If anyone has succeeded in putting small high-tech companies on the UK economic map it is surely Hermann Hauser. In the past 20 years the Vienna-born physicist has formed no less than 16 electronics and telecoms companies, all in the Cambridge area. He first came to Cambridge at 16 to study English and has lived there ever since, apart for a few years spent abroad with Olivetti.
His first company, formed in 1978 while he was working at Cavendish Laboratory in Cambridge, was Acorn Computers, a 1980s success story. Its BBC micro computer incorporated many features advanced for that time, such as the simultaneous mixing of graphics and text.
Hauser went on to lead the team which developed the first computer designed entirely on silicon, resulting in revolutionary computer architecture at low cost.
For Hauser, wealth creation is inextricably linked with revolutionary innovation. ‘This involves fundamental new processes or products that don’t fit into the traditional way of thinking,’ he says.
Small companies, says Hauser, ‘can concentrate all their firepower onto the innovation the company is being built around’. Large companies cannot afford to put their best people onto such projects as they might not make a significant contribution to the bottom line for years.
Hauser’s innovations and start-ups have made him and many of his colleagues millionaires, but he still has wider ambitions to pursue. Over the past 15 years he has been a central figure in the development of ‘Silicon Fen’, the network of small high-tech firms scattered around Cambridge, modelled on California’s Silicon Valley.
‘Research shows that 80% of new jobs created in the US come out of small companies,’ says Hauser. ‘Cambridge now has the highest concentration of high-tech companies in Europe.’
Spin offs from university research and other start-ups average two a month and there are now 1,200 companies in the area, employing 35,000 people. But there is still a way to go, says Hauser. ‘New companies coming out of the Massachusetts Institute of Technology and Stamford University are thought to generate over $1 trillion for the US economy. This outstrips Cambridge by a factor of almost 100.’
But Silicon Fen has produced its first $1bn company, ARM, which designs micro-processors and is a spin off from Acorn.
‘Any successful model in fostering small companies always consists of the same factors,’ says Hauser. These are the presence of a world-class university and an entrepreneurial culture. ‘It takes a long time for this culture to build up because it needs support from a wealth of lawyers, sympathetic financiers, accountants and property agents. But Cambridge is starting to get in [these type of people] who understand that start-ups may not generate profit for years.’
A missing link in Cambridge is the presence of the large companies that are a key ingredient in Silicon Valley, home to Intel, Hewlett Packard and Apple. Hauser says such companies are a good source of the management talent often lacking in start-ups, which tend to have people more focused on developing ideas.
‘Many of the most successful small companies grew because an experienced manager left a big company for a small one,’ he says. ‘We don’t have the same access here to high-quality management.’
Hauser is attempting to address this problem by setting up the Cambridge Network, consisting of six companies including his own venture capital company, Amadeus Capital Partners. Amadeus provides seed capital to high-tech companies which have products with global potential. Its first fund has a £30m target and contributors include US software giant Microsoft.
Also part of the network are accountancy and consultancy firm Arthur Andersen, venture capital company 3i, a network of business angels and the University. The network’s aim is to link Cambridge to other similar regions in the world. ‘The single most important ingredient that makes these regions work is the network of people,’ says Hauser.
Finance is an important factor, but money is just 10% of the story, he adds. ‘The other 90% is how well the venture capital company helps the start-up with its business model. Partnership and technology advice and help with recruitment and team building are also important.’
Hauser has already lured top management to some Cambridge companies. The managing director of Advanced Rendering Technology, a high-speed imaging start-up company funded by Amadeus, came from Silicon Valley, and ARM’s manager came from Motorola. The chance to build up a business is the main attraction for such managers, as large salaries are certainly not in the package.
Hauser’s talent for innovation and wealth creation has not been lost on the Government. He has been a Foresight panel member involved in investigating how to harness new technologies and is also on the sub-committee of the Higher Education Funding Council, where he is concerned with developing relationships between academia and business.
He has been influential in seeking Government approval for tax breaks for small companies. In recent meetings at the DTI, Hauser and Larry Sonsini, a top Silicon Valley lawyer, told Chancellor Gordon Brown that a halving of capital gains tax in the US opened the floodgates for venture capital, which in turn sprouted many new businesses.
Hauser is hopeful that November’s Budget will hold a similar cut in UK capital gains tax, now at a 40% level. ‘We’re asking that small companies be left alone while incubating. You shouldn’t kill them before they have a chance to hatch.’
His vision for the future is to commercialise more home-grown innovation and to stop new ideas being converted into business outside the UK. ‘I hope that Cambridge remains the leading high-tech area in Europe and that we can do justice to the phenomenal rate of innovation in our universities.’
Hermann Hauser at a glance
Age: 50. Born Vienna 1948
Education: Primary and secondary education in the Tyrol. MA Physics from Vienna University. PhD in Physics at Cavendish Laboratory, King’s College, Cambridge University. Honorary Doctorats Universities of Bath and Loughborough.
Current job: Co-founder of Amadeus Capital Partners