How Cisco plans to spend $500m in East London

In January 2011, networking equipment maker Cisco announced a goal to invest a staggering $500 million in East London’s technology sector over the next five years.

The investment project, dubbed the British Innovation Gateway (BIG), was welcomed by prime minister David Cameron. Cisco’s investment will "help create many new jobs and opportunities, and support our drive to diversify our economy and generate sustainable economic growth", he said at the time.

So what is Cisco going to spend the money on?

Broadly speaking, its intention is to invest in and support London-based start-ups, especially those that are focused on "smart and connected communities", Cisco’s jargon for technologies that integrate business, government and civil networks.

For Cisco, the "enlightened self-interest" comes from the fact that if successful, these technologies will drive demand for network equipment and services.  

The BIG programme is designed to do this in a number of ways. The most conspicuous components of the programme will be two ‘innovation centres’ – one located in Shoreditch, the other somewhere in the vicinity of the Olympic park.

What exactly is an innovation centre? "That’s a very good question, actually," says Russell Craig, public sector manager for Cisco’s Internet business solutions group. "It’s a very broad concept, and we’ve deliberately refrained from being too precise about what it is."

Cisco is holding a consultation "with a broad range on stakeholders" in July 2011 to ‘co-design’ what the innovation centres should be.

The company does have some idea of what it wants. "Our objective is to create an environment where Cisco, our partners, entrepreneurs and start-ups can come together," explains Craig. "We may provide an incubator space for those start-ups on a long or short term basis – we’re not quite clear about that yet."

Cisco is currently weighing up three potential properties for the Shoreditch centre, one of which is located right next to Old Street’s Silicon Roundabout, he says.

The innovation centres will also allow these putative entrepreneurs to access Cisco’s National Virtual Incubator, a network of venture capitalists, academics and the company’s own engineers, all connected using Cisco’s telepresence technology.

A third component of the BIG scheme will be a series of open innovation competitions. The company already runs what it calls ‘i:prizes’, allowing entrepreneurs to submit their ideas to be judged by a panel of experts. The BIG programme will introduce an annual, UK-specific i:prize, Craig says, with a menu of different prizes available to the winner.

Craig could not give precise details of how much of the $500 million investment each of these parts of the scheme will receive, but he did say that Cisco hopes to spend a significant proportion of it on direct investments in UK start-ups. Again, though, the mechanics have yet to be worked out.

“Often the organisations that run incubators take an equity stake in the companies,” says Craig. “That’s not something we are considering, although I couldn’t rule it out. We need to be flexible, and treat each individual case on its merits.”

“Of course, the investments we make will depend on what is available out there,” he adds.

Cisco had originally hoped to take the opportunity to run a “smart city pilot”, documents obtained by Information Age from UK Trade and Investment reveal. The company would have liked this to have taken place in North Greenwich, and during the first six months of this year.

Craig says that plan has yet to come to fruition. “There’s certainly still a desire to make that happen, but its not going to happen in the next six months. London is a particularly complex environment, with a lot of political bodies involved, and we want to do it right.”

The same documents also reveal that Cisco’s decision to build an innovation centre on the Olympic site depended on specific conditions. However, the precise nature of those conditions has been redacted from the documents, on the grounds of commercial sensitivity: “While Cisco have been a very active sponsor/supporter of the Olympics, their plan to set up an Innovation Centre rests on [redacted]”.

Craig says he does not know what that condition was, but speculates that it would have been something to do with what the Olympic Park Legacy Company plans to do with the various properties on the site after the games – and which other companies will be involved.

“The OPLC still needs to make some final decisions about their disposition, and who is going to be involved,” he says. “That’s going to be a complex partnering environment, no doubt.”

Cisco’s $500 million investment may well benefit the UK’s technology sector, and as such it should be welcomed. But it will be worth keeping an eye on what exactly the company gets in return for that investment, as it clearly hopes to play a significant role in London’s technological infrastructure for years to come.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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