London has become Europe’s answer to Silicon Valley. Tech entrepreneurs are fighting for start-up survival in what is being billed as “Tech City”; an area of East London that has become home to hundreds of small and medium sized companies, as well as big-name players including Facebook, Google and Twitter.
As entrepreneurship becomes an increasingly popular option for today’s business graduate, shunning traditional MBA jobs in an environment with like-minded individuals is, for some, the way to go. Today, there are nearly 1,500 digital companies in the area alone – a remarkable increase since 2010, when there were approximately 200.
The number of technology companies in London increased 76 per cent from 2009 – 2012, while the tech sector as a whole in London grew by almost 17 per cent, according to figures published in the Tech City Third Anniversary Report.
Job opportunities during the same period grew by more than 16 per cent – there are now 582,000 people employed in London’s tech sector. In a world where MBA students are seeking to enter start-ups in record numbers, these figures are encouraging.
“There is incredible momentum in the UK tech and digital sector. The Government has created a policy landscape that’s transformed the UK’s start-up scene,” says Joanna Shields, incoming CEO of Tech City UK, an initiative backed by Britain’s political elite which supports start-ups and fosters investment in the area.
Gordon Innes, CEO of London & Partners, the official promotional organisation for the city, says London is one of the world’s “great cities” for start-ups. "London provides huge opportunities for smart technology firms who are keen to pursue innovative business strategies,” he says.
Leading business schools have set-up camp there. Imperial College Business School recently held a series of debates examining the UK’s strategy for the skills, knowledge and infrastructure for the future digital economy in Tech City.
Professor David Gann, Vice President (Development and Innovation) at Imperial College London, says that the UK can lead the next generation of digital services. “Through our world-class universities, top businesses and digital start-ups, we can generate better opportunities in cities and create growth in the job market,” he says.
Closer ties to big businesses have never been more important for MBA students, and the same goes for technology companies, big and small, says Dr Sionade Robinson, Associate Dean of MBA Programmes at Cass Business School. “Being located in the City of London puts us at the hub of the most important city for global business in Europe. Our location has helped us create a network of corporate relationships that we provide Cass MBA students with,” she says.
Cass, part of City University London, also have an incubator for its tech-minded MBA students, The Hangout. Parveen Dhanda, who helps run the day-to-day operations, says that there are currently around 10 MBA students using the service.
“We provide an opportunity for students that have decided on a business idea to work in an environment with similar start-ups. At the end of their MBA program they will have developed more relationships and have a better idea of how they want to take their ideas forward,” she says.
Nicolai Schumann, a Cass MBA graduate and SME founder who used the schools’ London incubator, says that “it’s all about collaboration” when it comes to launching a company.
Bennie Johnston, Head of API's at Just Eat Technology which is based in Tech City, agrees. “A lot of the time the businesses we do collaborate with have been near us – it makes that sort of thing easier. It’s a lovely place to meet like-minded individuals,” he says.
One of the main reasons start-ups come to London is to find top talent. Steve Pateman, Head of UK banking at Santander, said last week that there needs to be significant cultural change to ensure firms have access to the brightest graduates.
London TechMeetUps, a branch of the TechMeetUps organisation which seeks to help develop technology start-ups in the world’s major cities, held a jobs fair this week to help address the problem. Dozens of start-up entrepreneurs, most of them based in Tech City, pitched to the audience of job seekers.
Bernhard from Busuu says that finding the right talent is the biggest challenge their company has faced. They want to expand from about 35 to 50 employees, and hired some MBA graduates last year. “We moved the company last year from Madrid to London, and to find top talent, it’s much easier being in London. It was definitely the right decision for us to come here,” he says.
Jon Page, Sales Director of Tech City start-up Athena, says it is tough finding the right employees. “This is where people want to work. I can comfortably say, out of our team of six guys, if we weren’t here [in London] we wouldn’t have at least 3 of us. Half the team would not be here,” he told BusinessBecause.
Bennie from Just Eat Technology agrees. They are hoping to hire about 25 people by the end of 2014. “It’s a growing company and we’re struggling to find good people in the market,” he says.
But it is not just hiring potential that brings MBAs and tech entrepreneurs to Europe’s Silicon Valley. Finance is a key consideration for start-ups, and office rents in London are set to reach an historic high by 2018, as record levels of investment in infrastructure and demand from tenants and overseas investors grows.
London’s West End has just overtaken Hong Kong as the world’s most expensive place to rent offices – with a 14 per cent rise in the cost of taking on a West End lease reported last year.
Knight Frank, the property consultancy, said earlier this month that rents in the City and the West End could reach £75 a sq ft and £120 a sq ft respectively by 2018. The revival in demand for office space is blamed largely on technology and media firms with large deals signed by Google, Amazon, Facebook, Twitter, Ogilvy & Mather and News UK.
“Small-scale start-ups have loads of opportunity for shared office space. But once you do begin to grow, it’s cheaper to be in the City than going to an office in the West End,” says Bennie from Just Eat Technology.
Michael Ter-Berg , CEO of Thomson Screening, said that East London is a “hub” for tech start-ups like his, which generates opportunity, networking and access to finance.
Successful graduates with the ambition to do something themselves are attracted to Tech City – and that will only grow stronger, he says.
“It’s important to have access to networks and angels. It’s proving to make successful companies and there are sure to be a lot more. We see that happening here like it did in Silicon Valley.”
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