Speaking at the launch of Tech London Advocates today, Klein pointed to a recent report by the Boston Consulting Group (BCG) which found that the internet contributed £121 billion to the British economy in 2010, representing 8.3 percent of GDP. This makes the UK the most web-dependent country in the G-20.
In particular, the report highlights the proliferation of mobile devices, widespread use of social networks and the rise of online commerce as key factors in driving the internet economy, with the share of total retail carried out online in the UK projected to reach 23 percent by 2016.
Small and medium businesses (SMEs) are described in the report as “the growth engines of the economy”, with companies that use the internet for marketing, sales and interactions with customers recording revenue growth of 12 percent over the past three years, compared to only 4 percent for those who made low or no use of the internet.
Meanwhile, Downing Street and the London Stock Exchange are working to support the internet economy, with the introduction of a new High Growth Segment that is intended to be a launchpad for fast-growing companies, as well as the abolition of stamp duty on AIM shares and the extension of the Funding for Lending scheme and the Seed Enterprise Investment Scheme (SEIS).
“You'd think we were in rude health - we've got the number one country in the world for the internet, we've got consumers who get it, start-ups who get it, SMEs who get it, we've got a stock exchange that wants to help, we've got a government that wants to help, so what's the problem?” said Klein.
“In a word, the problem is the City. There are £700 billion of assets under management in the City. As far as I know, the job of fund managers is to invest in growth and make money; as far as I know, the internet is one of the biggest growth opportunities for society and for every sector of the economy; so why is it that no major investment manager, no fund manager, no bulge bracket investment bank has an analyst for this sector?”
Klein said that the analysts in the retail sector and the media sector, which have been decimated by the internet, do not understand the underlying metrics of e-tailers and online media companies. Moreover, the majority of FTSE 100 companies will not reveal what proportion of their sales take place over the internet.
“There are some real superstars - Pearson does nearly a third of its revenues online, WPP does nearly a third of its revenues online, Tesco only does 6 percent of its UK revenues online, which is under the 8 percent number, but at least they tell you the number. You ask Sainsbury's, they won't tell you the number, ITV won't tell you the number, nor will GlaxoSmithKline.”
Klein said that, while it is great that companies are investing in Moshi Monsters, Moo and SongKick, the tech industry needs to work harder to capture the attention of the FTSE 100, because “unless we can really grow big companies that create 15,000 jobs, then this is just another sector like in Silicon Valley, where a small amount of people get rich”.
This is what Tech London Advocates, founded by former Skype vice president and Telefonica global innovation director Russ Shaw, aims to achieve - using the experience and influence of its members to facilitate partnerships between tech start-ups and large international companies and investors.
Shaw believes that this will not only benefit start-ups but also enhance investment conditions for larger businesses, enabling them to benefit from the culture of innovation embodied by London's tech entrepreneurs.
But Julie Meyer, CEO of Ariadne Capital and founder of Entrepreneur Country, said that it is up to the big corporates to start being more open minded and take an active interest in the technology sector, rather than playing it safe by investing in stable earnings businesses such as mining.
“If we don't want US technology firms to continue to take over different digital ecosystems, the corporates need to open themselves up as a highway, because the financing of entrepreneurship can only build the cars, they can't build the highways. The highways are the critical piece,” she said.
Jason Goodman, CEO of Albion London, added that corporates that are investing in the technology sector, like Telefonica with its Wayra academy, and even Tesco, should be held up as role models and celebrated, so that other big corporates are incentivised to follow suit.
It is ultimately down to the technology industry in the UK to make the corporates sit up and recognise the value of the internet economy. If that means getting out there and storming the boardrooms of big business, then so be it.
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