How London's Tech City is starting to grow up, whether it wants to or not

The capital's tech entrepreneurs are attracting big backers and creating major businesses, even if they don't look quite how some might have expected.

London's tech community is growing beyond its hipster roots. Image: iStock

The Digital Shoreditch festival, which showcases the work of local entrepreneurs, contains an element of anarchic fun you don't find at many other tech conferences. Talks entitled 'WTF is the Internet of Things?' and 'Zombie apocalypse, we're here to help', and the un-improvable 'FML I need a desk' vie for space alongside more sober items about raising funding.

Silliness aside, could London's tech startup scene be growing up? It's now seven or eight years since a group of tech startups in the east end of London found themselves labelled 'Silicon Roundabout'. Today, the cluster has become known as 'Tech City', and London now boasts nearly 300 work spaces and accelerators for startups.

While it's often been mocked as the kingdom of fixie bikes, ridiculous facial hair, and too-short trousers, London's startup scene is now attracting significant investment and creating big companies - even if they are perhaps not quite the ones that were initially expected.

"London's startup machine: you have deep knowledge in the human capital, it networks furiously; a massive incubator accelerator workspace system; finance backers that actually know what they are doing and understand how all this works - in a city that designs and codes," said Ian Dowson, managing director of William Garrity Associates, a corporate development specialist who has been tracking London startups for a number of years.

"London is the largest international fintech centre in the world and total investment is probably around $4bn now," he told the Digital Shoreditch event, adding that for London startups the average value of the deal is starting to increase, meaning "startup entrepreneurs are being given real funds to scale up".

Dawson's research shows how the make-up of London's tech startup scene has evolved in recent years. While the early story of Tech City was one of hardware companies as well as software startups, if you follow where the money is now going, it's towards finance and ecommerce tech companies - perhaps unsurprising given Hoxton's proximity to London's financial districts.

According to Dawson's analysis, in 2013 $1.28bn was invested in London startups with $486 going to financial tech, $230m to digital media, $148m to ecommerce, $118m to hardware and IoT, and another $114m to medical technologies. Last year investment hit $1.88bn, split mainly between fintech ($801m), ecommerce ($545m), digital media ($172m), and med-tech ($110m), with cloud accounting for $91m. This year so far, funding stands at $776m with fintech again taking the lion's share at $410m, ecommerce accounting for $179m, digital media taking $74m, and cloud grabbing $57m.

While these might seem like impressive numbers that suggest funding for London startups could hit $2bn this year, it's still way behind New York ($4.2bn), Boston ($4.4bn), or the giant San Francisco ($15.7bn).

It also gives London a focus which is different to those other startup hubs, so observers waiting for a consumer web startup like Facebook to emerge out of Tech City may be missing the point - instead Zoopla or Just Eat might be more the types of companies that flourish in the UK capital. Finance and ecommerce are perhaps not as glamorous as the flat-white-sippers might hope, but that could well be where London's herd of unicorns will be found.

Still this doesn't mean that the suits have entirely over-run the tech hipsters of Hoxton, who still take things at their own pace. As one visitor to the Digital Shoreditch event wondered why a session was running late, another attendee turned to him and smiled, saying: "Well, it is Shoreditch..."

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