What makes a great tech startup hub?

1. Close connections with universities

Con­grat­u­la­tions, you’ve decid­ed to start a tech busi­ness. Now the ques­tion is where to base it and oper­ate from.

Prob­a­bly the most impor­tant thing to con­sid­er when choos­ing a start­up hub is access to bright minds to fill the jobs that will be cre­at­ed. For this rea­son, it’s ide­al to pick a city where there’s a pres­ence of world-class uni­ver­si­ties and inter­na­tion­al­ly recog­nised research insti­tutes.

Priya Lakhani, founder and chief exec­u­tive of arti­fi­cial intel­li­gence-pow­ered edtech plat­form Cen­tu­ry Tech, says what makes Lon­don one of the bet­ter start­up hubs for a base is you’re at the cen­tre of some of the best insti­tu­tions and peo­ple around, not just grad­u­ates, but aca­d­e­mics, engi­neers and more.

The impact this can have can send rip­ples through your busi­ness and beyond the recruit­ment process. “Being able to work close­ly with aca­d­e­mics ensures we grow in a research and evi­dence-led way,” says Ms Lakhani.

2. Creative and low-cost lifestyle

A big draw for grad­u­ates look­ing for work is the lifestyle on offer. It may often be a deal­break­er when they decide whether to stay in the city where they stud­ied or move else­where.

Daniel Nathrath, chief exec­u­tive and co-founder of Ada Health, says Berlin is the per­fect city for his com­pa­ny, which is behind the symp­tom check­er smart­phone app Ada and has been in busi­ness since 2011. This is thanks large­ly to Berlin’s cre­ative cul­ture and rel­a­tive­ly low cost of liv­ing com­pared with oth­er major inter­na­tion­al cities

Start­up hubs that can offer this have a wider pool of tal­ent to hire from, which means you can access high-qual­i­ty skills from across a range of dis­ci­plines, he adds.

Described in 2003 as “poor but sexy” by the then-may­or of the city, Berlin is now vying with oth­er Euro­pean cities to become the Sil­i­con Val­ley of Europe. “It’s been fan­tas­tic to see the city’s tech scene grow and flour­ish over the last eight years,” says Mr Nathrath.

3. Lower wages, leaner operations

Once your start­up is expe­ri­enc­ing sig­nif­i­cant growth, you might decide to open offices in oth­er loca­tions. Insurtech start­up Kasko is head­quar­tered in Lon­don and has expand­ed to Ger­many, Sin­ga­pore and Latvia since it was found­ed in 2015.

Accord­ing to co-founder and chief tech­nol­o­gy offi­cer Matt War­dle, choos­ing Latvia was a no-brain­er. He had pre­vi­ous­ly man­aged devel­op­ment teams there for Accen­ture and was aware “it’s a high­ly edu­cat­ed coun­try with hard-work­ing peo­ple, so there’s a rich tal­ent pool of hun­gry can­di­dates”.

A key fac­tor that makes Lat­vian cap­i­tal Riga one of the up-and-com­ing start­up hubs is the cheap­er wages com­pared with oth­er coun­tries, includ­ing the UK.

“Lat­vian salaries are actu­al­ly around 70 to 80 per cent of the UK’s. And peo­ple here pre­fer full-time jobs over con­tract work, which has allowed us to grow a sus­tain­able team of hap­py, loy­al col­leagues,” says Mr War­dle. “We get to pay above the aver­age wage while mak­ing sav­ings else­where. A thir­ty-two-per­son office with all the trim­mings in Riga costs the same as an office for eight in Lon­don.”

4. Good transport links

Open­ing over­seas offices close to your head­quar­ters’ time zone, like Kasko has done in Riga, makes oper­a­tions eas­i­er, but build­ing a remote cul­ture can bring its own chal­lenges.

It’s for this rea­son that you should base your­self in a city with good trans­port links, road, rail and air. “Sev­er­al times a year we get every­one from all our sites togeth­er to work, relax and grow. Those cheap flights become anoth­er Riga bless­ing,” says Kasko’s Mr War­dle.

The start­up hubs with good trans­port infra­struc­ture are like­ly to have a more mobile and agile ecosys­tem. It helps a city to be more acces­si­ble, attract tal­ent from out­side and cre­ate links with oth­er start­up hubs. This, in turn, can fos­ter the type of entre­pre­neur­ial com­mu­ni­ty that dri­ves future inno­va­tion and makes a city appeal­ing to investors.

Paris, for exam­ple, has the third-best pub­lic trans­port sys­tem in the world, accord­ing to Arcadis’ Sus­tain­able Cities Mobil­i­ty Index, behind Hong Kong and Zurich. Two years ago, a dis­used Paris rail depot was turned into a start­up incu­ba­tor, Sta­tion F, backed by French tech bil­lion­aire Xavier Niel, who fund­ed it with €250 mil­lion.

5. Championing startup success

A recent study by EY revealed Paris has over­tak­en Berlin for start­up invest­ment. Over the first half of 2018, invest­ments in the French cap­i­tal totalled €2.2 bil­lion, com­pared with €2 bil­lion in the Ger­man cap­i­tal; half-year fig­ures for 2017 were €1.4 bil­lion and €1.6 bil­lion respec­tive­ly.

Paris’s ambi­tion to estab­lish itself as one of the lead­ing start­up hubs in the world is being sup­port­ed by the French gov­ern­ment. In Sep­tem­ber, Pres­i­dent Emmanuel Macron announced €5 bil­lion of fund­ing, pledged by pri­vate sec­tor investors, will be poured into tech com­pa­nies look­ing for late-stage invest­ments over the next three years.

“The French have been very suc­cess­ful at pro­mot­ing Paris glob­al­ly. Macron has cham­pi­oned our tech sec­tor, invit­ing glob­al lead­ers to France Dig­i­tale Day [a lead­ing tech event in Europe] and speak­ing at the launch of Sta­tion F,” says Romain Pail­lard, co-founder and chief oper­at­ing offi­cer of cod­ing boot­camp Le Wag­on.

“All this has helped to build buzz and pull tal­ent towards France’s tech scene, both French nation­als return­ing from Sil­i­con Val­ley and those attract­ed to the inno­va­tion the city promis­es. Paris is gain­ing con­fi­dence. It’s learn­ing from Sil­i­con Val­ley with­out slav­ish­ly copy­ing it.”