How U.K.'s queen of tech turned London into Europe's Silicon Valley

WASHINGTON - It's a bit ironic, really, speaking to Baroness Joanna Shields at 1776 in Washington.

The venue, an incubator for some of the area's most innovative and rapidly growing businesses, takes its name from the year that the United States split from Great Britain. The United States would later take from the United Kingdom its long-held title of world's largest economy.

Shields made the opposite split, and she's now helping Great Britain challenge the United States for one of its most coveted and long-held titles - the world's premier destination for startups.

A native of Pennsylvania, Shields is the digital adviser to Prime Minister David Cameron and has emerged as one of the most influential individuals in the areas of technology and entrepreneurship policy in Great Britain. After earning a master's in business from George Washington University, she moved to Silicon Valley in the late '80s and has held management roles for the likes of Google and Facebook. It was the latter that initially sent her to London, as she was recruited to oversee Facebook's operations in Europe, Asia and the Middle East.

Shields stepped down from that job a couple years ago to spearhead the British government's technology initiatives. Last year, she was introduced into and received a title of honor from the British House of Lords.

Cameron and Shields stopped by 1776 during a recent trip to Washington, and we sat down with the baroness to discuss some of the most common challenges facing today's startups, her advice for entrepreneurs, and what government policies she believes can help break down barriers for new and growing technology companies. Our conversation also revealed some of the decisions she and her team have made to put London in a position to rival American startup hubs like Silicon Valley and New York City. What follows is a transcript of our interview, edited for length and clarity.

Harrison: When you first moved to the United Kingdom from Silicon Valley, how different was the culture surrounding entrepreneurship, and are those differences still prevalent today?

Shields: When I took my first company overseas from Silicon Valley, we went to the U.K., and in those early days, the mentality was really quite different. But now, those differences have really faded. Sitting here in 1776, it's just like any incubator or accelerator you would find in London or really across the country. The U.K. has become by far the startup capital of Europe.

Harrison: What's behind that? Was there a spark?

Shields: Around the height of the recession, we recognized that there was a movement happening in pockets across London, and really across the country, with startups popping up everywhere. In part, it was because when students were graduating from school, there weren't any jobs waiting. So people found their way into places with like-minded people with big ideas, and the opportunities around digital became very clear.

I was running Facebook's operations at the time, and we had a massive developer program through the company's open platform. I remember bringing Mark Zuckerberg to Number 10 Downing Street and telling the prime minister about the incredible talent that had emerged around the country and that some of the world's best developers were here in the U.K. His policy team was starting to recognize the same trends, and they launched what's called Tech City, which is essentially our initiative to recognize the startup movement in London.

Ultimately, tech and digital businesses were really the engine of the economic recovery. I think they're a large part of the reason we pulled out of the recession long before the other markets in Europe.

Harrison: How did the government step in to support this so-called startup movement?

Shields: First, the Prime Minister opened up his doors on Downing Street. We started holding monthly tech breakfasts, where we would celebrate what these people were doing and the vital role they played in the economic success of the country. It made people feel good about being in a startup. It sounds simple, but that open-door policy really changed things.

Second, it was about listening. Once we got them to the breakfast, we started asking what they needed and what was getting in their way. One by one, we have tried to address issues they raised.

Harrison: What were some of the barriers they mentioned?

Shields: For instance, at one point, everyone was worried about recruiting talent. We have taken several steps to try to address that, from introducing a new entrepreneur visa to fast-tracking certain visa applications. Now, I rarely ever hear about people not being able to recruit the right talent.

Harrison: Are there other steps you have taken to try to smooth the path for entrepreneurs?

Shields: We have really been doing everything humanly possible to support our startups, scale-ups and speed-ups - I got that last one from [entrepreneur] Steve Case, by the way. I like "speed-ups." But from adding that entrepreneur visa to adding some new R&D tax credits, we have really bent over backwards trying to make it easier. We now have something called the Patent Box, too, where if you conduct R&D in the U.K., and you follow a process to declare that research with the government, any revenue you make from that R&D will only be taxed at 10 percent, which is phenomenal.

We also worked hand-in-hand with the London stock exchange to find ways to ensure that the markets make it possible for small but growing companies to list. We basically dropped the amount of equity you were required to give up in order to list on the exchange and opened up a fast track for companies to list on AIM, which is our exchange for small but growing companies.

Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.