Startups head to the suburbs

Why the tech industry isn’t locked into London.

The future of tech in the UK is suburban. Tech City, aka London, still reigns supreme, followed by Manchester and Edinburgh, but some of the fastest growth in tech companies is to be found in smaller towns, commuter belts and the suburbs.

The latest figures from this year’s report by Tech Nation ( pcpro.

link/287nation) reveal that 16 “silicon suburbs” and “tech towns” – tech industry cheerleaders are big on alliteration – have a higher proportion of technology-related employment than the UK average, including Newbury, Southend and Swindon. That makes them a “fertile breeding ground for the next generation of tech startups”, the report notes.

Of course, London is still the centre of British tech, but a wider spread of companies across the country, the rise of co-working spaces, and support from universities means more tech ideas are finding their feet not in Shoreditch but in Slough.

Slough over Shoreditch

There are plenty of reasons for tech to expand into the suburbs. First, there’s the rising cost of running a business in east London. Rent has skyrocketed: residential property in Hackney has seen the fastest growth in rent over the past decade across Britain, according to Rightmove, while commercial property rents climbed by 181% in Shoreditch from 2010 to 2015, according to Ernst & Young. That makes it a lot harder to found a company without going broke first, with pressure from higher costs for office space and the need to pay staff a living wage. Co-working spaces and incubators help, but the former are often expensive, while the latter requires applications and approval before you’ll get your free desk and mentorships.

“While London is home to plenty of startups, larger tech giants in need of masses of office space often locate on the fringes of cities”

That said, plenty of Brits are founding outside of London for reasons other than its vampiric effects on raised funds. Gerard Grech, CEO of Tech City, explained that there are a range of benefits to starting up outside of the major cities, from more space for your family to basing yourself near your customers.

“People have done well in London and Manchester and Edinburgh and other big cities,” said Grech, “and they’re now thinking about setting up their own business and they do it with their family in mind. They do it on their own terms in places you may not expect, because they want to be in the countryside or where they have family,” he added, “and there’s a clustering effect that happens as companies become more successful, it attracts others to the area.”

That’s not the only draw. While London is home to plenty of startups, larger multinational tech giants in need of masses of office space often locate themselves on the fringes of cities, setting up big campuses. Grech points to Newbury as an example,

“Seeking out help from other tech firms in the area will give your startup support and let companies learn from each other”

where Vodafone has its global headquarters. “What tends to happen is around Vodafone, a number of companies cluster up to serve it and its needs as it grows – that’s why you’re seeing these types of companies in places you may not expect,” he explained. That can include firms offering basic IT services or procurement platforms to cuttingedge data analytics or the latest AI developments — the key “underwiring and infrastructure” that props up the wider industry.

That may sound less sexy than a group of hipster friends forming a global startup around IPAs in the local craft beer bar, but getting a foot in the door at an international giant is a good way to accelerate the spread of your idea, said Grech. “Vodafone is obviously a multi-billion pound company with multiple offices around the world, so it can [help you spread] internationally,” he explained.

Starting in the suburbs

If starting up your tech firm in the dining room of your suburban home appeals, be warned there are some challenges. Venture capitalists and other funders tend to be based in London – so be ready for a few train journeys to the capital when on the hunt for investment. Plus, the Tech Nation report notes that finding the right staff remains a challenge for everyone, regardless of location. John Jackson founded software firm Flow XO in Burnley because it’s near his home, but being close to Manchester makes hiring easier. “We decided to focus on hiring developers from Manchester because of the talent pool there,” he told PC Pro, saying the company now has offices in both locations. “For some reason, it’s still easier to hire developers in cities.”

Chris Reid, founder and CEO of Burnley-based Connect Childcare, said that hiring “can be tricky, in truth”, with higher wages in neighbouring Manchester. However, his software company benefits from connections to the neighbouring college with its apprenticeship schemes and local development bootcamps, not to mention good transport links. Still, he says, talent often gets “sucked into Manchester”.

Overcoming the challenges

Mojiworks is an early-stage startup making games for messaging platforms such as Facebook Messenger. It’s based in Guildford, said co-founder and CEO Matthew Wiggins, because the city is a “major European hub of game development” – and it’s only half an hour on the train to London. “It has a long history of significant game companies stretching back to the 1980s, and was Electronic Arts’ first European HQ,” Wiggins said. “By being here, we get access to the vibrant local community of tens of game companies and thousands of developers, plus we can attract talent from the other nearby tech clusters.”

Hiring staff can be a problem, Wiggins admitted, but noted that the local games community is well connected, offering a better network than the disperse developers scattered about London. Plus, the lower costs and good quality of life in Guildford are “both big positives” – while those who do want to live in London are still close enough to commute. “We’re often a shorter commute than if they were travelling from one side of the city to the other,” Wiggins said.

Grech says seeking out help from other tech firms in the area – building your own network and tech hub – will give your startup support and let companies learn from each other. “That’s why you’re seeing a growth spurt in co-working spaces,” he said, noting startups and tech firms benefit from “clustering” to share what they learn.

But startups shouldn’t be afraid to go it alone. Look at Xero in New Zealand, says Grech, a “big tech unicorn based in a place you wouldn’t necessarily expect”. The same is true of British games company Coatsink. “They’re building great stuff for the Oculus Rift in the US, and they’re in Sunderland,” noted Grech, adding Coatsink is helped by the University of Newcastle having a strong gaming programme, offering a stream of talent. “They’re ambitious, connected and they may not be in Edinburgh and London, but they are definitely servicing their market very well.”

Past and future

That the suburbs could be the future of British startups shouldn’t come as a surprise. The neighbourhoods that make up Silicon Valley are full of suburban streets – indeed, the garages where HP and Apple made their start aren’t to be found attached to urban apartments but suburban houses.

“There are more and more tech companies being incorporated every year, and that’s because it is so much cheaper to start a company than it’s ever been, and digital innovation can come from anywhere,” Grech said. So the next Google may well not be found in Old Street, but Newbury instead.