Fred Destin

Developing London tech clusters beyond Shoreditch: Croydon ?

 Here in London we're all very proud of the progress made over the last few years.  Having come back from 4 years in Boston, I have been surprised by the level of maturity that we have achieved and how far we have come.  

But London is a city of 9 million and our efforts and mindshare right now are still very much focused around Mayfair, Soho, City and the City Fringes.  The question is: how do we successfully take innovation into Dalston, Hammersmith or even Croydon?

London Rising

Perhaps the fast and furious progress London has made is best highlighted by the following data in the recent trade mission led by Mayor Boris Johnson (in collaboration with London &Partners):

  • UK tech firms based in the capital attracted more than $1.4 bn in VC funding in 2014, double the amount in 2013. 
  • The UK has produced at least 11 technology companies worth more than $1bn (£590m) since 2000, including London-based firms Just Eat, ASOS, Zoopla, Shazam and Markit.
  • London attracts the best talent from all over Europe and the world;  it has 6 of the world’s top 100 universities (Imperial, LSE, King's, UCL), including 2 in the top 10 (Oxford and Cambridge).  
  • London has the largest IT sector in Europe, more than twice the size of any other city.  Today 382,000 people working in computing, gaming, telecoms, film and media, second only to fin tech.  London is now the world's largest centre for FinTech, with 44,000 people working in the sector – more than both Silicon Valley and New York.  
  • The tech giants have followed : both Google and Facebook chose London to build their largest hub outside of the Valley.

The next challenge for London is to drive innovation deeper into the natural clusters that have formed inside and around the capital.  The TechCity initiative, launched in 2010, smartly decide to espouse what was already happening on the ground by aligning itself with the burgeoning cluster of Shoreditch and Silicon Roundabout.  With proximity to the City and a high density of digital companies, funky bars and coffee shops, this was pretty much a no-brainer.  But as Cory Doctorow pointed out, the pressure to give to more and more commercial developments (witness the sad fate of the Truman Brewery) creates exciting opportunities for the likes of Peckham and, perhaps, neighbouring Croydon.

Croydon Tech City, anyone ?

I was recently approached by Francois Mazoudier, who is leading a team currently bidding for the design and management of a new Croydon Tech City initiative.  His ideas around what it would take to make such an initiative successful got me thinking too. 

Croydon is a large town about 9 miles south of Charing Cross and a populous part of Greater London, yet most people have no reason to venture there.   So if you are sitting in the shoes of the town councillors, how do you think about developing a vibrant and sustainable cluster ?   I am going to assume that the town's objective is not to create a vibrant community of makers, artists or small digital agencies but really to put Croydon on the map as a destination for the best tech companies, so that the next Transferwise or Shazam decides to build and maintain HQ down there.

The easy part 

These days setting up, running and operating a co-working space cum incubator is not the operational challenge it once was.  Technology is highly standardised, funky fire-rated furniture readily available and SaaS services to help you run your co-work space cheap and varied.  The logistics are really nothing more than table-stakes and will not set you apart.  In fact London is teeming with co-working spaces and incubators of various guises with varying degrees of success.

Adding value through space & experiences 

Most co-working spaces in London are standard issue. Rows of workstations, cell block meeting rooms, a tired ikea sofa and a ping-pong table for the lame cool factor have become the co-working norm - not exactly inspirational.   The proper design of a work environment, carefully thinking through fluid use of space, way finding, noise constraints etc. can turn a boring utility into a haven for creativity and community.  Frank Gerhy's hand in designing the Facebook's office in London reflects the hacking values of the company in the physical environment (unfinished stairway, completely unstructured communal spaces) and mentally encourage employees to continue to experiment.  At the extreme end of the spectrum, you will find next-gen co-working environments like NeueHouse  with its rotation art installations, exceptional barista and state of the art digital studio.   As designer Haley McLane would say of her Clypd offices : "I don't design offices, I design experiences.   The space and amenities serve the purposes of generating experiences that innovators will enjoy and thrive in".

facebook 6
At Facebook, you can work in a VWKombi too

The message is this: A deep understanding of the unique dynamics of co-housing vibrant startups in a single well designed hive, serves to move the experience well beyond the traditional co-working space.  NeueHouse would call it (a) "giant machine for creating".

neuehouse rockwell 9
Neuehouse's "Spanish Steps", a place for unforeseen experiences

Adding value through Community 

The best co-working and incubation spaces are distinguished by the quality and vibrancy of their home-grown community. The features list of their office environment are secondary.  

The most extreme example of this is Y-Combinator, which does not have a residential program but thrives through its exceptional network of mentors and alumni. This network has become a magnet for the world's best emerging entrepreneurs (see this infographic).  I mean, where else do you get to hang out with Dropbox founder Drew Houston ?

Facilities-based co-working spaces need to rely on both internal community (startups, exec team) and external community (mentors, investors)  to thrive.

Community is a concept easily thrown around but it has become a loaded word for me.  Because entrepreneurship has become so aspirational, it is easy to get together a large posse of wantrepreneurs, B-list mentors and assorted group of people who feed off innovation but don't actually contribute that much to it (which is why you will hear credible guys like my former partner Chris Lynch vent anger at the wannabes sometimes).

I think that if one is serious about achieving a high quality, sustainable community with startups that not only get off the ground but scale, being selective and intentful about community creation is a core requirement for success.  This means getting the top angels, the VC's, the entrepreneurs who have actually built companies from scratch engaged with your startup community.  Success breeds success.

Putting on your A-Game

So as I am sitting here thinking through how to make Croydon Tech City successful, here is the advice I would recommend to follow: 

  1. Facilities are table stakes and, frankly, commodity.  Anyone can deliver great wifi and software to book meeting rooms and organise events.  It's all in the cloud and it's all cheap.  Well-serviced desks are a requirement but not a differentiator.
  2. Push the boundaries hard on smart space design.  The physical instantiation of you co-working environment becomes your brand and drives the experience of the space.
  3. To the extent possible, be ruthlessly selective about who comes into the co-working environment.  The list of startups working inside your space should be aspirational in itself.  Great people will attract great people.
  4. Strive to get the A-Listers. If you can get the top angels, mentors and venture capitalists in the London ecosystem to engage, your virtuous circle will kick in.  Seed financing programs and business mentors are a dime a dozen, but those who have been associated with real, meaningful successes are few and far between.  Find a way to get them to engage and really put Croydon on the map.

There is much for towns like Croydon to do.  The challenge cannot be underestimated but Rome, as they say, was not built in a day and the opportunities abound.  Perhaps the next Zoopla, Deepmind or CSR is being built right there, right now and waiting to be discovered. 

With the right ingredients, level of ambition and clarity of intent, there is no reason why London cannot continue to deliver world class innovation clusters away from Shoreditch and in areas that are at face value less obvious, just like Croydon Tech City. 

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Fred Destin

Cytokinesis at Atlas Venture: bio and tech take off

Atlas Venture announced at his latest annual meeting that the biotech and tech groups were going their own way.  Since I did spend ten years there, let me give you my view on it.

Aligned, yet different

The two groups had a ton in common.  Both are laser focused on early stage and have espoused a model of being super capital efficient and lean early and supporting hard and fast scaling once companies show promise.  

Both groups have been innovating for a few years now in adapting fast to changing market conditions, with biotech showing the way in "asset light" and virtual companies and the tech group in pushing a high-velocity seed approach and more recently spearheading the development of Angellist Syndicates in Boston.

But as these strategies indicate, the rapid market evolution especially in tech meant the models were rapidly drifting further apart.  Whilst the biotech guys would go very deep on macro themes and groundbreaking science and literally engineer companies around the most promising areas, often taking interim operational roles, the tech team was all about finding the most promising entrepreneurs as early as possible and letting them rip.   

Whilst both approaches aim to "bend the risk curve", you can see that operationally it gets pretty diverse.  Whilst the ability to allocate reserves across sectors once the fund matures and punch above your weight on some investments (Veracode, Zafgen, Zoopla to take fund VII examples) is attractive, it does not really justify keeping the franchises meshed.

The biggest difference, as correctly identified by Dan Primack in his article, is that Biotech is really tough to run with small funds (Bruce Booth indicates a $265M standalone target for Bio Team) whilst in Tech we thrive on it.  For our side of the business, small(er) really is beautiful.

What, no name ?

Over at BetaBoston, Dennis drops a nice little sub-headline ("The Firm with No Name"), since the Biotech boys will keep the brand.  It's a fun dig and he's right to raise the question ("if it's been planned, why isn't the name ironed out ?").  

I wasn't in the room when the brand question was discussed, but I think I know my partners quite well and can guess what's going on.   Both teams are feeling pretty good about themselves right now and confident in what they are doing, so they are happy to announce the split at the annual meeting as soon as the decision is made.  

Tech Team, having successfully reinvented itself, thinks a new name might actually be fun and crystallise the reinvention, whilst Bio Team, feeling good about its model and performance too, likes the continuity that it provides in an environment where new managers are few and far between.  

Happy / Sad

I'm really delighted I joined Accel and am having a blast.  I would lie if I didn't tell that I miss New England and my old partners, and that a part of me wishes I was part of this new chapter.  I'm equally excited for my buddies JF, Bruce and Peter over on the Bio side, and as you can see from Bruce's blog, he is too.

Godspeed, my friends.

PS Yes, yes I'm aware FierceBiotech used mitosis but I came up with the idea first under the shower this morning so I kept it.

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Fred Destin

Zoopla at seven – how focus and speed drive exceptional outcomes

 I first invested in Zoopla in July 2007.  At the time, a mere £500,000 to get the company going and back Simon Kain and Alex Chesterman in improving the real estate experience.

Last week, almost exactly 7 years after this first investment, Zoopla released its last set of numbers:  40 million monthly visits,  six-months revenues of £38.8 million and a profit margin that is flirting with 50%.

As I left the last board meeting, I marvelled about how this management team had taken the business so far and so fast; this is not so much as statement about the top line as a statement about having built a sustainable, robust, profitable and extremely well run machine in such an incredibly capital efficient manner (the company only ever took cash from Atlas and Octopus and a few angels, and not that much of it).

Zoopla was launched in 2008 with the simple goal of trying to improve transparency and efficiency in the residential property market, helping all actors be smarter and better educated about their property decisions and helping market professionals by providing them with high quality clients and enabling ongoing relationships with those clients.

When I look back, 6 years later, we still have the exact same objective.  We still use the KPI set that Alex and I designed 5 years ago.  We will have the same tech team, the same tech stack, the same CTO.

We started with a simple mission and focused relentlessly on the task. Shifts in strategy were subtle and thoughtful. The brand evolved slowly and continuously without ever straying from the original promise.

As a result, everything this company does is tightly executed, with absolute focus on the mission and a culture of speed.  For example, when we acquired PropertyFinder in 2009, Simon and Alex did not spend any time trying to integrate disparate tech platforms: they migrated 100% of the data onto our systems and the absorption of that larger business was fully complete in a mere 90 days.

 Zoopla was never dramatic, but it was and is always dramatically fast in its execution.

The credit lies with Alex and Simon and the team they assembled;  I just had to get out of the way and be there with capital when they needed it ! 

Lessons of success cannot be applied from one company to the next, but here are some guiding principles of why Alex has been so successful:

  • Focus only on the mission: you won’t see Mr Chesterman mentoring at Seedcamp or parading at tech conferences, unless he is receiving an award.  He’s busy building Zoopla.  He’s been busy building Zoopla for 7 years.
  • Fast and steady decision making: If your toughest job as an entrepreneur is to make decisions under conditions of uncertainty, then this team should be a model.  By biasing towards fast action the team has been able to out-execute everyone else in the market over the span of several years.
  • Iterate strategy slowly and carefully, execute tactics brutally fast: I think that we spent enough quality time in this business every year re-assessing our overall strategy carefully and with an open mind but not putting any pressure our ourselves to change it.  At the same time, when a consolidation opportunity arose or a new marketing channel emerge, the team was on it like a plague, mobilising any and all resources necessary to capitalise on these extremely fast.
  • Always set (achievable) stretch goals. Csikszentmihalyi would be happy with a company like Zoopla.  By always setting slightly unreasonable goals and systematically hitting them, this is a culture where important get done fast and reliably, where a culture of delivery permeates the entire organisation, and where there is extreme confidence that seemingly unreasonable goals can indeed be achieved.
  • Keep it Simple.  I remember Alex saying a good company should be run on 6 numbers.  Whilst our KPI sheet grew to incorporate a few more than that, the company never erred from keeping its operations and its mission simple.  Complexity kills, and Zoopla is a shining example of doing a few things that matter extremely well.
  • Respect the tech.  I always get concerned when I see a large commerce or digital media player without a strong tech component.  Zoopla always understood the value of good design and of a strong and scalable backend.  We can say without a shadow of a doubt that the engineering strength of Zoopla is a great part of why we are where we are today.  It is my belief we outperform everyone on SEO, traffic generation, lead transformation and mobile.  We have built most of our systems internally and as a result were able to be nimble and integrate our acquisitions extremely fast.
zoopla reception
A photo I took of Zoopla’s new reception – we finally have a proper office :-) 

I realize none of these are groundbreaking insights.  But maybe that is exactly the point.  We chose a big market and a simple mission and executed relentlessly.  When opportunity knocked (such as with PropertyFinder and our other acquisitions), we took it.

In the final analysis, it makes no sense for consumers to be presented with a plethora of property sites with incomplete inventory.  In 2012, capitalising on years of fast consumer growth and what was simply a better product, we took and integrated the Digital Property Group and in the process gained a great new shareholder in the form of DMGT; a game changing move.

I am proud and at the same time humbled to have worked alongside these guys for seven years.   When you invest in real pros, all you have to do is sit back and watch !