Tech City startup dreams are 'a complete myth' says ex-Microsoft exec

QuantumWave CEO says startups should surrender to acquisition

The Silicon Valley dream of the sixties, seventies and eighties is no longer an option for modern IT startups, current financial and technological realities meaning new companies would be better selling up than branching out.

This is the advice of Robert Marcus, QuantumWave Capital CEO and an ex-director on the mergers and acquisitions team at Microsoft.

Marcus, commenting on the effectiveness of London's Tech City as a breeding ground for startups, said: "We see attraction of capital. It creates a momentum, and creates a depth of focus – and money, frankly – that spawns a larger innovation environment."

Marcus was adamant that the presence of Google, Amazon, his old employer Microsoft and "other internet heavyweights" in the area was "a very good thing".

"The investments they're making in the Tech City environment are really serving to provide a strong foundation for innovation and the attraction of talent," said Marcus.

But while Marcus maintained Tech City is building an "environment that allows innovation to emerge", he was unable to name a single startup success story from Tech City, saying, "I don't think I can think of a particular [company]... I think the answer is volume.

"Over 1,000 companies are innovating at Tech City, in 33 incubators and accelerators. Huge numbers. So I don't think you see one extraordinary success story, but you see thousands of companies providing perhaps tens of thousands of jobs. People with a particular expertise, finding jobs," continued Marcus.

"Tech City is still a very recent phenomenon. It takes a minimum of three years to build a technology company of significant value just from a core IT point of view. Then you have to get it out there, it has to evolve to a point where it becomes a known entity, and I think it's very natural that the early stage of such a phenomenon has volume, because some of that volume is consolidated as companies fail, merge, or people move from one to the other."

Only last week, at an event celebrating the opening of Yammer's brand new Tech City offices, following its $1.2bn (£743m) acquisition by Microsoft back in June 2012, Yammer's EMEA general manager Georg Ell told Computing that Yammer still considers itself "the success story of Tech City".

Tech City startup dreams are 'a complete myth' says ex-Microsoft exec

QuantumWave CEO says startups should surrender to acquisition

Marcus said the IT sector is very different to what it was in the golden days of Silicon Valley start-ups.

He said IT professionals' talents can be "trained to a certain level through education, but individuals with talent in their DNA are not, particularly in the wake of the financial crisis, able to very easily come out of school and get top jobs in great companies.

"So you get a bunch of people with great educational credentials, incredibly bright, who are moving more and more towards the Silicon Valley dream – create a company, go IPO. I think that's a complete myth, but people continue to have that dream.

"Internet innovation moves at such a speed that large companies can't innovate at a pace necessary to fulfil customer demand, so they're looking increasingly to early-stage companies to acquire that technology and integrate it as alternative to in-house R&D," Marcus said, adding that the Facebook model of achieving success by growing very large by having a huge number of users is no longer seen as the way forward.

"I think that's changing, and I think now you're seeing many more small companies going to a certain point, attracting attention, forming commercial relationships, and early stage acquisitions happening.

"Silicon Valley has become much more of a state of mind than a region. It is no longer a regional experience that requires certain attributes to actuate itself. Some of those attributes include access to capital, access to advice in the form of mentoring, or specific advice of one device or another, or access to public and private partnerships. A whole range of factors are needed for success to appear out of any one of these hubs."