I was quite amused by the recent piece I read about the CoM creating a new minister for finance, digital and competition. I have no problem with the Island developing a bigger digital sector. I endorse diversity as a strategy but the conjunction of the item with the timing and other pieces has to be commented upon.
Conversations with former colleagues with whom I worked in the previous tech bubble made me aware a year or so ago we are into bubble territory, rather like the late 1990's. Stories of people pitching non existent projects and others of companies being bought without any technological due diligence abound. Valuations based on irrational projection of almost meaningless metrics. I've seen it all before and it is here again. So it is no surprise some in political circles want to jump on the band wagon. Of course a few will make it and some fortunes will be made, but many others will fail.
Locally the drive has focused very much on FinTech. This is understandable and is likely very sensible for individual companies, but it is probably a big mistake for the Island. I want to differentiate here between the more disruptive startup and the established support business role. There's a need and perfectly good business to be done installing networks, managing hardware and patching servers for local financial organisations. That's not really what we are looking at here. FinTech really is looking at the small disruptive start up software company.
Whenever I have been involved in such companies there has been a common theme to the successful ones. They have had ample access to and understanding of the domain knowledge and problem to be solved. Clearly locally there is specialised domain knowledge in financial services and it makes sense for a startup to utilise that. So what is the problem?
Risk is the answer to that, and specifically that it doesn't really represent an effective diversification of an already over balanced economic base. It does not matter that the skills are different and the business model is different the odds are that a problem in the financial service sector locally would also be a problem for the associated digital companies. It would be better strategically to concentrate the digital sector on the much smaller local industries like tourism and agriculture. There's plenty of opportunity, and some requisite local domain knowledge in both those areas. Just look at airBNB or this list http://modernfarmer.com/2014/02/10-silicon-valley-agriculture-start-ups/ to see just how big the opportunities might be.
I am also a little bemused at the decision to include competition in the responsibilities of the new minister. I can see how you might need to do something about its lack for the finance sector when we have seen so many scandals involving the fixing of Libor, Fx and gold prices. However software development is a highly collaborative, cooperative undertaking. That's one reason why people in the last tech bubble started creating incubators and hubs. We even have on here in Jersey see http://www.digital.je/hub.
It is a little surprising therefore to see Digital Jersey and some others locally are promoting the Barclays accelerator. Good for a company that gets selected, but again not so good for the Island: “The 10 companies will be guided through the process of growing and developing their businesses with the help of funding of up to $100,000 from Techstars. They will have world-class mentorship from industry experts and will be based at the London Escalator, near London’s Tech City, giving them the optimum environment to thrive “.
Why on earth would we be encouraging the most promising local startups to upsticks to London if we are trying to build a local digital economy? It makes no sense to me. It is the sort of irrational thinking that happens in a bubble – anything that mentions the buzzword is talked up positively even if it is a pile of ordure.
Some relevant links