Huddle Chief: Here's How the Government Can Help Tech CityAlastair Mitchell, CEO of enterprise collaboration company Huddle, on expanding into the US and how to give London's Tech City a boost.
September 05, 2013
by Steve Ranger
Alastair Mitchell is chief executive and co-founder of enterprise collaboration and content sharing company Huddle. Since it was formed in 2006, the company has grown to employ more than 200 people in London, San Francisco, and New York; has raised in excess of $40m in investment; and is one of the best know enterprise tech companies to be associated with London's Tech City, with an office right on the so-called 'Silicon Roundabout' and customers including Unilever, P&G and KIA Motors. ZDNet spoke to Mitchell about Huddle's US expansion and the state of the UK's startup scene.
Q. Tell me about Huddle's expansion into the US market.
We started in the UK and we've grown very fast, and we always knew we'd be operating in the US because it's the largest market for collaboration services.
We opened our first office in San Francisco three years ago and now we've got offices in San Francisco, New York and Washington DC as well as London so we are now very much expanding into the US.
It's made a dramatic difference to our business because it opens up a very big market, and it gives you exposure to all the exciting things happening in the market over here in San Francisco.
What's different about doing business in the US?
The market is that much bigger. To put it in context, 50 per cent of the world's software revenues are out of the US and 10 to 20 percent are out of the UK and Ireland, so there's a dramatic difference in the market size.
But entering any new market is a big risk because you could be a big fish in a relatively small pond or a very small fish in a very big pond. You risk being completely dominated and losing your space in the market.
For us it was very important because in a very fast-growing cloud business the access to talent and finance and experience is very strong over here in the US. You do it for the size of the market and because you want to expand your business more rapidly and bring in talent and resources that you wouldn't otherwise be be able to by staying in Europe.
Is it a problem that the UK lacks the infrastructure to support fast-growing businesses which tend to float on Nasdaq instead?Absolutely Nasdaq is grabbing the lion's share of floatations whether you are a UK, European or US company. That's shame, but the bigger and more worrying trend is the lack of late-stage finance available in the UK and that isn't showing huge signs of improving.
I speak to European VCs who are privately very pessimistic because they are not able to raise money for their companies in Europe compared to the amount of money that's available in New York. For example, there is one building on Sand Hill Road where there are four VCs, and they control more money in their funds than all of the VCs in London do, and that really affects B-C-D [funding] rounds.
As you are growing a fast-growing company going towards flotation, it is very unlikely you will be able to raise the amount of money you want to raise to get you on that journey in Europe; you will be most likely raising that from US VCs. That's more damaging than the floatation bit, but it all goes hand in hand. And that's one of the reasons to come over [to the US] for the talent, the size of the market and access to finance, they are the three reason you'd expand into this market.
How is the London startup scene developing?
One hundred percent there is definitely a scene in London now, a strong and vibrant technology startup scene and that's good for everyone. There hasn't been and it's growing and it keeps on growing and it's phenomenal. There are more small startups happening than I have even seen in the last 15 years getting funding at seed and A level.
It's becoming a magnet for development talent which is the first thing you need, it's a buzzing ecosystem, it's a vibrant place to be. It really is happening. You go into the City [of London] and technology guys are getting laid off... you try and hire talent around Silicon Roundabout and the market's crazy.
What could the government do to help?
There are two major things the government could do. The first thing is move the focus away from early stage seed finance... to later stage. How do they get later stage money investing in the UK.
You've got this ecosystem, but unless you let that ecosystem grow from a small seeding into a big tree, you are going to fail. They've got the seedlings going now they have to grow them into big trees.
Secondly, one of the ways to do that outside of attracting finance is to buy British. The UK public sector is something like 47 percent of GDP, so just by buying from startup companies the UK public sector can grow an enormous amount almost beyond any investment into that ecosystem.