I have worked with Baltic startups for 13 years and the leap made during this time is incredible. The UK is a great place for doing business. Baltic entrepreneurs have founded some of the best UK fintechs, such as TransferWise, Revolut and Monese. And many Baltic startups have offices in the UK, including Starship Technologies, Funderbeam, Pipedrive, Edurio, Giraffe360, Trafi, and Brolis Semiconductors. Recently I’ve been working more closely with fintechs and developing opportunities for Baltic companies in the UK. In general, tech startups, servicing a wide range of sectors, are very welcome in the UK.
Companies go to the UK because of the size of the market (66 million people), the English language, which is widely studied and spoken in the Baltics, the good time zone, and the proximity to the home market. I see some companies expand to access the experienced talent they cannot find at home, while some are keen to have a London address. The UK also offers a variety of accelerator programmes with amazing mentors and contacts, and access to investors is made easy thanks to investment schemes like EIS and SEIS.
As costs have escalated in the Baltic home markets, UK costs comparably do not seem so high, especially outside London. In the past year, I have enjoyed working in northern England, in Manchester, Leeds and Liverpool, getting involved with companies like Fitek, Fractory and Files.fm as they set up their sales offices in that region.
What does Investment Baltics do?
We help Baltic companies expand to the UK, offering free, confidential advice and support. We support businesses with market research, advise on business culture and environment, and how and where to set up. As the law and tax systems in the UK are different from the Baltics, we can put you in touch with specific legal and tax advisers. We can facilitate meetings with accountants and recruitment agencies, and provide advice on opening bank accounts. We also help companies find the right networking opportunities to allow them to develop contacts in the UK.
What kind of startups are most welcome in the UK and which are likely to be the most successful?
Tech startups are very welcome, but the market is not just limited to tech. The most successful startups are probably those with the resources for expansion. The UK is a market that expects a physical presence – they like to see you there.
GET IN TOUCH
If you are looking to invest or set up a business in the UK, the best time to go is during London Tech Week (10-14 June). However, there are many more relevant conferences and events. For more suggestions, or if you are interested in expanding your business to, or setting up an office in, the UK, please email us at email@example.com.
The UK is the 5th largest economy in the world (IMF World Economic Database 2017)
A steady growth is forecast for the UK through to 2022 (IMF Database 2017)
The UK is number 1 in Europe for inward foreign direct investment (UNCTAD FDI Statistics Database 2016) with total investments in the UK amounting to £1,336.5 billion (£573.1 billion from EU countries and £763.4 billion from non-EU countries) (UNCTAD World Investment Report 2018)
650,000 new businesses were set up in the UK in 2016 (StartUp Britain 2016)
The UK is the number 1 choice in Europe for key strategic investments, such as headquarters (EY Attractiveness Survey 2018)
The UK is the third most attractive destination for investment in the world after the USA and Hong Kong, and this position is unchanged since 2016 (UNCTAD World Investment Report 2018)
The UK is the most attractive destination for investment in Europe, and this position is unchanged since 2016 (UNCTAD World Investment Report 2018)
The UK’s software and technology sector is larger than the rest of Europe combined (London & Partners survey 2018)
The UK’s competitive labour costs are lower than those of Italy, France and Germany (Eurostat 2018)
London led every category in the Global Financial Centres Index 20, ahead of New York, Singapore and Hong Kong (Eurostat 2017)
The UK is the number one destination for health and life sciences foreign direct investment in Europe (EY 2018)
The UK is the most advanced e-commerce market worldwide (SaleCycle Blog 2018)
UK consumers are the world’s biggest online spenders per head, at over $3,500 per year
Google encourages employees to spend 20 percent of their work time each week on side projects. It’s considered one of the best ways of unlocking creativity and innovation. This policy helped launch Gmail, Google Maps, AdSense and Google Talk, and is probably one reason why Google is one of the world’s most innovative companies.
The tech giant is not alone in this approach to innovation. LinkedIn has InCubator, which gives engineers time away from their regular jobs to work on their own product ideas; Apple has Blue Sky, which allows workers to spend a few weeks on side projects; and Microsoft created Microsoft Garage, a space for employees to build their own products using Microsoft resources.
Tech enterprises are happy to hire talented employees, even if they devote less than a regular 40-hour week to company development. When given time away from regular work, employees can train their entrepreneurial spirit and become intrapreneurs, a term that characterises an employee who acts as an entrepreneur.
Freeing employees from regular duties unlocks their creativity as they switch from cognitive activity fixed on a set of tasks to different challenges. It also helps employees stay motivated in their regular jobs.
Some of the world’s most ambitious and creative people, working at top academic institutions and prestigious companies, can often be held back by a cultural convention that demands that 100 percent of their focus is on projects at hand. While they make slow and steady progress, such focus limits what they can achieve, and how fast.
If you work in such an environment, you don’t need to quit your day job to become an entrepreneur and start your own company. You can devote 10 percent or more of your own free time to your project. “The 10% Entrepreneur” by Patrick McGinnis is a great book, offering advice on how to manage your time on your way to entrepreneurship.
Before pursuing a full-time entrepreneurial career, use your free time to validate your ideas, research the market and competitors, develop a prototype, and start building your team. This can be accomplished in your spare time with just a few hours a week.
Entrepreneurship is not about quitting your job and starting a company. It is about indulging a passion for solving problems and helping people. Once you determine a solution, then it’s time for scaling your project to achieve better results. Then you will need mentorship and guidance to test your idea, to find talented, like-minded people, and to aid the launch of your company.
That’s why I co-founded Founderly, an interactive platform that provides access to fellow founders, industry gurus, and experts. Founderly also offers resources to help you build your team, grow your seed of an idea into a successful business, and accomplish your goals at your own pace in your spare time.
I believe there is an entrepreneur in all of us – you just need to find a problem you can solve to turn you from a dreamer into a doer.
Vattan is a product architect who started working when he was 16 years old, focusing on advertising, marketing, technology, programming and business growth.
After running a healthcare accelerator in Berlin, I wanted to understand why accelerators do what they do, so I made it the topic of my PhD, which I finished last year. Here are a few of the things I learned from studying the unique social network dynamics of startup accelerators.
The first thing I looked at is why mentors mentor. If you think about it, it’s quite weird that they offer time, knowledge and networks for free. I found that accelerators are very rich in social capital and, in particular, offer early access to new information that other people do not have (i.e. the startups). They also offer network ties – new people. Finally, accelerators are central to their ecosystems, so being associated with them is good for people’s reputations. This translated into saying that mentors mentor for early access to non-redundant information, tie formation, and social validation, to use the sociological terms.
This showed clearly why, when designing a mentoring programme, it is important to remember that the mentors need to get access to useful information – mainly meeting startups earlier than other people; that they need to have an opportunity to network with the other mentors and investors, not just the startups, so they gain network ties; and that they are profiled on the accelerator website, and at events, so they gain social validation. Not doing all of these mean the mentors will not be gaining the social payment they expect, consciously or just instinctively, and will probably lose interest in the programme.
I also found that because accelerators, and accelerator founders, tend to be well networked in their ecosystems, they have a lot of social capital. This particularly means they are both useful to other people, and in a strong position to spread reputational damage if people act badly towards them. Startups, by contrast, often have very little social capital. If they are young, or not from within that ecosystem, they may not know enough people to be able to threaten reputational risk to people who harm them, and do not have enough peripheral social value to be able to reward people for helping them.
The sociological approach showed that accelerators actually play an important role in protecting startups.
We know they support them, but this shows that accelerators deploy their social capital on the startups in their programme both to persuade mentors to help them, and to put ‘bad actors’ off causing them any harm. While you may be able to get away with screwing a startup, you face a far higher cost if you fall out with an accelerator, with all of its mentors, investors and corporate partners.
It was interesting to use the language of sociology and, in particular, social network theory, to describe accelerators. It gave a far clearer understanding of the things we do instinctively, and produced clear guidance on how accelerators and corporate innovation programmes can be designed to achieve more, and to work better.
Dr Tobias Stone is a startup founder and investor, and CEO of Newsquare, an innovation consultancy. You can read more on the findings from his research at www.medium.com/@newsquare
You have to budget for licensing, hire workers, buy necessary technologies and materials, etc. It can be very hard to keep track of (and afford) all of the expenses, and unless you have a nice chunk of change saved up you may need some outside help.
Many startup owners are too afraid of taking out a business loan, as they feel there are too many unknowns when taking out the loan.
How much will it cost?
How much will my interest be?
What about collateral?
Will I even be able to pay it back?
It is understandable to be nervous, but you shouldn’t let these doubts get in the way of advancing your business. Thankfully, there is a tool that business owners can use to answer all of these questions and more: the business loan calculator by Camino Financial.
Real Life Example of Business Loan Calculator Use
Let’s take a look at Koji Kanematsu, a Japanese immigrant who was looking to start his own sushi shack.
Kanematsu found himself missing his favorite street snack, Onigiri, that’s how he decided to start his own business serving this delicious rice ball snack. But when Kanematsu needed some extra cash to move his business forward, traditional banks turned him away.
He simply did not have enough income for the banks to trust that he would repay the loan.
Kanematsu eventually turned to a private lender. Before granting him the loan, they helped him calculate how much money he would need.
Using a business calculator and the amount needed, they showed Kanematsu how much his monthly payments would be, how much interest he would pay and how much the loan would actually end up costing.
By taking the time to calculate how much money he would owe, Kanematsu was more confident that he could pay back the loan. He was eventually approved for a $50,000 loan. This was enough to really propel his business to the next level.
With his new financial backing, he was able to increase his revenue by over 400% and begun working on opening a second and third location.
This story shows how a little guidance can go a long way in ensuring success with a business loan. While it can be helpful to consult with lenders, you can also find out all of this information using a business loan calculator.
What To Watch Out For
When you use a business calculator, there are a couple of things to watch out for during your calculations:
Debt Service Coverage Ratio — It is important to know your debt service coverage ratio before taking out a loan.
There are multiple ways to calculate this, but the most basic one is to take all of your monthly costs (rent, inventory, other loan payments etc.) and divide that by your gross income. Multiply that by 100 and you have your debt service coverage ratio.
This should fall under 30%, otherwise taking out another loan may strain your finances too much.
Monthly Payments Don’t Exceed Monthly Profit — Your loan’s monthly payments should never exceed your business’ monthly payments. As a rule of thumb, your loan’s monthly payments should never exceed 80% of your monthly income.
The Loan Cost Doesn’t Exceed The Growth From the Loan — It may sound too good to be true, but with proper planning, you can make sure that the money you gain from the loan exceeds what it will cost you to pay back the loan.
If you are not sure that the loan will make you more than it costs, then you need to go back to the drawing board to have a plan for how to turn that loan into more growth and profits.
It’s your turn to use a business loan calculator
We hope this helps you realize the importance of business loan calculators and try them yourself. There’s nothing you can lose, you can only win knowledge and growth for your business.
In July the Tech Open Air (TOA) will bring together the leading minds of the international startup and tech scene for the eighth time at the historic Funkhaus. Under the motto of future-proofing attendees, the unique festival-meets-conference format braids together unexpected connections between some of the most varied disciplines, with speakers hailing from diverse areas of expertise in technology, music, art, and science.
Between July 2-5, more than 150 speakers, 120 satellite events, and 20,000 participants (8,000 at the Funkhaus) are expected to attend. The event stretches across the entire Berlin with satellite events held by national and international companies, startups, scientific institutions, and more on the first and fourth day of the festival, as well as on the evenings of the July 4 and 4. The former broadcasting halls of the Funkhaus will host panels, keynotes, knowshops, and various matchmaking formats that are ideal for networking. The program further includes a wide variety of art and music installations, as well as live acts during the day.
The program pillar “Emotional Innovation” will also feature numerous physical workshops, experiments and mindfulness performances. Companies and founders additionally have the opportunity to present their innovative projects at the Haus of Tech, covering an area of 4.000m², with startups exhibiting their ideas and products in the Startup Alley. Five pillars and five stages for exceptional speakers The Tech Open Air is the opportunity to engage with thought leaders that are ahead of the pack when it comes to the future of work, technology, and modern life. The festival focuses on the five verticals New Communities, Pioneering Business, Zukunftsmusik & Kunst, Deep Tech and Emotional Innovation. Confirmed national and international highlight speakers from these verticals include: Claire Hughes Johnson, COO of the online payment service Stripe; Bruce Linton, Founder & CEO of Canopy Growth, the first cannabis company in North America to be publicly traded, and to date has received more than $6 billion in capital ; Niklas Östberg, Founder & CEO of Delivery Hero; Cybersecurity expert Michal Braverman-Blumenstyk, CTO, Cloud and AI Security Division at Microsoft; Danny Lange, VP of Artificial Intelligence at Unity Technologies, whose technologies are used to create half of the world’s games; and Amber Vez Box, founder and president of rewardStyle, where the monetisation of brands in the digital space is driven by a network of more than 30.000 influencers.
“Accelerated developments in technology, in the way we work, and in modern life, in general, threaten to catch us in a spin-cycle and spit us out again without us having much say. TOA’s approach is different: We make you future-proof by providing a stage for visionaries to share their insights. That is why this year, in the age of fake news, we are focusing on building online and offline communities,” said TOA founder Niko Woischnik.
“We are also looking at what is behind the buzzword of “disruption” from a different angle: for instance, Bruce Linton of Canopy Growth is at the head of a publicly traded cannabis company. Who would have thought?”
Niko Woischnik, TOA founder
“We also look into deep tech and what it’s doing to revolutionise the Fourth Industrial Revolution, as Michal Braverman-Blumenstyk is doing at Microsoft, and at how the role of mindfulness and taking care of the human has become imperative. With global editions in New York, at SXSW in Austin, and in Mexico City we have become even more international, and this is following us home to Berlin where the festival welcomes attendees and speakers from across the world.”
This article by @EnisHulli from @500Startups was first published in February 2018 issue of CoFounder.
US startups still top the unicorns list, with their access to a large, unified market from the get-go. But the US is slowly becoming the best place to sell a product, not to build it, and international startups are emerging to challenge their US competitors in their homeland.
The US presents a key opportunity to increase customer base, get in front of downstream investors and unlock massive opportunities. This requires significant research and careful execution, but above all, a team’s mindset and vision are critical to turn the wheel in the correct direction and Americanise the company when the right time comes.
Start with a global mindset: build local, scale global
International teams can do cost-effective product development and achieve early sustainability much faster than their US competitors. The unlimited runway and the freedom to test out new markets are vital in creating global success stories with locally-incubated teams.
Shift to an English-only workplace
English is an enabler that boosts the whole team to become more efficient while operating across geographies. This universal culture sets the precedent as the team grows and drastically affects the company’s destiny while recruiting, selling the product or raising funding in the US.
Hire employees from a variety of backgrounds
Cross-cultural diversity brings different skills and views to the table, while also strengthening the team’s ability to expand the business. Communicating effectively around the globe helps the team build cross-border relationships and understand cultural nuances for doing business in different countries.
Test different markets, but start with the US
Entrepreneurs should not be afraid of the US market, in fact they should consider it a valuable opportunity and experiment with it from the early days. The US market, with different dynamics to the rest of the world, usually has a lot of competition but also has huge openings in niche verticals. International teams have to iterate the product, business model and market multiple times before achieving product-market-fit. The sooner this happens, the better.
Get backed by respected investors
Most investors in the US do not take international teams (with international traction) seriously, so try to reach them through people they respect. Convince local, prominent and resourceful investors first; warm introductions matter.
Entrepreneurship is a game of attrition. Startups must continuously reinvent the business and pivot in new directions, based on feedback from the market, but the US is not just another market. Entrepreneurs need to have the right mindset from day one to experience the micro failures that will lead to the macro successes.
You’re a social entrepreneur with a great idea. You’ve done all the paperwork to register your nonprofit, engaged a writer, hired a designer and are looking toward your launch. Perhaps you’re asking yourself, “If I build it, will they come?” The answer is no unless you’re going to invest time and energy to clearly identify your audience and spread the word.
Define an audience narrower than the “general public”
Hopefully your writer began your professional relationship with this question, “Who’s your target audience?” Some business people and social entrepreneurs struggle to answer this or dream too broadly, thinking, “Wouldn’t everyone be interested in my idea? It has wide appeal.” When you try to communicate to everyone, you end up with messages that do not connect with anyone.
Try to narrow your focus with demographics such as location, age, occupation, gender, interests, education, income or other factors. This allows you to communicate more efficiently, directly and with language that will resonate with your target audience. Facebook advertising, should you choose to invest in it, allows you to define a startlingly specific target audience. The narrower your audience, the less you’ll spend to reach the right people if you choose to invest in advertising.
Get noticed by search engines
You might have to wait days or weeks after your website launch to show up in search engine results. Define your keywords early to ensure that once your website does appear in Google, it shows up in the right search results.
It’s not realistic to think that your site will initially appear on page one or two of search results for the majority of your keyword terms. It may be an uphill battle to compete with organisations may have worked on their SEO for years, regularly writing blog posts, cultivating backlinks and using social media to build visibility.
Follow this process:
Use a keyword tool like Google’s Keyword Planner to gain insight into how often certain words are searched and what terms are most competitive. Narrow your list to those that are perhaps not the most competitive but also most closely align with your goals.
Use these keyword phrases in your headlines, page titles, blog posts, and website copy.
Submit your website sitemap to Google using Google Search Console.
Post your blog posts on social media and seek links back to your content from other websites.
If your website is built in WordPress, look for the setting in WordPress > Settings > Reading that says “Discourage search engines from indexing this site”. Make sure that this option is unchecked after launch. It’s good to leave it checked while the website is under development.
Cultivate your core supporters with email
Email is still the best way to communicate with your donors, members and volunteers. Social media messages are dependent upon the whims of each social media platform; your posts there will not be seen by each of your followers. Paying for sponsored posts can help you more consistently reach followers, but why not just reach them directly with email? Create an email list either within your membership software or in an email marketing platform like MailChimp that integrates with your system. At last check, MailChimp is free for up to 2000 subscribers as long as you send less than 12,000 emails per month.
Use social media to build audience
Consider which social media platforms are favoured by your target audience; create profiles there. Before creating a page or profile on any platform, consider that to be successful, social media is not a place of one-way communication. You will need to:
Make posts on a regular basis (blog posts are ideal to share on social media).
Comment on other’s posts.
Respond typically within 24 hours or less when people comment on your posts or reply to you.
Answer direct messages.
Don’t set up social media profiles if you aren’t prepared to spend time in this way.
At minimum create a Facebook page for your organisation and add an email signup widget to it. Using this page, you can make posts and create Facebook events for each item on your online event calendar that can be shared among friends or colleagues.
General advice for picking platforms:
Instagram – Use if you will regularly have something visual to share and a target audience on the younger side. Be sure to use the stories feature for maximum exposure.
Twitter – If your nonprofit will be ever-changing, Twitter will allow you to post breaking news, important messages and other current information.
LinkedIn – Use if your nonprofit will be business-related such as a chamber of commerce, association or professional group. Promote your blog posts here.
YouTube – If you have at least one video, post it in your YouTube channel to potentially capture a wider audience than you would if the video just lived on your website. Add any future videos and be sure to add links to your channel to all of your other social profiles and your email list signup form.
Make sure every part of your donation or membership billing uses responsive design
Half of visitors to nonprofit websites are using a smartphone or tablet device. While many nonprofits have responsive websites, some have a donation pages that create frustration with tiny, often unreadable text when viewed on mobile. This often means that they are using a membership management software that isn’t mobile-friendly. If people receive your emails and want to take action, be sure that they can complete the entire task of making a donation or membership payment on their phone without having to scroll right or zoom in to read. Google also favours mobile-friendly sites in search results.
Bring value to your followers, donors, volunteers or members
To enlist your core constituents in promoting your organisation, you’ll need to deliver value to them. This might mean:
Being sure that they are thanked in ways that are uniquely meaningful to them.
Your donor or membership CRM can help you use technology to restrict content and event tickets as well as reach out to specific groups by email.
Do you have other marketing tips to share? Leave us a comment.
Amy Hufford is a Technologist at MembershipWorks. She has worked in membership technology for more than 20 years and has experience building membership websites with a variety of membership software platforms.
Remote consultations, digital treatments, medical robotics, wellness apps, Artificial Intelligence: the world of healthcare, too, is moving into a new digital age. Technology is not only revolutionizing people’s approach to treatment, but actually fostering a new ecosystem in which big companies, start-ups, research institutions, investors, physicians, pharmacists and other stakeholders work together towards a single goal: to prevent disease, nurture health and encourage a culture of wellness.
The subject has been much discussed, including at an event entitled “Frontiers Health at Milan Digital Week: Living the New Ecosystem” organized on 15 March by BNP Paribas Cardif, one of Italy’s top ten insurance companies, and Healthware Group, a leading digital health consultancy.
Combining experience, networking and cross-fertilization of ideas among the ecosystem’s various players has always been the object of events put on by Frontiers Health, which over the last five years has created a worldwide community of healthcare innovators, one to which Healthware is proud to belong.
Digital health has a key part to play in this process of transformation. Reference models, targets, expectations, all are changing; and so is the wider vision. The insurance industry has moved from simply paying out financial compensation for illness, injury or loss towards the higher aim of preventing and mitigating them; and technology now offers it a chance to develop next-generation policies with innovative services and support, as well as a customer experience featuring promptitude, flexibility and user- friendliness. Some years ago, BNP Paribas Cardif began its Open Innovation journey towards that goal, inventing a new, innovative and effective model for sourcing Insurtech start-ups and building them into its operations. This “cross-fertilization” has, for instance, led to a collaboration with Healthware Group to develop an innovative new digital health product, and another with D-Heart, which thanks to one of BNP Paribas Cardif’s Open-F@b Call4Ideas has managed to market the first smartphone-based means of independently carrying out an ECG and referring the results straight to a clinician.
This new ecosystem of health innovation has already shown it can generate value: according to figures presented during the event, more than $18 billion have been invested in Digital Health start-ups between January and October 2018, 56 percent more than over the same period the year before.
In five years no less than $45 billion of venture capital has gone into digital health start-ups on average, a figure to rival the level of investment in the pharmaceuticals industry; and the total value of this market could reach some $400 billion in 2024.
The leading trends are digital treatments, with forecast average annual growth of about 30 percent by 2023, Artificial Intelligence and the lowering of human/machine barriers. “The healthcare sector has begun a digital transformation as radical as any seen in other industries over the last few years – perhaps more so. Digital healthcare is truly revolutionary, because it will enable every operator in the sector to re-shape its production processes, its service provision and the ways it can benefit its users’ health. Health insurers’ presence in the healthcare ecosystem will make it easier to access treatment and will encourage preventive behaviour,” said Roberto Ascione, CEO & Founder of Healthware Group.
“Our recent study on health confirms the sustainability of this new ecosystem. Patients are more and more 4.0: 77% of them are already using tech to look after their health, and 55% would be prepared to share their health data through tech devices with those in the healthcare sector and with insurers. That trust means we can now enhance our social role, along with the best firms in digital health and other stakeholders in the sector, improving access to products and raising people’s awareness of disease prevention and the culture of wellness.” said Isabella Fumagalli, Head of Territory for Insurance in Italy at BNP Paribas Cardif.
The Brexit dilemma of eco-system relocation for London start-ups
By Amelia Ann Román and Niels Baay
Developments surrounding the on-going Brexit negotiations create uncertainty which is reflected in the European financial markets and the global economy. This uncertainty is interrelated with economic risk, and thus forces entrepreneurs to re-evaluate their risk and return trade-off schemes. Throughout this interlude, London-based entrepreneurs may well be considering pursuing their entrepreneurial opportunities elsewhere rather than remaining in the London metropolitan area. This possibility raises the fundamental question: whether European entrepreneurial ecosystems have the merits to attract the London based startups contemplating relocation due to Brexit.
What is important or qualifies as essential to entrepreneurial success in one region cannot be applied in another region. In simple terms, what goes for London is not necessarily the right recipe for successful startups in for instance Paris, Amsterdam, Berlin or Tallinn. These European metropoles are becoming unique entrepreneurial ecosystems for startups with their specific cultures, institutions, and characteristics differing from other startup regions in the world. Unique ecosystems are more than just locations; they are crucial for startups and all startups should ask themselves whether they are in the right place for their business. Because location decisions are of high strategic importance to each and every company, this question is now, of particular importance for entrepreneurs currently based in the London entrepreneurial ecosystem.
Introducing the London Entrepreneurial Ecosystem
London is known for being one of the most successful startup ecosystems globally, producing the largest output of startups in Europe (Startup Genome, 2017). Currently, the city of London hosts on average around 5,100 active startups which is the fourth largest startup output in the world, and accounts for more than twice the number of startups compared to the next biggest European ecosystem, namely Berlin, which hosts on average 2,100 active startups (Startup Genome, 2017). Overall, the London entrepreneurial ecosystem ranks first on a European level in all indices (European Digital City Index; Global Entrepreneurship Index; Startup Heatmap Europe; 2016), and ranks third according to the Global Startup Ecosystem Ranking conducted by Startup Genome in 2017, behind Silicon Valley and New York respectively. Not only is London’s startup industry the most developed in Europe (Nesta Report, 2016), but due to proximity to some of the world’s largest banks, professional venture capital funds, and technology firms such as Apple, Google, and Facebook, London’s startups have access to both potential investors and acquisition opportunities (Startup Genome, 2017). In addition, London’s cultural diversity is one of the strongest attributes that its ecosystem has to offer, with the capital’s multiculturalism acting as a key differentiator compared to other global startup ecosystems (The Guardian, 2015). Despite London being one of the most attractive ecosystems for startups globally, since the EU referendum held by the UK in June 2016, numerous sources (The Guardian; Financial Times; TechCrunch) have indicated the possibility of a great number of startups considering relocating to other European ecosystems afore and after the initiation of Article 50 of the Lisbon Treaty of the EU on the UK, more commonly referred to as Brexit.
Brexit, the Free Movement of People & the Access to Talent
London continues to be the best destination for technical talent within Europe (Balderton Capital, 2016); however, as a result of the uncertainty surrounding the current Brexit negotiations, London lost some of its technical talent to neighbouring capitals, specifically to Berlin and Paris (Atomico Report, 2017). According to a source of the Financial Times (2017), this is “[…] not because the UK is not appealing anymore but because they (i.e. talent) don’t want to invest a year and then have to leave again”. Hereby, European nationals are avoiding a move to the UK given the current ambiguity regarding visas (Inc., 2018). A study by Balderton Capital (2016) claims that London’s attraction rate could further decline as higher recruitment costs of foreign talent who need visas could become a significant problem post-Brexit. According to the Financial Times, the UK has already experienced a sharp drop in job applicants from other EU member states. Data indicates that during the first quarter of 2017, there was a 10% reduction in technical job applications from abroad compared to the same quartile in 2016 which was before the Brexit referendum (Financial Times, 2017).
The Future of European Entrepreneurial Ecosystems
A survey conducted by Balderton Capital (2016), showed 82% of the startups are concerned about access to talent post-Brexit. The study concludes that losing just 20% of its startup workforce will result in talent being dispersed across other European entrepreneurial ecosystems, resulting in there being no definitive leading ecosystem in Europe. As Brexit has the potential to shift the startup ecosystem playing-field in the EU, we argue that it is essential to research this further and ask if London startups are considering relocation due to Brexit. This naturally leads to the next question of which European entrepreneurial ecosystems stand to benefit by a possible exodus of the London startups.
A review of prior academic literature on location studies highlights several key factors to be taken into consideration regarding the situation of London startups possibly leaving the entrepreneurial ecosystem and relocating elsewhere. A company’s location decision is thought to be not arbitrary but strategic. Location decision models have often been applied to analyse the relative importance of location specific characteristics in company’s preferences of favouring one location compared to other locations. With a review of studies from before the 1980s to current studies, we find a total of 18 essential indicators. There are factors related to the cost of production, such as (1) transportation, (2) labour costs, (3) access to raw materials and external (4) economies of agglomeration, which were among the four most traditionally cited location determinant factors at the time.
Two decades later, this was expanded on with major production factors such (5) access to the labour market, and (6) market size. Also (7) taxes was found to affect the firm’s choice of location during the final evaluation of alternatives. Research expanded on traditionally cited factors affecting location to include factors such as (8) quality of labour, (9) business climate, and the (10) quality of life. Other studies analysed the potential effects of (11) energy costs (electricity and natural gas), all of which were at the interurban level.
Numerous scholars have since identified that (12) knowledge spillovers from universities are a key source of promoting firm innovation and performance. Startups which are active in the high technology sectors are influenced in their location decisions by the opportunity to access knowledge generated by universities. Another significant challenge to be faced by entrepreneurs, especially those concentrated in technology startups, is (13) access to capital. These startups have little evident history of their performance and often hold ambiguous technologies, thereby creating financial concerns in how to signal the company’s value to potential venture capitalists. Startups that are located in large metropolitan areas are best positioned to benefit from the facilitating access to venture capital. This notion is supported by research that highlights that technology startups are typically located in major urban centres.
An additional factor that has an impact on location decisions, is the possibility for entrepreneurs to recognize opportunities. Three social sources of information, namely through (14) mentor assistance, (15) (in)formal networking events, and (16) participation in professional forums, were found to have direct and positive effects on opportunity recognition by entrepreneurs.
Location decisions involve uncertainty by nature, and (17) uncertainty avoidance, which seeks to capture societal attitudes toward risk, ambiguity, and unpredictability, and thereby support beliefs and behaviours that promise certainty and conformity. This creates an interesting dilemma for current startups in London’s entrepreneurial ecosystem, as both (re)location decisions for companies and the Brexit create uncertainty.
One reason why entrepreneurs should consider their home regions as the prime location for their new ventures lies in being able to leverage their social capital, which refers to the range and depth of an individual’s social network, the strength of which is determined by the frequency of interaction with a large number of long-lasting acquaintances. In addition, social factors, such as (18) proximity to family and friends, weigh up to 4 times more in location decisions made by entrepreneurs compared to economic factors.
The European Digital City Index
The model which used as a guideline for this paper is the European Digital City Index (EDCi) of 2016, which describes how well different European cities support digital entrepreneurship and startups (Nesta Report, 2016). The EDCi provides information about the strengths and weaknesses of local ecosystems and describes what ecosystem indicators are most valuable to attracting and retaining startups (Nesta Report, 2015). The EDCi index of 2016, is comprised of 10 themes, subdivided into 40 individual indicators. The literature on location decision making is the guide for choosing which of the indicators is used in our analysis. Each of the 18 location determinant factors have been assigned a number corresponding to its order of appearance in this paper, with (1) transportation being the first, and (18) proximity to family and friends as the last location determinant factor covered in the theoretical framework. Only the Index indicators that have an established direct or indirect correlation to location determinant factors are applied.
These 18 general location determinant factors cover multiple individual indicators from the original Index. Next, the consequent weighing of these location determinant factors are subject to alterations. The weights of the individual location determinant factors are categorized under low (0.333·), medium (0.666·) and high (1.000). One last location determinant factor was added (18) Proximity to Family & Friends, which is left as a qualitative variable. The total of 60 European ecosystems is used to create the tailored index. The raw data collected by the Index underwent several processes in order to be able to answer the research question.
Interviews with startup founders
The target population is defined as all the active startups that are registered in the London metropolitan area, where a startup is, an entrepreneurial venture designed to search for a repeatable and scalable business model and is valued under $1 million. The sample frame used is the Tech London online platform. In addition, a background check was conducted, using the online data platform Crunchbase and the Company House platform operated by the UK government.
The primary data of the London startup entrepreneurs, was collected through structured interviews via telephone. The final sample size was determined by the number of successful interviews recorded within 100 interview attempts. After the two unstructured interviews, 100 structured interview attempts were made, the outcome of which represents the total sample size of fourteen in-depth interviews.
This section illustrates the most important findings of the ecosystem ranking which were generated using normalized values. The overall ranking is discussed, followed by how further improvements to the ranking are considered to establish the most likely scenario.
Table 1 shows how the original ecosystem ranking from the EDCI differs from the tailored ecosystem ranking using the 18 indicators from the location theory. The main differences being Vienna and Tallinn.
Table 1: Adjusted Top Ecosystems based on Normalized Values
Original Ecosystem Ranking EDCi – 2016
Tailored Ecosystem Ranking
Grey=Considered Alternatives to the London Ecosystem
Ecosystem Ranking Adaptations
Apart from the inclusion of the Taxation Cost location determinant factor and its corresponding medium weight, no alterations have been applied to the original weights of the Index.
Under the Access to Capital theme, the two most important sources of capital were already expressed in terms of the highest weights. The remaining Availability of Crowdfunding location determinant factor is not as popular as the other two sources of financing, and was provided with a medium weight. Thus, if any weight adjustments are to be made, it would have to be within the Access to the Labour Market theme. Within this theme, only 3 out of the possible 6 location determinant factors could be considered subject to weight alterations. Finally, it can be argued that the level of English Language Skills would be a factor that all London startups would consider before relocation to an alternative European ecosystem. Consequently, the weight increase of the English Language Skill location determinant factor altered the ranking to produce the newest ranking as seen in Table 2 with the top five rankings.
Table 2: Final Ranking London Alternative Ecosystems
Final Ranking London
Total Sum 13.848
After analysing the composition of each ecosystem per individual theme, and examining the suitability, structure, and reliability of the underlying data, it was concluded that the Amsterdam entrepreneurial ecosystem has the best qualifications to attract startups leaving from London due to Brexit.
Analysis from the interviews
With the use of data from the interviews with the London startups, we now ask if London startups are considering relocation to another entrepreneurial ecosystem, and if so, to which European ecosystem. The sectors in which the startups operate are: Blockchain Technology, Platform Technology, Cloud Computing, Consumer Electronics, Cyber Technology, Educational Technology, Insurance Technology, Real Estate Technology, and Transportation.
Brexit and the London Startup
The opinions on Brexit depend on countless factors such as the startup’s core business, their target market, the nationality of their staff, and how the company sees its future, to name a few. Those that were eligible to vote, voted against Brexit. But a positive outlook prevails. One entrepreneur said that “Brexit is no real concern for my startup operations as the main focus lies on providing an online platform”, thereby implying that it is different as compared to providing a physical product regarding possible exports, “[…] and because the platform is only active within the UK”.
When asked why the entrepreneur voted against Brexit he mentioned that although it did not affect his business per se, he did not want the added uncertainty that Brexit would create. This startup raised just shy of half a million British Pounds end of May, 2018. This response in provided some insight into why entrepreneurs still have positive outlooks despite Brexit. Three-quarters of the interviewed startups said that they have their main target market in either London or the UK alone, and feel they are less affected by international economic and political factors than those who are exporting their products or services abroad.
The London Startup and the Access to Capital
Despite the large increase in the total amount of funding capital for the London ecosystem last year, the startups biggest concern is the access and availability of capital. Two reasons were named. The first by an entrepreneur who said that “[…] the individual investors (such as Business Angels) have become more risk averse because of Brexit, […] and rightfully so”. The entrepreneur, who has already set up 3 startups, stated that in his opinion, where microcredit is less widely available compared to a couple of years before, corporate investing has become a lot more popular among startups nowadays. One startup mentioned receiving a loan from the European Investment Bank (EIB) to help with the experimentation to implement Blockchain technology in education. The co-founder of this startup pointed out that “many UK startups before us have received funding help from the EIB” and that “a funding gap will be created if the EIB decides to withdraw future funds from the UK because of Brexit”.
The London Startup and The Retention of Talent
The interviewees worried about the retention of foreign talent. (Co-)founders mentioned either the visa system, the access to talent or the retention of talent as a major concern post-Brexit. One consolation for London startups currently employing EU talent will be that the settled status will grant EU nationals (and their family), who have spent 5 years in the UK, the same rights as UK citizens after Brexit. However, as startups are relatively young companies, the question remains if this limit of 5 years will suffice to retain their staff.
The London Startup and Relocation Decisions
Asked if they considered initially developing the company in any alternative ecosystem beside London, half of the entrepreneurs stated they did. Each founder mentioned alternative entrepreneurial ecosystems where the entrepreneurs had a previous residence, for either work, personal or educational reasons. The logic behind this supports earlier findings that entrepreneurs will locate in regions where they are able to leverage their social capital.
The London Startup and The Proximity to Family & Friends
The last question asked was whether the effect of relocation on family and friends played a role. Almost all of the entrepreneurs mentioned the effects that relocation would have on their family and friends. Several entrepreneurs acknowledged that proximity to family and friends played a factor in the relocation decision making.
Our analyses point to Amsterdam being the most likely recipient of any entrepreneurial refugees leaving London followed closely by Dublin, Paris, and Berlin. Glued to the city of London by their family and friends, most London startups do not have the time nor the financial means to consider possible relocation to another European ecosystem. For most London startups, the value of their social capital simply outweighs that of the possible benefits derived from relocation. For London startups considering relocating their HQ, chances are that they will relocate to an ecosystem where the founder has a previous history, either private, educational, or work related, or simply has a well-established network in the area. The startups are of course, basing their answers on the current situation. Few are able to conceive the economic impact of a Hard Brexit as the probability increases; hence their optimism and their tendency to trust in the stability of their home market of London. The uncertainty may be prolonged if an extension of Article 50 is granted.
Authors of this article are:
Dr. Amelia Ann Román, Associate Professor Entrepreneurship, CEDIS/CAREM, Amsterdam School of International Business, Amsterdam University of Applied Sciences; and Niels Baay, Founder and CEO of NexusBay B.V.
We asked Carol Jiang, global general manager at Badi, about the new trends in startup development and how these are influencing Badi.
Badi is the Barcelona-based room rental platform that enables people to list, find and securely book rooms that suit their needs, from anywhere in the world. We use artificial intelligence (AI) to provide a more accurate, unique and fast solution to the growing housing needs in the big cities. The algorithm shifts through listings to find the right rental outcome and it is this technology that makes our offering different from the rest as we can provide such a tailored and efficient service. Our mission is to find and unlock every single living unit available in the world to answer the needs of our community. We want to reshape the rental infrastructure and make city living accessible to everyone.
The biggest trends we see are the adoption of AI and mobile solutions. In practice, there is rarely enough time to make endless visits to view rooms and, in major cities especially, they are snapped up too quickly to hang around. Our platform uses AI to eliminate the need for these visits by making flat and roommate hunting easy. Even if you live on the other side of the world, you can find your match and easily secure your room safely with our online payment technology.
Essentially, we use intelligent algorithms to pair up perfect flatmates according to factors like age, tastes and interests. We want to make city living accessible to everyone by cutting out the middle-men and giving people more control when it comes to renting a room. As a PropTech start-up, we are centred around AI, algorithms and data – it is these technologies that allow us to become the quickest and most innovative room rental marketplace.
Our solution is the first in the PropTech space and we’ve already seen encouraging adoption across the rental market, addressing different challenges. For instance, ‘virtual property managers’ use bots to help renters to log issues, book in services and contractors, and help tenants fix small problems and repairs.
AI allows us to match people based on their personalities. For instance, we know from our data that smoking and having pets are the most annoying traits of a flatmate.
AI can also eliminate initial bias, providing an arguably more accurate match than first impressions. There’s an overused phrase, “I didn’t think I would like you when I first saw you”, between people that on paper could become best friends – AI can pick up on that much faster and create connections for life.
Machine learning helps when enhancing user experience in the whole platform flow. For instance, when bringing demand and supply together, it is able to speed up the process by optimising towards previous matches.
We’ve also developed a recommendation engine for listers that learns about the matching process between landlords and tenants and suggests which are the most ‘effective’ users to live with. This speeds up the renting process, meaning landlords do not have to wait for candidates to search and request their flat, because Badi recommends them beforehand.