly profitable business, with its games at the top of the highest grossing charts in more than 100 countries. In October, it sold a majority stake to Japan’sSoftBank, a transaction that valued the business at $3bn. Even in an industry known for moving at speed, it is a phenomenal story of global success. And it is an example that can and should be emulated. The geographic lesson is not that all entrepreneurs should move to Helsinki – though I would highly recommend it as a city – but to have international ambitions from the outset.

While every location has its opportunities and disadvantages . . . where you start out is no longer a helpful predictor of your chances of success

As global internet access has grown dramatically in recent years, global expansion is where the biggest opportunity lies. Japan is the world’s top country for mobile app store revenue; China has the greatest number of internet users; and Brazil is second only to the US for use of leading social networks. You cannot build a truly global business unless you manage to break into these markets. This is perhaps one area where entrepreneurs in the emerging tech hubs have an edge. More so than start-ups in the US, the founding teams at companies such as Skype and Supercell aimed and planned for global success from the start because their ambitions went beyond being a leading domestic company in Sweden or Finland.

Although it is possible to build a global business much quicker than ever before, it is still not easy. The skills needed to develop a great product are not the same as needed to build and run a global business; to hire the best talent on the other side of the world; or to build the business relationships in places such as China that are needed to crack the market. And the cultural differences can be extreme – as anyone who has experience of negotiating contracts between American and Japanese companies can testify.

But the scale of the opportunity is such that an increasing amount of investment help is there. In our latest round of fundraising, we were struck by the number of leading institutional investors who now see this as a significant area of focus.

So as the war of the tech hubs plays out, perhaps Silicon Roundabout will one day rival Silicon Valley, or perhaps it will not. But, for the London entrepreneur who dreams of becoming big in China, that is not going to hold them back.

The writer is chief executive of technology investment firm Atomico and was a co-founder of Skype