This article first appeared in City AM.
Chris Wade, Board Director, Magic Pony, Octopus Venture Partner, co-founder and Partner at Isomer Capital
With the news this week that Magic Pony Technology has been acquired by Twitter, we are witnessing a crucial turning point: five of the world’s biggest technology companies have now purchased UK-based Artificial Intelligence (AI) companies. See Magic Pony Technology and Twitter, SwiftKey and Microsoft, VocalIQ and Apple, Deepmind and Google, and Evi and Amazon. Over the coming days and weeks, we will undoubtedly read plenty of thought pieces pointing to the UK as the epicentre of artificial intelligence technical talent, with questions asked about how the UK is creating skills the tech giants cannot yet find in their own Silicon Valley backyard.
However, I am more excited about looking forward and considering what these acquisitions mean for the European technology market from a global perspective. For example, how important is it that when it was recently announced that Deepmind AlphaGo had beaten a human in the Chinese game of Go, that Deepmind themselves made the announcement – not Google, who purchased the business just over a year ago? I also want to consider what the impact will be of these ground-breaking AI technology teams staying in the UK – which has been the case with Evi based in Cambridge, DeepMind in King’s Cross and now Magic Pony Technology in Soho.
In fact, I would be happy to go as far as to say that with the news today, we are witnessing the beginnings of Europe’s very own ‘Silicon Valley-esque tech specialism. Of course we are currently celebrating the fifth anniversary of Tech City, but in terms of leading the way in building internationally renowned, genuinely technological innovation, I think today’s AI development marks an exciting moment.
When corporations acquire innovative companies, these start-ups become magnets for world class talent. In the case of UK AI, I expect we will now witness a rapid expansion of the European talent ‘gene pool’, as global AI experts flock to Europe. But what next? Historically, when we have concentrated pools of technical talent, two things happen. Firstly, we can expect to see the launch of many more start-ups in the space. This further grows the talent ‘gene pool’, which in turn improves the attractiveness of the market to external talent – and thus the virtuous talent circle develops! Secondly, we will likely see a growth in venture capital funding available at an earlier stage to AI start-ups. This provides the capital injection needed to build even more success stories in the space.
The reason I think this is a critical moment for the UK market, is because we have seen a similar explosion of new technologies and subsequent history-altering activity once before. In the 1950’s the area between San Francisco and Santa Clara was better known as the US’s prune-growing capital. That is, until 1968 when four semiconductor engineers left Fairchild – including Gordon Moore of the now famous Moores Law – to form Intel. The rest, as they say, is history – in 1974 Intel came out with one of the first microprocessors which played a crucial step towards the emergence of computers, ultimately providing Steve Jobs and Steve Wozniak with the inspiration for Apple I. And of course, the use of silicon chips in these early technologies gave us the name – Silicon Valley.
It is no coincidence that at the same time (1972) we saw the birth of venture capital with both Kleiner Perkins and Sequoia Capital raising their first small venture funds – which had similar characteristics to today’s emerging European VC funds: small funds, thematic focused and highly supportive of entrepreneurs.
The Apple IPO of 1980, which valued the business at $1.3bn, sparked many other exits – which all started from the humble beginning of semiconductors to computers to software, ultimately combining in the creation of Silicon Valley as the world’s great technology power house and where the venture capital industry would lead the world.
Today I counted over 25 AI start-ups in the UK alone, and we are increasingly seeing AI in real world applications. Entrepreneur First, the UK’s leading pre-seed investment programme for technical founders from which the Magic Pony Technology came, reports a doubling of AI start-ups in the last 6 months. At the same time, much has been said about the flow of capital into European venture capital funds and skills these venture team now have.
The Magic Pony Technology acquisition announced today is an important part of the story in building Europe’s emerging technology industry. Are we up to the challenge of creating the next world leading technology centre? Well, it certainly feels like we have the right ingredients at the right time.
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