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Why HP’s purchase of Autonomy is good news for UK startups

Dan Crow worked at Apple and Google, and now a UK-based startup – where the Autonomy takeover is seen as great news

The planned acquisition of British software company Autonomy by US tech giant Hewlett-Packard has stirred up a lot of comment. Shadow business secretary, John Denham, said there might be a case for looking at whether certain strategic industries should be protected from foreign takeover, and criticised financial backers of technology startups who insist on a sale of the business so they can recoup their investment. Tony Burke, Unite’s assistant general secretary for manufacturing, claimed the problem with merger and acquisitions is that they do not grow the economy and rarely create jobs.

Have we really come to this? Instead of celebrating a great British success, our reaction is to wring our hands and discuss legislation to make sure such success cannot happen again. Something is very wrong with this picture.

I spent more than a decade in San Francisco and New York working both for startups and for large tech companies such as Apple and Google. Two years ago I returned to the UK, where I’m now CTO of one of London’s leading tech startups, Songkick. Much has changed in the UK since I left, but apparently we still have a fair way to go if we’re to emulate the success of Silicon Valley.

The UK has several concentrations of startup activity. A number have sprung up in “Silicon Fen” around Cambridge University, Autonomy among them. Another hub is in east London with more than 500 startups based around Shoreditch, in an area fondly known as Silicon Roundabout. Government support for these burgeoning communities is very helpful, but what we really need is a steady flow of money and expertise to fund exciting new companies. These companies are creating thousands of new jobs and are attracting new investment from within and outside the UK.

What success looks like

Any success like Autonomy’s is a huge inspiration for those who aspire to run a company. It shows that hard work, and building great products pays off. Mike Lynch, Autonomy’s founder, was a penniless graduate when he founded the company in 1991 and now stands to reap the rewards of decades of success. He has a long history of investing in British startups. He and many others now at Autonomy will be ploughing their money and their know-how back into the UK startup scene, creating yet more jobs and, hopefully, more successful entrepreneurs.

So let’s look at Autonomy’s acquisition a different way. This is not a threat to Britain’s future, its a vital component of our future. If we want large, successful technology companies in the UK we first need lots of smaller, successful companies. Autonomy’s acquisition will pump vast sums into both the UK government’s coffers and into the hands of investors.

Successful startups reach an “exit”. This usually comes in the form of an initial public offering – such as Google’s – or an acquisition, such as Autonomy’s. In either case, the value created by the employees is transformed from a theoretical one into something that you can actually bank, and the employees and the shareholders make a lot of money. In the case of an acquisition, the company (hopefully) becomes part of a greater whole where it can continue to find success.

Show me the money

So, what happens to all the money HP just agreed to pay? A lot of it will immediately flow to the British government, through taxation. The several billion dollars of extra tax revenue will make a small but significant dent in our debts, or could be used to save thousands of vital public sector jobs.

Meanwhile, many individuals will become wealthy. Some may retire to sail around the world. But others will become investors and use that money to fund new startup companies. This virtuous cycle is at the heart of Silicon Valley’s success. Each generation of startups creates new wealth that is ploughed back into the next generation through venture capitalists and angel investors – such as the music executive who got Lynch and Autonomy started by loaning him £2,000 in a pub. Wealthy individuals with a passion for, and deep knowledge of, technology help budding entrepreneurs start their own companies. If we can ignite this cycle here in Britain, we can spawn an entire new technology industry to rival America’s.

So, let’s toast Mike Lynch and Autonomy. Let’s welcome the influx of HP’s money and all the good things it will bring to the UK. We should be celebrating this very British success, not looking to stifle it. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds