'We are the 8 percent' but the city isn't backing the internet economy, says Saul Klein

'We are the 8 percent' but the city isn't backing the internet economy, says Saul Klein

Summary: In a rousing keynote at today's London Web Summit, venture capitalist Saul Klein said the UK is the world leader in developing an internet-based economy, but needs to invest in its future.


In a rousing keynote at today's London Web Summit, venture capitalist Saul Klein said the UK is the world leader in moving to an internet-based economy, but city financiers are not investing in our internet future. "We are the 8 percent," he said, and "We shall not rest until we are all 8 percent or more!"

Klein derived his "8 percent" slogan and #demand8 hashtag from Boston Consulting Group figures for 2010, "the latest we have". These showed that the UK's internet economy accounted for 8.3 percent of GDP, which was the highest in the world. The UK was followed by South Korea (7.3 percent), China (5.5 percent), Japan, and the US (both 4.7 percent).

Klein said the internet economy is already bigger than education, health, and construction as a percentage of GDP, and not far behind the financial services industry.

Saul_Klein (600 x 400)
Saul Klein, venture capitalist and co-founder of Seedcamp, speaking at the London Web Summit today (Friday).
(Image: London Web Summit)

This was good, but "there's something wrong in the city", said Klein. The UK's financial industry ("the city" for short), managed funds worth £658 billion, but it isn't being used to back the UK's digital industries. "Why is this money sitting on the sidelines of the internet economy?" he wondered.

Klein pointed out that US giants such as Apple, Amazon, eBay, Google, and Facebook are generating £15bn worth of revenues in the UK.

Some established British companies are successful in the digital economy, said Klein, and he cited Pearson publishing (33 percent digital) and WPP advertising and marketing (30 percent) as success stories. Tesco, by contrast, is making only 6 percent of its sales online, "but at least they could answer the question", Klein said. Not all supermarkets could or would.

To build a "balanced internet economy", Klein reckons that all the UK's quoted businesses should get to at least the "8 percent" level, and be prepared to explain why they have not reached it. However, he would prefer quarterly monitoring, so that investors can act accordingly: "celebrate the champions and short the laggards". He said: "No one wants to be the next Kodak or HMV."

Of course, the "8 percent" slogan is already out of date. Klein said the internet economy should contribute 12.4 percent of the UK's GDP in 2016, when it would be worth £225 billion to the economy.

Early in his keynote, Klein had pointed out that Europe's economy is doing very badly, and suffers from very high youth unemployment. The unemployment level for under 25s is about 18 percent in the UK, 57.6 percent in Greece, and 56.5 percent in Spain. Young people need to be given the skills and encouraged to contribute.

Failure to engage with and invest in the new internet economy is not just an immediate problem, but also one with long-term consequences.

Klein is a London-based venture capitalist at Index Ventures and co-founder of Seedcamp, a startup accelerator. He has been involved with investing in a lot of early stage internet companies including MOO, Last.fm, Tweetdeck, AlertMe, Chartbeat, GlassesDirect, MyHeritage, Soluto, and Songkick. Earlier, he worked for Skype, and he founded what is now Lovefilm International.

While Klein must be applauded for putting his money (and other people's money) where his mouth is, the British are a cynical lot. The UK has been a world leader in other high technology industries. These include computing — where LEO (Lyons Electronic Office) was the first business computer — and aviation, where the De Havilland Comet was the first commercial jetliner in production. Converting innovation into large-scale industry is a different matter, but if the UK fails again, it won't be Saul Klein's fault.

Update: Saul Klein has now posted a video of his keynote speech at the London Web Summit on his blog at localglo.be, along with his slidedeck at Slideshare.


Saul Klein's three demands
Saul Klein's three demands: the concluding slide from his London Web Summit keynote. Credit: Saul Klein


Topics: Start-Ups, Emerging Tech, United Kingdom, Tech Industry

Jack Schofield

About Jack Schofield

Jack Schofield spent the 1970s editing photography magazines before becoming editor of an early UK computer magazine, Practical Computing. In 1983, he started writing a weekly computer column for the Guardian, and joined the staff to launch the newspaper's weekly computer supplement in 1985. This section launched the Guardian’s first website and, in 2001, its first real blog. When the printed section was dropped after 25 years and a couple of reincarnations, he felt it was a time for a change....

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  • re. We are the eight percent.

    Thanks Jack, interesting stuff, as usual.

    We could do so much better if our government got behind it all.
    • How much corporate welfare do the companies take?

      One way or another, the government is involved.

      The "free market", as it's sold for us to swallow, is a complete myth.
  • Given?

    Europe as a whole, including Great Britain, should be more concerned with the young unemployment. Non-actuated youth have traditionally been fodder for demagogues. However...

    "Young people needed to be given the skills and encouraged to contribute."

    You can't give a skill to anyone; to acquire a skill requires work, not a handout.
    Peter Sabin
    • That is true

      NOTHING is free.

      There is ALWAYS a cost.

      And sometimes people don't know the cost.

      Or in the case of entities like Facebook and Instragram, people lead themselves to believe what they give up has no value. But if it has no value, how come Facebook can get a $429 million refund? Seems what people give up has far more value after all...

      It's nice to be product on a shelf, no?
    • Perhaps badly expressed....

      Young people should have the opportunity to develop IT skills. Via Index Ventures, Saul Klein has invested in CodeAcademy, for example.
      Jack Schofield
  • There used to be a news article once, which was entitled

    "The Internet Devalues Everything It Touches".

    It's kinda hard to have an economy... or at least one that's not parasitic... when the internet is involved.
  • they are all c-unts, city and silicon 'roundabout'

    The investment aint there because 95% of the internet BS 'innovators' that asks form money want to launch and exit. They city is not stupid, it doesn't see an assured return and would prefer to play roulette somewhere else where they can be assured of a couple of million bonus and retire... not sure what you don't understand about our 'light touch' regulated city?