Write-up from Northern Startup 2.0

Before setting off for this month’s Northern Startup 2.0, I saw a weather forecast that suggested our current spell of mild weather would soon be disrupted by a “Continental cold front” that will cast us into a deep freeze next week.
Apt, I thought.
Right now, the IT sector – and the web community in particular – is actually quite buoyant, but we know it won’t last and the financial cold front that has affected so many other businesses recently is headed our way.
Tonight’s theme at an event that has become a regular sight on the local technology scene – subtitled ‘Beating the economic blues’ – might seem ill-timed for some of us, but the reality is we know things are about to get chilly.
In fact, the mood was generally upbeat. The general feeling seems to be that the very best ideas are often borne out of times of economic hardship. Necessity breeds innovation, after all.
You can see a running commentary via Tweets tagged ‘NS20’, but I thought I’d give an overview for those in a hurry trying to piece it all together.
The first speaker was Mike Butcher from the infamous TechCrunch UK, who observed that the web sector seems to have passed through a peak in 2007 – “our 1968 Summer of love” – but that the European market is complex and can not be simply understood in terms of peaks and troughs of launches, acquisitions or failures.
That said, he also pointed out there was no serious exit (i.e. being bought or floating on the markets), for start-ups in Europe for at least three years and that one venture capitalist had apparently recently suggested to him that most companies will find their best source of funding via their customer base.
Wait, what?
For those of you used to traditional business models, expecting customers to pay for services or products might seem obvious, but in Whacky-Web-World, that kind of talk gets you sent down to the crazy farm. We live in interesting times, it would seem.
Mike went on to highlight business models he was noticing emerging, some of which I know for a fact are being readied for launch by Manchester firms right now. The ones that caught my eye out of the list were:

• Niche Social Networks – instead of everybody being on the same site, we start to use sites that hit specific niches. Examples I can think of might be people with common hobbies or interests, but also people in certain industrial sectors. This could be built on existing social networking sites, but the power of niches can be irresistible if done properly
• Advertising getting smarter – Facebook has opened the flood gates for advertisers. It’s possible to target a demographic with dizzying specificity (e.g. “males, 18-24, working for IBM in the UK, interested in cinema” is possible), and advertisers are catching on
• Return of professional content – apparently the amount of traffic sites are getting for showing professionally produced content for things like sewing buttons on shirts is astonishing. Who knew?

And what about more generall? Mike put it as “Web 1.0 was about ‘Finding’, Web 2.0 was about ‘Friending’, whilst Web 3.0 [don’t shoot the messenger, he said it] will be about ‘Following'”. In other words, if you want to see the future, it’s already here.
His final synopsis was upbeat: Europe has better venture capitalists (we’ll come back to that), our technology platforms around mobile are more mature and more standardised, we seem to have a deeper well of talent. Our only weakness seems to be a fear of failure.
It was in similar upbeat mood that Ed French of Rising Stars presented, pointing out that the 300 tech deals done in Europe in 2007 were completed by almost 300 different investors, showing that the European tech scene was “not a sausage machine”, a criticism often levied at the US tech investment scene.
In fact, the venture capital markets in Europe are much more accessible, stable and seem (from data given in another talk) to be growing whilst the US markets are in sharp decline. That’s not even taking into account the vast network of business “angels” in the UK and EU that seem much more humane than their US equivalents appear to be.
Ed went on to give a detailed explanation of a graph I confess I was a little baffled by – I had consumed a bottle or two of beer at this point, so (hic!), please forgive me – that seemed to plot an investor’s return on investment as a multiple of stake against the risk of failure. I told you it was baffling. It suggested Google was good, and Bebo was bad, so I’ll go with it.
Fortunately he summed it up as a set of three actions for us to follow to build great tech companies: add great people to your business, which means people who suit what you do and love what you are trying to achieve; focus clearly on what it is you’re trying to achieve, and stick to it; communicate what you’re doing effectively.
James Brocket from CalibreOne also reenforced the point about suitable investment in people, offering a wide range of advice on how to “seduce” the people we need into our businesses. Talk later on this subject of “hire slowly, fire quickly” felt a little post-Lehman Brothers for my taste, particularly from a recruitment consultancy, but the culture of Google’s and Apple’s recruitment processes (that can take 20 interviews to be got through before being hired), was what I think the general point being alluded to: be picky about you hire.
Neil Parking of Business Link North West discussed a range of options open to small start-ups to find finance and support during difficult times, despite some of them having “gone tits up recently”, in his words. Even so, it’s surprising quite how much support is out there – I’ve always advised start-ups to take a look at the Business Link website, although anecdotal evidence is that the person-to-person advice is often more suitable for traditional business sectors.
The other speaker squeezed into the bursting schedule was Dr Zoe Lock of the Technology Strategy Board who discussed the huge bags of cash they had available to invest at sector level over the next 3 years. If that’s your bag, go dig. If it isn’t, just be pleased that there is still money there for the really big ideas to take off in times of recession. You might argue £1 billion spent on an open-ended ‘innovation’ brief right now is a bit rich, but compared to what is being spent on banks just to keep the lights on, it seems a bit of a steal.
The evening wrapped up with a panel session dominated by business-focused questions (I tend to turn off when people in suits talk about “ICT”), followed by a “ask the audience”-style Q&A session about an attendee’s start-up – I’ll save you the detailed discussion on this as the “problem” seemed to be something like “we’re profitable and have lots of opportunities and just don’t know how to take advantage of all of them”. I’m genuinely pleased for them it looks an interesting product, and I wish them the best for the future, but if that’s their biggest problem perhaps the only way I could offer help is by crying them a river?
It was in the panel discussion that Mike stabbed in one last point about being noticed by blogs like his: be extraordinary, be a Black Swan or a Purple Cow, and you’ll get noticed.
I think the one thing we all took away from tonight was that not only was it possible to be extraordinary, but many of us fully expect to be so in 2009. For Manchester’s technology scene then, it’s going to be an interesting time, no matter how blue the economic – and actual – climate outside may get.