Will Silicon Valley come north?
AS far as many industry analysts are concerned, Greater Manchester’s digital and creative sector is constantly reaffirming our position as the ‘original modern city’.
For a start, the success of MediaCityUK has focused the eyes of the world on what we’re doing and how it can be achieved. And that’s before the sector’s close ties with The Sharp Project, in east Manchester, and Manchester’s Northern Quarter are factored into the equation.
Indeed, many believe those innovative, fast growth tech companies based here will now rise to even greater prominence on the other side of the Atlantic thanks to new direct flights between Manchester Airport and San Francisco being launched next summer.
Graham Pearce, head of technology at KPMG in the North, sums up the city’s evolution in the creative and digital sector by saying: “Manchester is ambitious. The city’s entrepreneurs don’t want to play second fiddle to those in London and there’s an ambition to achieve growth on a global scale, putting Manchester on the map internationally. Indeed, this is happening already.
“Landmark transactions, such as JMI Equity’s £32m investment in Avecto, demonstrate how Manchester businesses are attracting overseas attention and investment.
“The recent Business Rocks conference embodied the confidence and energy we see across the city’s digital and creative sector.
“It showcased Manchester, but also demonstrated our ability to attract some of the best talent from around the world.
“It’s clear that momentum is building and with many private equity and venture capital firms keen to invest, particularly for those businesses that can deliver high returns, are scalable and will disrupt the market, there’s still a lot more to come.”
Alison Loveday, the chief executive of Manchester law firm Berg, maintains that this is a particularly good time for start-up companies in the creative and digital sector.
She explained: “To realise this potential, the region must develop a global mind-set, as opposed to just thinking nationwide. We are not just competing with Tech City in London, but the rest of the world.
“While it may be too early to compare Manchester to Silicon Valley, the announcement that Manchester and San Francisco are to be connected via a direct flight further demonstrates the potential for the city’s burgeoning tech sector to grow and build links with the world’s leading tech hub.
“It provides an opportunity for sharing and building knowledge and expertise on a global scale that we haven’t seen before.”
Rob Wilde, co-founder of Manchester-based recruitment website developer Volcanic, said that one of the main reasons why creative and digital companies operating in the north west flourish is because they constantly innovate.
Rob said: “We feel fortunate to be working in a sector that is currently one of the fastest-growing in the UK.
“Indeed, if the UK is to grow its economy, it is vital that businesses in the creative sector are nurtured and invested in.
“It’s creative and digital industries that will help to drive growth across the UK’s major cities in the near future and the biggest challenges to this will be retaining key staff and overcoming a lack of skilled jobseekers.
“The UK is currently one of the world leaders when it comes to fostering a powerful digital and creative industry, but we’re not exempt from stiff global competition.
“In this respect, standing still is not an option, coming up with the best and most innovative ideas are our currency and this is what enables us to stay ahead of the pack.”
However, other industry insiders are warning that the picture isn’t resolutely rosy.
Ann Rimmer, chief executive of Manchester-based Clock Creative and former chairperson of the north west branch of the The Design Business Association, explained: “Greater Manchester’s digital and creative scene is going through a period of fragmentation.
“There are a lot of small players all offering similar services, which is enabling clients to push prices down.
“The trouble with this is that the smaller players lack specialism and ultimately are creating a real opportunity for differentiation within the sector.
“What we are seeing, though, is continued growth in branding and content, and marketing automation is becoming increasingly popular.
“I think over the coming year we will see some consolidation.
“At the moment, clients are trying to do more themselves but, eventually, I think we’ll see a return to the value of creativity and digital expertise.”
Dale Huxford, corporate finance and technology specialist in the Manchester office of law firm Squire Patton Boggs observed that last year was a relatively weak one for technology mergers and acquisitions.
He said: “But this isn’t altogether surprising given the amount of money invested in 2014-2015. That said, we’re already seeing a stronger start to 2016, and we would expect this trend to continue as companies reach the end of their capital reserves and must make the decision on whether to raise additional funds for the next growth phase, or whether to look for a logical partnership or exit.
“Early-stage investment has slowed slightly from its peak toward the end of 2015, but not nearly as much as pundits have claimed.”
Dale believes that those medical technology companies aimed directly at consumers will be among the best performing in the coming year.
He added: “I think that the extension of the North West Interactive Healthcare Fund for digital small and medium-sized enterprises underlines the significance of that sector in our region.
“There are also more business-to-business technology companies with strong product and sales pipelines, and a number of leading online gaming companies that are either headquartered in Manchester, taking advantage of the cluster of skills around MediaCityUK, or that have established strong development centres in and around this region.
“Given how many strong digital technology companies are focused on the FinTech, MedTech, Internet of Things and online gaming sectors, it wouldn’t be at all surprising to see a rush of companies move into the next-generation information security space, as each of those sectors involves the collection and use of highly sensitive personal information.
“If I had to offer a prediction on what will be the fastest moving sector for 2016, that might be the one I’d choose.”
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