The case for connection: The next phase in the evolution of UK tech

For the last decade, inventors, investors, and government have looked to London to sustain the continuing growth of the nation’s tech startup ecosystem. Now the integration of cities across the UK into a national network will be crucial to the next phase of that ecosystem’s evolution. Natasha Guerra, CEO and co-founder of Runway East, explains why.

East London’s renowned “Silicon Roundabout” has been at the heart of the tech startup boom, the centre of a vibrant ecosystem cultivated over several years that has seen the capital spawn a number of world-class companies. But, while London’s huge scale and reach does still make it an undeniably attractive place to start and grow a fledgling business, there have been signs that London alone cannot sustain the growth of the UK’s startup economy. The next phase in the evolution of the UK’s innovation ecosystem will need to be directed by efforts to put burgeoning startup communities across the UK– to date, mainly supported in isolation of each other – on a more equal footing as part of a genuinely connected nationwide ecosystem that empowers tech UK startups to access everything they need to realise their full potential wherever they are based.

The London tech startup scene has become almost too successful for its own good, with companies facing ever-intensifying competition for – not to mention increasing cost of – talent, funding, space, and the other resources they depend on to sustain their growth. The squeeze on space, for example, can be seen in how so many co-working spaces (not Runway East, I hasten to add, which remains proudly committed to its focus on supporting startups) are increasingly occupied by well-funded corporates, agencies, and consultancies, themselves fleeing rising commercial property prices but having a knock-on effect on supply (and therefore price) of space for startups. WeWork, for example, recently admitted that just 15% of its members are software companies, highlighting how even flexible workspace is incredibly competitive for startups.

Beyond London

Why, then, are we not seeing more startups taking the plunge and setting up in any number of regional cities that can offer more space at lower cost and less competitive talent pools?

A major factor is FOMO – the concern that setting up shop elsewhere will leave them at risk of being cut off from London, the “spiritual home” of UK tech startups that provides access to a vast support network of investors, accelerators, co-working spaces, and industry bodies. VCs and tech giants – and government initiatives directed towards supporting the technology industry – have perhaps inadvertently helped to perpetuate this misconception by focusing their efforts primarily on London. It’s no coincidence that almost 80% of the entire country’s venture capital tech funding last year went to London, according to figures from PitchBook.

Whether deliberate or not, this focus on London has tended to see other tech hubs around the country to be cast as “second fiddle” to London – secondary destinations where even the biggest and best startups are destined only to be big fish in small ponds – while London is where the big money and best talent inevitably ends up. This outlook is far from helpful. It belittles the achievements of startups from outside London and can seem to impose artificial limitations on ambition within the country’s other fruitful regions – a plainly ridiculous notion when ‘unicorns’ such as Skyscanner and The Hut Group have successfully grown outside the capital.

A number of regional cities across the country – including the likes of Cambridge, Bristol, Manchester, Cardiff, and Sheffield – have long since established themselves as productive pockets of innovation, cultivating a number of high-growth success stories that prove you don’t have to be based in the ‘Big Smoke’ to flourish. Several of these cities have even developed strong reputations for excellence in certain sectors, based on the success of their biggest startups. Cambridge, of course, has long been renowned for pharmaceuticals and microprocessor innovation, so it’s no surprise to see a number of promising MedTech startups emerge from the Fens. Bristol, on the other hand, has developed a number of big names in AI, such as Graphcore and FiveAI, that have collectively raised millions of pounds in venture capital within a matter of years and are growing at a phenomenal scale.

If all the extraordinary work done so far to develop these regional hubs – largely spearheaded by community-builders and advocates – is to have the fullest effect as the evolution of the UK innovation ecosystem enters its next phase, it is important that the cultivation of regional tech startup hubs is viewed as a means to a bigger end, not an end in and of itself. We need to begin fostering a startup scene that sees regional hubs connecting rather than competing with each other for attention and resources. And a truly interconnected startup ecosystem means that all the familiar names in London – from investors, accelerators, and co-working spaces to service providers and trade bodies – are also familiar and accessible in the key cities around the rest of the UK.

Calling the VCs

Venture capitalists clustered in London and the South East also have an important role to play. Driven by the pursuit of the companies with the greatest growth potential, it’s in their best interests to cast the net wider and do more to identify and support startups from the regions with the potential to grow into scaleups and beyond, rather than competing over the same London startups. It’s about more than just fleeting visits; they need to deeply embed themselves in the regional hubs and really become integral parts of the communities from which the next big startups have already begun emerging.

Of course, money isn’t the only thing startups need to push through into scaleup territory. Hiring is one of the toughest challenges for fast-growing startups, particularly when they require specialist skills or experience, and this is only exacerbated by the concentration of talent in London. Making high-quality talent more affordable and accessible to startups around the country is key – and one effective way of doing that is to empower startups in the regions to complete their growth journeys there, making talent more likely to stay locally or return from London.

Space, too, is more affordable and accessible for startups in regional hubs than in the overcrowded London market – and if contacts, talent, and resources are flowing more freely around the whole UK, startups will be able to dispel fears that opting for more affordable local space will come at the expense of access to everything else they need to accelerate their growth and step up into the scaleup ranks. The next step on from that, of course – and a conversation for another day – is to address the scarcity of available “grow-on” space for those startups once they outgrow co-working spaces and other flexible options.

The startup economy is one of the key driving forces for growth for UK plc, and a strategic priority for the government. London has so far born much of the burden of growing the sector, but the time is right now to “join the dots” between various regional hubs to break down silos and ensure that the UK can continue nurturing a nation of startup successes and maintain its place among the world’s best destinations for tech innovation.