How to build UK tech optimism, with Kanishka Narayan MP
The last few years have seen investors and the tech industry getting much more involved in UK policy, although few have made the jump from VC directly into Parliament. But back in July, Kanishka Narayan, former fintech and climate investor, became Labour’s MP for the Vale of Glamorgan.
Before entering electoral politics, Kanishka led Clocktower Ventures’ UK and European presence, did his MBA at Stanford, worked in capital markets at Lazard, was Head of Tech Policy for Labour’s frontbench, and spent several years as Senior Adviser in the civil service on a range of domestic public policy issues.
It’s a rare set of experiences for a politician of any party, so we caught up to discuss how this shapes his work as an MP, how to build a common language between founders and politicians, and how to build an optimistic case for UK tech that everyone has a stake in.
Kanishka’s take on the politics of UK tech optimism:
Politicians and founders often find themselves speaking to different audiences: there’s rarely overlap between the median constituency voter and a startup’s target customers in e.g. London, Zones 1-3. Rather than targeting a niche, the focus for politics is on building coalitions across 650 constituencies, each with its own unique bundle of demographic, economic, and social concerns. So we need a fundamentally different mindset to build coalitions for common problems.
We need to ask why the argument on housing and energy has largely been won, but the argument for AI and technology hasn’t been convincing enough. The benefits really become clear when you get adoption, rather than just innovation, so part of the challenge is to find ways for us to adopt the frontier very quickly, so that there isn't this four-decade wait as there was for Edison’s electricity through to New York eventually adopting it.
To the extent that the world of bits rather than bytes is more geographically dispersed, the right thing to do in terms of political interest and the right thing to do in terms of commercial reality can coincide. Similarly, being able to connect your individual trajectory to the places we come from is also important, to deepen the sense that the wider sense of opportunity that this whole ecosystem offers is open to a much broader base of people who can really thrive in it.
We should feel optimistic about UK tech because our fundamentals are strong and what’s contingent is solvable. Our institutional quality, regulatory ability, R&D positioning are solid, and other factors — like financing, internationalisation, developing talent to build domain and commercial expertise — we can solve.
Full interview with Kanishka Narayan, MP for the Vale of Glamorgan
FORM: You're relatively unique in making the transition from the world of startups to the world of politics. How well do you think either group understands the other, and has anything surprised you about the world of politics that might not be obvious to founders and investors?
KANISHKA NARAYAN: I think there are two things that I wouldn’t think of instinctively when I was in VC that I think about a lot in politics.
The first point is about consistently understanding the proportion of the broader landscape your specific sector represents. Venture-backed startups are designed to be fast-growth companies. There’s an implicit assumption that prioritising fast-growth startups creates a fast-growth overall economy. From a macro view, that assumption isn’t consistently borne out as a primary growth driver. Instead, a deeper venture-backed tech sector may only generate growth within a specific corner of the economy, without moving the needle overall or addressing the wider challenges facing society. So those of us who believe in the power of our startup economy have to consistently do more work in making the argument specific and relevant to the whole country.
The second, more fundamental point is psychological. If you’re running a startup, particularly in consumer, you focus on efficient customer acquisition. You start with a tight product definition, and work your way through stage financing as you expand out. Focusing on a small, well-defined audience — say, via tube ads in London’s Zones 1-3 — might be how you target an optimal LTV:CAC as you grow.
In politics, you are thinking about different priorities. Rather than targeting a niche, the focus is on building coalitions across 650 constituencies, each with its own unique bundle of demographic, economic, and social concerns. And you can’t work your way from a specific niche to a wider market; you are talking about and tackling every challenge together. In a typical day, I cover local housing cases, experience of schools, anti-social behaviour, local investment, technology, and energy.
In that mix, how you are able to build coalitions — to hold up our common problems and turn them into a common purpose — is a much more imprecise and unwieldy process. It requires a fundamentally different mindset. It’s about compromise, long-term thinking, and fundamentally, about moving forward the country with a sense of collective energy.
How much do you think that asymmetry between tech and politics matters?
KN: It does matter quite a bit. Because you have amazingly talented, high energy, high agency people operating in this part of the economy, but the incentive structure of venture often steers them away from engaging with places like the Vale of Glamorgan. They tend to focus on dense, affluent markets where you can test product-market fit most efficiently, and can ultimately scale most efficiently. The fact that these two audiences rarely interact with one another serves a disconnect between high-growth sectors and most of our communities. That is a challenge for two reasons.
One, because we found a bunch of amazing people, ideas and money which could do a lot more, I think, for the country at large and also their own goals in a more durable way. You build a more durable consensus behind technology if we serve some overlap of people and ideas between the worlds of technology and politics.
Two, I think long term it builds a degree of ultimate mistrust between voters and politicians if politicians aren't able to keep up with frontier technology. So maybe a neobank doesn’t have the Vale of Glamorgan as its primary focus, but I still use their products and a lot of people living around me do as well. Our expectations about what technology can do for us is driven by our experience of how fast it has moved on. By contrast, politicians can get used to a series of static expectations and ways of doing things that are very, very different, perhaps making the excuse that ‘hey, my kind of market is different, so I can just keep doing things the way they were’.
So I think we miss out both for the country and the quality of our politics when we both don't make attempts on each of our sides to try and come closer.
It’s a critical point, that UK tech is chronically London-centric and, frankly, lacks perspective on the UK as a whole. As MP for the Vale of Glamorgan, where does what founders and investors do intersect with the challenges and opportunities for a constituency like the Vale?
KN: So the caveat here is that agglomeration and superstar effects in technology and digital markets are real, so I’m not here to place undue burdens on people to say ‘go and make sure you sell in every single part of the country, even when your unit economics don't work’. That is not going to be a good strategy. If we're trying to make a difference over the long term, we need to focus on practical solutions that acknowledge these realities.
But there are two areas where I think you can still do things in a way that is consistent with whatever you might want to be doing commercially and economically.
One of those is a really personal thing: which is that whilst it's true that, as a commercial strategy, you might not always be driven to every corner of the country at all times, on a personal level, many of us have either come from or spent time in different parts of the country.
The places we come from shape our understanding of what opportunity can mean. I grew up in Cardiff. Matt Clifford grew up in Bradford. Being able to connect the story of your individual trajectory to the places we come from and represent is really important, because it starts to build and deepen the sense that, even if the commercial focus and the short term might be in a particular concentrated place, the wider sense of opportunity that this whole ecosystem offers is open to a much broader base of people who can really thrive in it.
Secondly, looking at the evolution of where technological innovation is located, not just in very consumerised software, but throughout the whole stack, means increasingly focusing on things which are more space based rather than independent of geography.
This is obviously the case when you go all the way down the stack, ultimately including energy sources for future, computationally intensive models. So that’s one place where you can actually clearly make a commercial argument for why it's great to go and build a fantastic data centre in South Wales. And I suspect it is also the case for some things that are not fully software, not hyper-capital-intensive infrastructure, but instead hybrid projects.
So, to the extent that world of bits rather than bytes is more geographically dispersed, that means further cause for optimism because what the right thing to do in terms of political interest and the right thing to do in terms of commercial reality can coincide.
Just to pick up on that, there are clearly a few different audiences you’re trying to speak to — the country at large, your constituency, industry, the rest of the Labour party — each with their own perspectives and incentives which aren’t always aligned. Is that ‘bits vs bytes’ distinction a way to craft a consistent, singular story that can speak to them all?
KN: Yes, so I often find that conversations which are focused on the objective of prosperity are largely focused on venture-backed innovation that is going to push on the frontier and drive growth, and historically that has largely focused on the bytes world. And then there's another conversation which is a lot more about enhancing dignity, distribution, and inclusion, and that is focused a bit less on startups driving the vanguard, but instead more on publicly supported goods and services and building a sense of collective dignity. But I feel frustrated that those two outcomes are usually pursued by different sets of people with very little overlap. So how do we bring those two together?
One thing might be that, yes, the bits focus, rather than bytes alone, gets you out into more places and therefore can be a great way to bring all of us together into a shared exciting mission of prosperity and dignity. That's one way of doing it.
I think another, that requires a lot of heavy lifting, is to try and find ways in which you can coincide commercial reality and the prosperity outcome with the dignity outcome, within the world of bytes.
So let me give you a specific example: a really fundamental driver of a country's prosperity is the quality of the work opportunities that each of us is able to take part in. At the moment, looking broadly across government, the government's R&D budget is concentrated in science, in defence, in healthcare, but the DWP has close to zero R&D budget if you take away impact evaluations, right? But to me, the future world of LLMs represents a huge opportunity to enhance the dignity of people in the labour market. And I can imagine that there are commercially interesting ways of doing that, too, if you can support someone to move up a job and get an earnings uplift, too.
So there are lots of innovations which might be possible in the imminent future, where the disparity between what is right to do in terms of prosperity, both in aggregate and commercially, is not too far distant from what is the right thing to do for all our collective dignity.
In your maiden speech you talked about the UK as having missed the last decade of innovation - what's the optimistic case for the next decade?
KN: OK, so first, a diagnosis of the past. If you just look at everything from equity value creation in public markets to the shared base of who has been able to participate in that, you can see very clearly that UK public markets in technology have just kind of lost out on that front and, partly as a consequence but also as a broader phenomenon, most people in Britain haven't been able to take part in the opportunity the last decade of innovation has offered in terms of spreading opportunity, prosperity, dignity across the country. So I have a very clear feeling that Britain has lost out in terms of the most ambitious possible outcome over the last decade of software.
Why do I think there's a cause for optimism? Because I think a lot of the drivers of that are contingent. If you look at what’s fundamental, which is a country's institutional quality, regulatory ability and deep R&D positioning, the great news is we are in an awesome place on potentially all of those fronts. The stuff that is contingent and less fixed are things like financing.
Some people also make the argument that our market size has constrained us, that one of the reasons Britain hasn't got a trillion dollar company or indeed $100 billion companies in the way that the US has is because our market size is small. They argue it's very hard to do that just within the UK, and then once you have the burden of internationalisation, it’s very tough.
But you only have to look at the anecdotal example of Israel to feel like that argument is inaccurate. If we take a much more open outlook at what we can do in becoming the engine of prosperity, not only for Britain but also by having an international outlook, it is in our history to go and set out globally, and I think it can be in our future as well.
So, the main reason I feel optimistic is because the stuff that’s fundamental and takes decades, if not a century or two, is in a really good place. And then the stuff that's more contingent — like whether you can get the right level of financing into the right places, or can you sell externally to make sure they have a big enough market, or can you make sure that people who are very, very good end up getting a little bit of domain understanding so they can also then adapt that underlying intelligence to be very good at enterprise sales and taking a company from series B to D — I think those things feel a bit more contingent to me and so very solvable.
Finally, it's impossible to talk about tech without talking about AI. We’ll soon hear more about the UK’s plans on AI policy, but how does politics play into the outlook for AI regulation, and how should founders think about that?
KN: So, why is it that the arguments on housing and on energy have largely been won, in terms of them both being drivers of economic growth but also of distribution and inclusion, but the argument for AI and technology is still in play rather than a slam dunk win?
When you go and knock on a doorstep in the Vale of Glamorgan, you see people who want to build decent affordable housing. People feel this acute sense that that's the right thing to do, not just for the dignity of someone having shelter, but also for the country to move on and move at pace. And the same on energy as well.
Whereas I think the argument on technology and AI being able to drive aggregate growth, and do it in a way that is fair across the country, that can support all of us rather than some of us, has not been convincing enough. And this is a non-partisan, long duration point rather than just this moment in time.
Secondly, the benefits really become clear when you get adoption, rather than just frontier innovation. I think part of the challenge is about finding ways for us to adopt the frontier very quickly, so that there isn't this four-decade wait between Edison’s electricity through to New York eventually adopting it, and the same on steam engines and the same on general ICT.
How we shorten that adoption curve and timeline is really critical to winning that political argument, and filling the gap between AI as a great thing for innovation and potentially for long term growth, but also as the right thing in terms of making life more exciting, optimistic and fair across the country.
Hit reply with follow up questions, or get in touch if you’re building at the frontier of tech and regulation.