Does Britain have any hope of finding the web's next big thing?

As Facebook gets ready to float, the UK's dotcommers battle to keep pace with the US. By Laura Chesters
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The Independent Online

In the fast-moving world of technology, 2012 has seemed like a long time coming. There is one reason for that: this is the year Facebook is finally expected to make it onto the stock market. The new wave of hot internet stocks to brave the public gaze – LinkedIn, Zynga and Groupon – have merely been the warm-up acts. Now that the social media giant is limbering up to sell shares to the outside world, there are two questions to ponder.

First, can a website with 800 million users and revenues of only $2.5bn in the first nine months of last year really be valued at $100bn? Second, will Britain ever produce anything close to such a global digital success?

The answer to the first question is probably, and to the second, probably not – but it won't stop a new generation of dotcommers from trying. The $300m injected into Twitter by Saudi billionaire Prince Alwaleed bin Talal shows there is plenty of money around for the right idea. Just don't expect Square Mile investors to join the rush. "The City of London has never been known for understanding technology and has never matched Silicon Valley's tradition of knowledgeable investment in technology start-ups, just as the UK government has never matched the vast investment made by the US government," said Geoff Mulgan, chief executive at the National Endowment for Science, Technology and the Arts. The UK government is heavily promoting its commitment to Tech City – the area around Old Street in East London that is populated by technology firms. However, advice and funding are just as important as physical space for new businesses.

Key to growing these businesses, according to one venture capitalist, is creating clusters of firms to support each other. Too often Britain's brightest technology successes have been isolated incidents, such as data-sorting firm Autonomy, sold to Hewlett-Packard for £6.6bn last summer. But there is evidence of certain sectors showing signs of creating a "scene", such as financial services, where quick loans firm Wonga has made a splash.

Julie Meyer, chief executive of investment firm Ariadne Capital, said: "We've seen the growth of [mobile money firm] Monitise – a nine-year-old company that is a game changer and a global leader now in this sector. The UK is good at financial services and we now have an ecosystem of these companies growing and innovating here."

Nasir Zubairi, founder of EuroTRX, said: "Incentives and costs are such that banks would rather allocate capital to investment banking operations or to lending to large corporates rather than to small firms."

There are signs that fund-raising will become easier this year, as Silicon Valley Bank gets ready to open its doors fully to new business in London.

And Cambridge is now the largest high-tech hub in Europe, even though it is only about 3 per cent of the size of Silicon Valley. So Britain does have its digital strengths, but Facebook has little to worry about on this side of the Atlantic for the time being.

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