Is London the best place for UK tech startups?
There are plenty of reasons for East London’s position at the centre of Britain’s tech startup universe, and it’s nothing to do with the availability of a good flat white. The capital has 47 universities; access to the City’s financial investments; a host of co-working spaces designed for startups, to ease the cost of rents; and the networking opportunities that come with being right in the thick of it.
John Harthorne, the CEO and founder of startup accelerator Mass Challenge, set up in Britain for the first time after five years in Boston. Unsurprisingly, Harthorne chose London.
However, high rents posed a problem, and continue to do so, even for relatively established startups such as Mass Challenge: in 2013, Colliers International said rents were up by 46% in the Tech City area – and they’ve been on the rise ever since.
As a result, Mass Challenge couldn’t find a home in the fashionable Old Street area, instead moving to Tobacco Dock near Wapping. Harthorne explored Whitechapel and other parts of Shoreditch, but couldn’t find affordable space – in Boston, the local government simply gave the project free space in the city’s new Innovation District. “We’re always looking for free space, which in Boston was possible,” he said. “In London, people would laugh and wipe tears away and be like, ‘I can’t believe you just said that aloud. It’s not going to happen’.”
London’s high rents are why startup accelerators such as Mass Challenge play such a key role. “A lot of our teams, because London is so expensive, have never actually been able to work together,” Harthorne said. “And now for the first time… they’ve been working together. And they have made incredible improvements, because they have been together.”
That means startups can stay in London and take advantage of the other benefits, such as concentrated access to “talent”, money, networks, mentors and everything else that abounds in the capital. “You’re going to go to the place where it’s easier to get access to each of those resources,” said Harthorne. “If you’re just a little off and you miss it just barely, then you get zero. It’s too risky not to be in a place with concentrated resources and access. It doesn’t mean you can’t succeed elsewhere. It’s just harder.”
Startup in the UK: Cambridge and Bedfordshire
London might be the most popular locale for startups, but Cambridge is the place to beat for tech: the university city has sparked 14 billion-dollar companies, notably Autonomy and ARM. Plus, as with Oxford, the city has a steady stream of the best-of-the-best university students – a key factor in looking for cheap but skilled staff for startups.
It also depends what you’re intending to create: London is top dog for financial tech, but Cambridge is the only cluster listed in the Tech City UK report that has electronics and components as a top specialisation. No wonder, then, that it’s where ARM and the Raspberry Pi were born.
You don’t need to be based in Cambridge itself to benefit. Fredi Nonyelu is founder and CEO of Briteyellow, an indoor networking and location-mapping startup. He lives in Milton Keynes, meaning he’s only 35 minutes on the train to the benefits of the capital, but is based at Cranfield University Technology Park in Bedfordshire.
“We have access to world-class local universities for talent, as well as the London universities, Cambridge, and Oxford,” he said. Factor in the lower cost of living, easier commute, and solid infrastructure, including good communication networks, and it’s easy to see the appeal.
Startup in the UK: Reading
Image: Reading Tom – Flickr
When choosing where to base his firm, James Rosewell, the CEO and founder of 51Degrees, wanted to achieve three things: access to software engineers and graduates (which he found via the University of Reading); lower costs on salaries and office rental; and a reasonable commute and work-life balance.
“[We wanted to] create jobs that were attractive to people wishing to work part-time, particularly parents returning to work after having children,” he said. “Twenty-five per cent of our staff are parents working part-time and with a commute of less than 20 minutes – usually on foot or bicycle.”
Rosewell is particularly critical of high rents in London, advising startups to think twice before moving to the capital. “Startups need to do everything in their power to keep costs down, and office rent plays a huge part in this,” he said. “Avoiding London is one way of doing this – unless, of course, the core business is dependent on a geographic presence there. It may feel like the right thing to do to be in the hub of London, but it’s crucial that startups look beyond this.”
Unless you’re in property, you’re not the one benefiting from the popularity of Tech City, he pointed out. “Businesses that have certainly benefited from the rise of Silicon Roundabout and Tech City are those that own commercial property and housing,” he added. “Rents and prices have increased far faster than they might have done otherwise. We are not in the business of fuelling property price inflation.”
Main image: Matt Buck – Flickr
Startup in the UK: Cornwall
Surf’s up for startups: Cornwall’s the place for anyone wanting to innovate in a more relaxed manner. The region doesn’t make the Tech City report’s ranking, but don’t let that put you off, said TouchByte managing director Jeremy Sneller, who is based in Falmouth.
“Cornwall is a fantastic place to live, therefore work-life balance is absolutely fantastic,” he said. “You can be working during the day and then go for a surf or a sail in the afternoon or evening.”
And when you’re in the office, you can rely upon a decent broadband connection. “Good communications is key, and the government has heavily invested in superfast broadband so we have fast access,” he said.
While private investment hasn’t trickled down from Old Street to Falmouth, the government has stepped in. “Because Cornwall is perceived to be an area where it needs investment, there are lots of government grants, so we make the most of those,” he said. “Also, they’ve set up four innovation centres down in Cornwall ,where they help startups and give them high-quality premises and access to people within the community.”
Finding staff is a problem, but TouchByte is happy to train locals. “In any business, getting good-quality staff is probably the number-one headache, and that’s the same here,” explained Sneller. “But because the options of slightly better salary roles are limited here, you tend to get talent doing mundane jobs. If we can offer them a career and a future and so on, we can pick up talent which we can develop.”
“There’s not this wealth of experienced people down here, so there tends to be a gap between the end of uni and people having children. They tend to head up to London, but as soon as they want to settle down, they tend to bring them back to the area where they grew up.”
Startup in the UK: Cardiff
Image: Ben Salter – Flickr
Go west! You won’t be lonely: South Wales, including Cardiff and Swansea, is home to 28,308 digital firms, posting an 87% increase from 2010 to 2013, according to the Tech City UK report.
You’ll have your pick of co-working spaces and reasonable property prices, and those surveyed by the report said there’s excellent access to public finance to help you get going. While private finance is scarce and skilled workers are harder to come by, the five local universities help mitigate recruitment problems.
“It regularly tops the polls of quality of life for UK cities,” said Neil Cocker, of Cardiff Start, a local tech startup network. “It’s not difficult to see why – it’s the fastest-growing capital city in Europe, but within literally minutes of mountains or sea, and with world-class sports, leisure, restaurants, nightlife and so on. Low overheads mean your investment will go further, and the quality of life means staff are happier and more creative.”
Key industries are health tech and life sciences, but Cocker also points to a growing financial-tech industry, helped by the presence of banks and insurers in Cardiff. “Insurance-comparison sites were essentially pioneered in Cardiff,” he noted.
He’s willing to admit the downsides. “Raising money can be tricky here, and we have less experienced tech entrepreneurs than many other parts of the UK,” he said. “Relevant finance and expertise can be tough to come by. But it’s improving, and people are more than willing to help you find the right people.”
Main image: Matt Buck – Flickr
Startup in the UK: Newcastle and the rest of the North East
The startups we spoke to from the North East were some of the most enthusiastic about the geography of their headquarters – a trend noted by the Tech City UK report, which said companies in the North East are “some of the most positive in the UK about the benefits delivered by their cluster”.
The benefits of cities such as Newcastle and Sunderland include fast broadband and cheaper rent, but one of the major hurdles holding back the area is “perception of the region”. The area saw a 24% increase in the number of new digital companies incorporated between 2010 and 2013. That’s lower than other regions, but that could be because it’s already well established.
Tom Beardsmore founded games firm Coatsink in 2009, choosing to base it in the North East simply because that’s where he’s from. “The initial reasoning was based on us being comfortable in the countryside, to be honest,” he said. “We’re from the North East and didn’t particularly like the idea of working in a busy urban environment. Since then, we’ve simply not needed to move – we’ve grown steadily in every aspect.”
Coatsink is based in Sunderland, an area that provides great access to graduates and experienced developers alike, thanks to specialised games courses at local universities and the larger studios based in the area – such as Epic Games, Ubisoft and Rockstar. “As a result, we’ve never wanted for skilled team members, which is by far the biggest benefit,” he said. “It’s also relatively cheap to operate up here, meaning we can invest more in our own products and intellectual property, which is central to our growth and long-term strategies.”
Image: Liam Swinney – Flickr
Helmut Okike works for mobile-payments firm Omlis, which set up in Newcastle because founder Markus Milsted thought London’s tech scene was too “saturated”. Plus, by situating in Newcastle, the company was able to take advantage of local talent, rather than fight for staff in London. “We feel we’re able to offer better opportunities for local talent to gain more experience on the job with more responsibilities, accelerating their careers quicker than they’d be able to if they chose to go to London,” added Okike.
“We’ve also had immense success in attracting talent from the South to the North to join our organisation,” Okike added. “We actually have a member of the marketing team who moved from Santander in Spain to Newcastle upon Tyne just to work for Omlis. We’re also able to attract a really high calibre of professionals who have family commitments and don’t want to leave the region. This plays a large factor in their motivation to ensure that they do everything they can to ensure the success of our business.”
Martyn Cuthbert’s latest startup is Nutshell Apps, a zero-coding, drag-and-drop app-building platform. “Newcastle is ahead of the curve with well-established technology hubs and a smart network of local investors,” Cuthbert said. “There’s a booming grassroots community of tech startup founders, developers and designers, supporting each other and building great things in the region.”
There are big-name companies such a Sage Software, as well as investors such as Northstar Ventures and Rivers Capital Partners – plus, the North East boasts plenty of government support. “The North East has seen huge transformations through sustainable economic development,” added Cuthbert, with money flowing into the renewable-energy sector in particular.
Anyone can set up incubators and workspaces, but local enterprise agency PNE Group have won European awards for their startup facilities. “You can’t ignore the considerable increase in the cost of living and rent, along with competition for talent and resources, in London,” said Cuthbert.
“The UK economy is extremely London-centric,” he added. “The beauty of technology means that it doesn’t matter where you are based.” It’s worth remembering that before hopping on the train to London.
Main image: Matt Buck – Flickr
Startup in the UK: The best of the rest; Bristol, Brighton, Leeds
We spoke to many different startups from many different regions of the UK, but there are still so many locations that we didn’t explore. In 2017 Market-Inspector released a comprehensive breakdown of startups in various cities across the UK, measuring them by factors such as 1- and 5- year survival rates, average internet speeds, and average weekly outcome.
Big cities like Bristol, Brighton and Leeds are hugely respected as hubs for startups – both have 5-year survival rates of almost 50% and average weekly incomes of way above £400 per week. They ranked as numbers 2, 6 and 1 respectively.
Similarly cities in Wales, Ireland and Scotland are often touted as great places to start. Swansea, Belfast and Edinburgh are frequently mentioned in the same breath as London, with high average internet speeds, 1- and 5- year survival rates, and living satisfations. These cities ranked highly too.
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