Carol Lewis
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It has been said that to create a successful technology cluster you need only two things – nerds and money. The nerds come up with the ideas and ways to make them work; the money arms them with the means to put those theories into practice. It is a combination that gives Cambridge a claim to be one of Britain’s most recession-proof cities.
At first glance, perhaps, it is a place of contradictions: 800 years of elite university, of grand college architecture and summertime punting on the River Cam, standing at the heart of Silicon Fen, a modern marvel of 1,400 high-tech companies and their 43,000 employees.
Here, too, is an East Anglian crossroads where much of the population works in the public sector but which has the highest level of institutional investment in company start-ups in Europe, attracting a whopping 18 per cent of the UK’s venture investment in 2007.
But the contradictions are only skin-deep. The different faces of Cambridge are complementary, not conflicting, and they, in the form of an army of nerds with their laptops and their test tubes, are likely to be those who will man the city walls and fight off the downturn that is laying waste to towns and cities elsewhere.
According to a recent study by the Centre for Cities, Cambridge experienced the lowest increase in unemployment of any British city last year. It ranks second, to Oxford, as the city with the most highly qualified workers in the country, and they earn the fourth-highest salaries. “It is entering recession in a position of strength,” the report read.
It is not immune to the economic meltdown, obviously. “We’re suffering in terms of rising unemployment,” Rob Hammond, Cambridge City Council’s chief executive, said, “but it is about half the national rate, which is a very good indication that we are resilient. This is partly because we have a diverse employment base and lots of public sector employment.”
About 45 per cent of the working population in Cambridge work in the public sector, including the city’s universities, the health service and the council. Mr Hammond says that there have been some job losses in the public sector, but the main concern is future cost cuts caused by the recession and government borrowing.
Riding to the rescue is the private sector. Big developments are planned, including the Hauser Forum, a new centre for start-up businesses, and the MediPark, a medical and biotech-nology business district that is expected to create about 7,500 jobs. If this means more people coming to live in Cambridge – and it surely does – then there are plans to extend beyond the city boundaries to build 19,000 more homes and for a £115 million guided-bus scheme on disused railway lines.
So far, so good, but the nerds cannot man the battlements on their own, they need their armourers, the money-men, rich entrepreneurs who will provide the finance – and rich businessmen don’t generally like to travel on the bus. They, therefore, can bypass the city’s notorious traffic problems by private jet. Marshall of Cambridge, a 100-year-old family-owned company specialising in aviation and motoring, the largest private employer in the city, opened a business aviation centre for executive jet passengers last year. There are up to 30 executive jet landings or take-offs each day at the airfield.
“We are not seeing any slowdown in activity on business jets and our flying club remains very buoyant,” Terry Holloway, group support executive of Marshall Group, said.
The company, which employs 2,600 people in Cambridge alone, is continuing to hire despite the recession. It is helped by having substantial government contracts, including ones with the Ministry of Defence, to supply support vehicles and provide aircraft maintenance. Like its high-tech neighbours, Marshall, which designed Concorde’s distinctive needle nose, capitalises on its proximity to the University of Cambridge. “We enjoy a very strong relationship with collaborative projects in space and aerodynamics research,” Mr Holloway said. “We have good relationships with the engineering departments and are involved in specialist training of students, research programmes and helping convert research to business.”
Yet the war against the recessionary hoardes wouldn’t be much of a war if there weren’t problems. The entrepreneurs may be flying in and out of the city, but they are not doing so in enough numbers or with enough money. John Bridge, chief executive of the Cambridge Chambers of Commerce, said: “There is a lot of innovation, lots of SMEs and not many global headquarters employing many thousands of people. We are not predominantly reliant on any one company or industry, which helps in a recession – but the key thing is a cash problem. We need funding to ensure that the innovators and start-ups are able to access funds; otherwise, we will begin to stifle growth.”
There is no shortage of ideas in Cambridge. The number of companies seeking proof-of-concept funding (initial money to establish whether there is a market for a new product or service) is at an all-time high. “This sends out very positive messages about the number of companies looking to innovate their way out of difficult times,” Richard Ellis, chairman of the East of England Development Agency, said. “The area is suffering just like any other in certain sectors, in construction, estate and retail, but some areas of the economy are somewhat more resilient than most. We are diverse and have a particular strength in research and development, IT and biotech, which does give us some cause for hope that the region is well placed to lead the UK out of recession.”
Yet Mr Ellis worries that venture capitalists are being too cautious and investing only in companies that have proven track records. He is concerned that they are moving out of the early stage market, particularly the technology start-ups at which Cambridge excels.
Teri Willey, chief executive of Cambridge Enterprise, a company that helps university academics to commercialise their ideas, is similarly concerned about the future for the city’s entrepreneurs. “There has been a significant drop in venture funds,” she said. “We are having to work a lot harder to find funding for the start-ups. We are having to churn the networks a lot harder and having to turn to the US a lot more to get funding.”
It is thought that more than 300 high-tech companies have originated from the University of Cambridge in the past ten years, including big names such as ARM, the microprocessor company, and Autonomy, the software provider (see case study).
There are strong networks of angel investors willing to fund start-ups, but venture capitalists in the region are being picky – preferring to fund green technology, environmental ventures and alternative energy, Ms Willey said. Many believe that green or clean-tech will be “the next big thing” for Cambridge.
The region is also enjoying a boom in corporate-funded ventures, particularly in pharmaceuticals and materials. “There are companies who want to make strategic investments before acquisition,” Ms Willey said. “We are also seeing a rise in licences as companies with money seek to innovate with ideas from the university.”
Ms Willey is soon to move from her city centre office in a beautiful Regency house to a modern office in a new business park. It is a path well worn by start-ups in Cambridge, forced to move from the picturesque but crowded centre of town to the spacious green business campuses on the outskirts.
Matt Schofield, chief executive of the Cambridge Network, is based on one such campus in the St John’s Innovation Centre. which provides business accommodation for 60 high-tech businesses. “Cambridge has a stellar reputation, much bigger than our size, and the quality is amazing,” he said. “Cambridge University is a huge brand – maybe second or third in the world – and Cambridge City is quite small to carry that brand. If it is going to punch its weight, then it has got to get itself out of recession. Unfortunately, not everything in the garden is rosy.” He cited a Centre for Technology Management working paper on the Cambridge high-tech cluster published this year: the research showed that increasing numbers of the city’s micro-firms (comprising one to four people) were failing.
Many of the business leaders in Cambridge build strong links with the university. “We live in symbiosis,” Arnoud de Meyer, director of the Judge Business School at the University of Cambridge, said. The business school has especially good links with business, with more than 120 local entrepreneurs involved in teaching and mentoring at its Centre for Entrepreneurial Learning. It is also closely involved in the setting up of new business parks and innovations in and around the city.
According to Professor de Meyer: “It is quite exciting in this time of doom and gloom. Yes, there is a problem with funding, but there is quite strong optimism. When you walk around the streets, you can feel the entrepreneurial drive.” You could call it fighting spirit, even in an army of nerds.
Success driven by brainpower
Company report: Autonomy
Autonomy has just published first-quarter results that exceed market expectations. The company, which makes software that helps businesses to search through data across phone calls, e-mails, video and instant messages, said that first-quarter revenue was expected to come in at up to $130 million (£88 million), up from analysts’ forecasts of $126 million. Its recent acquisition of Interwoven, an American software company, for $775 million, has contributed to a 40 per cent boost in share value this year.
Autonomy was founded in 1996 by Mike Lynch, who has a PhD from Cambridge. It employs 2,000 people worldwide, with 160 based in its headquarters at a business park on the outskirts of the city. A further 800 employees were acquired when it took over Interwoven and it continues to hire staff around the world, despite the recession.
“The highest-level, most complex work is done in Cambridge,” Andy Kanter, Autonomy’s chief operating officer, said. He added that the recession has had a positive impact on parts of the business, particularly litigation and regulatory affairs. “We came out of 2008 all right, and we are expecting 2009 to be an interesting year,” he said.
The company retains close links with the university, sponsoring IT scholarships and research. Dr Lynch teaches there, while Cambridge academics sit on the company’s board.
“Autonomy would never have been able to achieve its success without the large pool of talent in the area. The quality and quantity of engineers we are able to attract here is second to none,” Mr Kanter said.
Boom time for a start-up
Company report: Hypoxium
Dan Cowell, chief executive of Hypoxium, a start-up company based in the Innovation Centre on the Science Park, is unusual, in that he is not a Cambridge graduate, but typical, in that once he moved to Cambridge he was determined to stay.
He first came to the city to work for a pharmaceutical company, which he left to start his own business. He sold that and has set up Hypoxium, a contract research company specialising in cell biology.
“Once you are here, there are plenty of opportunities to find work in biotech,” Mr Cowell said. “Start-ups here tend to be made up of a mixture of PhDs fresh from the university and people like myself, who started out in large pharma.
“The last six months have been our best months yet. This has been due to two factors: the first is that companies may have recruited internally in the past to do the work, but, with headcount freezes and budget constraints, it is more cost-effective to outsource. In addition, the dollar rate has dropped, so from a US perspective we are 25 per cent cheaper, but my costs in the UK are unchanged.
“However, there may be hard times ahead for the UK biotech industry as IPOs are no longer an option for an investor exit and we are only left with trade sales or partnering deals.”