Business Weekly - Cambridge, UK

Falling investment, an inability to spot new technology growth sectors, below par entrepreneurs and better performing European competitors led the Report to say that as a standalone cluster in a wider world context, “all is not well in the state of Cambridge.”

The Cluster’s share of total deals made in the Continent’s top 20 clusters has fallen by two thirds, housing is too expensive, travel too onerous and America still does it all bigger and better – was the thrust.

Respected international news organisations latched on to the portent of doom delivered for a region so long the darling of UK innovation. However, to paraphrase another great writer, reports of Cambridge’s demise have been greatly exaggerated.

“Cambridge is firing on all cylinders,” said Dr Hermann Hauser at a recent visit to Cambridge of top Silicon Valley entrepreneurs. His venture capital firm, Amadeus Capital Partners, helped deliver the region’s single biggest investment of the year, £50m into Plastic Logic.

In terms of total European institutional investment in 2006, it came fourth behind London, Paris and Tel Aviv and stands as the number one European cluster when counting investment per capita.

It is no surprise that the media’s ears prick up at the potential sound of a Cambridge death knell, for so long pushing back the boundaries of science, churning out Nobel Prize winners and using its innovation to create blockbuster drugs, billion pound companies and world first breakthroughs. A decline is big news.

Library House’s fourth Cambridge Cluster Report, ”Looking Inwards, Reaching Outwards”, had an open reaffirmation of Cambridge’s standing as one of Europe’s leading technology clusters, which isn’t breaking news.

However, while it praised the particular strength of its ‘hard’ innovations work in Healthcare & Life Sciences, IT and Communications, it also noted a fall in deal share and investment levels due to an inability to fully embrace ‘soft’ innovation that measured unfavourably to other clusters. This was a story.

Strip away the vested interests of the different parties though and the Report reveals a cluster that continues to grow and dominate certain fields, yet like any world-leading business, has to work hard to overcome barriers and succeed in new areas while maintaining its competitive advantage.

Overall, the Report found that institutional investment in companies in the Cluster fell to £135m in 2006, from £167m in 2005. In addition, Cambridge’s share of deals made by the top 20 European clusters showed a reduction from 9.3 per cent in 2005 to 5.6 per cent in H1 2007.

It attributes the Cluster’s drop in investment and deals to the rise of investment in soft innovation – Service and Retail, Web, Mediatech – a sector in which Cambridge has seen limited activity.

With a relatively small population and poor road infrastructure, the area does not benefit from the same macroeconomics of more populous clusters, advantageous for soft innovation in places such as London and Berlin, which also have the further advantage of strong media and other creative industries, which the Report says are required for soft innovation.

Despite these disadvantages, there are major companies established and emerging in the soft sector, such as Bango, Texperts, Zinwave and the substantial gaming sector that includes world wide successes Jagex, Ninja Theory and Elite.

However, infrastructure remains a hot issue, not just in terms of travelling from A to B, but how to find somewhere affordable at A and B and how to then channel information between the two.

House prices in the region are restrictive and hurts the bottom line according to DisplayLink vice president, Michael Ledzion, as salaries need to take account of high mortgages rates.

Clennell Collingwood of TTP Ventures meanwhile calls for more Cambournes as he notes that new city centre housing advertises links to London where bigger salaries make Cambridge more affordable to non-Cambridge people, pushing the city’s workers out.