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The University of Cambridge’s Hauser Forum in 2013. The university’s tech initiatives paralleled the rise of local tech firms such as Sinclair Computers, founded in 1973, that took advantage of the brain power graduating from Cambridge every June.
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CAMBRIDGE, England—After a long push inspired by Silicon Valley, this centuries-old college town has taken on a new role as a modern, tech-industry hub.
The reward has been a flood of jobs and money. The downsides have been the same sort of housing and traffic strains beleaguering the San Francisco Bay Area. Another, more recent complaint by some locals: Foreigners keep snapping up the best companies that have sprouted here.
Cambridge’s tech bona fides were validated afresh last month when Japanese telecommunications giant SoftBank Group Corp.
agreed to pay $32 billion for ARM Holdings
PLC. The Cambridge firm designs the chips in more than 95% of the world’s smartphones.
That deal follows the acquisitions of other, well-known Cambridge-affiliated firms by some of America’s tech titans. In 2011, Hewlett-Packard
paid $11 billion for Autonomy Corp., an analytics-software developer that, at the time, was Britain’s reigning tech darling. That deal ended in acrimony after Hewlett-Packard accused it of fraud, an allegation Autonomy’s founder is still fighting in court.
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More recently, Alphabet Inc.
’s Google in 2014 bought DeepMind Technologies Ltd., a giant in the world of artificial intelligence. Microsoft Corp.
in February acquired SwiftKey, which designs smartphone keyboards that try to predict what a person is typing.
“I’m happy at some level to have great U.K. tech successes,” said Andy Hopper, the head of the University of Cambridge Computer Laboratory. He was research director at Acorn Computers Ltd., which helped build ARM. On the other hand, he said he fears ARM will be vulnerable if SoftBank runs into tough times. SoftBank has pledged to double the size of ARM’s 1,600-employee British workforce in five years.
There is a new potential challenge to Cambridge as a global tech hub: Brexit. Some industry players, including Mr. Hopper, worry the U.K.’s vote in June to leave the European Union, could damp Cambridge’s tech clout if it makes it harder for EU citizens to work in the U.K. At the same time, British venture capitalists say the plummeting pound, a collateral effect of Brexit, may also make U.K. tech firms more attractive to foreign takeovers.
The city’s recent tech offspring has helped Cambridge punch above its weight. It remains a minnow on the global stage in terms of startup funding, for instance, a key benchmark for cities aspiring to be the next Silicon Valley.
Venture-backed companies in the area raised $317 million in equity financing in the first half of 2016, according to Dow Jones VentureSource. By comparison, venture-backed companies in London raised $1.2 billion. Those in the Bay Area hauled in $9 billion over the same period.
Still, Cambridge has become the pride of the U.K. tech industry, which dubs the area “Silicon Fen,” a nod to both its budding computer-engineering sector and age-old marshes. About 57,000 people work at more than 1,500 local tech firms with a combined annual revenue of more than £13 billion, according to estimates from the University of Cambridge, which has helped foster the tech boom.
Founded in 1209, the University of Cambridge is the English-speaking world’s second-oldest university behind the University of Oxford, which is about 100 years older. Over the centuries, the university here played host to a variety of innovators including physicists Isaac Newton and Stephen Hawking and poets John Milton and Lord Byron.
Just as Stanford University helped spur Silicon Valley, the University of Cambridge did the same starting in 1970. It used its lands and funds to establish the Cambridge Science Park to house and support high-tech businesses.
“They did look to Silicon Valley and Kendall Square”—the area near the Massachusetts Institute of Technology in that other Cambridge, outside Boston—“as something to aspire to,” said Tony Raven, chief executive of Cambridge Enterprise Ltd., a university initiative that helps faculty and students commercialize tech-startup ideas.
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The organization shares a building with IdeaSpace, an incubator and co-working space for Cambridge entrepreneurs, at the west end of campus. It is housed in a gleaming glass building, past the Cambridge Lawn Tennis Club and across from the university farm’s wheat field.
The university’s tech initiatives paralleled the rise of local tech firms such as Sinclair Computers, founded in 1973, and ARM, founded in 1990, that took advantage of the brain power graduating from Cambridge every June. Microsoft said it started a Cambridge lab in 1997 because of the city’s “rich history as a center of higher learning and growing global impact as a leading high-tech hub.”
London-based pharmaceutical giant AstraZeneca
PLC is in the midst of moving its global research-and-development center from near Manchester, England, to Cambridge, where it plans to have 2,000 employees.
Now Cambridge is experiencing classic boomtown stresses. The median price of a Cambridge house in the second quarter of 2015 was £360,000 (about $476,633 at current exchange rates), up 47% from £245,000 from the same period in 2010, according to government data. That outpaced rising prices in London. The median rental rate of a private-market, one-bedroom flat in Cambridge for the year ended September 2015 was £900 a month, the highest rate in England outside London, according to government data.
Eben Upton, founder of the nonprofit Raspberry Pi Foundation, known for its $5 computers, said the 10-mile, rush-hour drive to his central Cambridge office takes 45 minutes, or just five minutes less than cycling. “There’s a need for some sort of plausible transportation strategy,” Mr. Upton said.
Mr. Raven, the Cambridge Enterprise chief, said the U.K. lacks the infrastructure—deep-pocketed venture-capital firms or corporate investors with tech-sector expertise—needed to keep promising companies under local control. He said this has extended a British problem that predates the modern tech industry.
“We came up with penicillin. We came up with the jet engine,” Mr. Raven said. “If you look across the world, the great technologies were designed by the British, but they were not exploited by the British.”
Write to Stu Woo at Stu.Woo@wsj.com
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