On London Startups: The good the bad and the ugly - part 1

After having reading some blog posts about startups in London I have decided to comment on the topic. Reading them triggered a “someone is wrong on the Internet” rage so I decided to write this post. This article will concentrate on the IT/software industry, because of my experience in this sector.

What’s a startup

It seems that “startup” means different things to different people. Being a big follower of Steve Blank who has categorised six types of startups, I will try to express my opinion on why London is good for some, great for some others and toxic for a specific category.

According to the master there are six types:

A person doing their passion, code/UI etc - lifestyle startup.
A small business (that wants to remain small) starting up.
A high growth startup — let’s call this a “Silicon Valley” type startup.
A buyable company — Accumulate users/traction/something and sell out to a big company: Buyable startup.
A spin-off of a larger organisation who wants to deliver sustainable or disruptive innovation to their area before the competition does — Spin-off startup.
A startup aiming at social change — Social startup.

I assume that most readers are interested in “Silicon Valley” or “buyable” types of startups, types 3 and 4 in the categorisation above. Because I think that the case for them is fundamentally different in London, it’s analysis follows in the second part of this post: https://medium.com/@dimist/on-london-startups-485ea5c34ce6. What follows is a brief analysis of the remaining types.

Lifestyle startup

For a lifestyle startup things in London are well suited for a number of reasons. To get started, a person can register as a sole trader or set up a limited company; both are easy to do and trading can start almost immediately. Some accounting firms can do that within one day, which for european standards is amazing.

The British treat the freelancer as a craftsman, so not only it is common, but there is also an ecosystem of support around freelancing: groups, Meetups and other social networking and educating events. There is lots of work available, which is the most important thing; local companies prefer to hire a freelancer when they face a spike in demand, rather than employ someone whose role would be temporary or vague. Many companies have as an informal policy to hire contractors for new projects, which then are handled to their stuff for maintenance.

For these reasons someone who wants to “go solo”, will feel very comfortable in London.

Small business

Again UK and specifically London is more than OK. When the government does not support an effort, it gets out of the way. This is a big change for someone like me from a country like Greece where the tax system or the regulations change every week and inspections translate to money collection as fines or bribes.

There are many IT shops serving either a number of bigger customers or acting as mini-consultancies. There is a big number of web-development agencies, web design agencies, Android or iPhone shops, SEO consultancies and many many others that are thriving. I have seen many of them incubating in hubs or being in small share-desk situations doing well or thriving.

An extra bonus from the UK’s society is that for most cases a company’s portfolio or track record is more important than having a fancy office in a prestigious business district. Big paradigm shift from countries where the “prestige” of an office matters equally more than the output of work. This lowers the cost of doing business and increases the quality of the output: small business owners will see more gains investing in what they are doing (say send their lead developer to a convention), than paying high rents for office space.

Self funded Sustainable or Disruptive startup

I suppose, although I have no considerable knowledge on the specifics that this has generally to do with each country’s economic climate of if funds are available for investment and how each large company can sense market shifts.

I am currently working for one, so it is something that happens :-). Being unaware of how often though or of any statistics, asking everyone who could assist to get in touch…

Last but definitely not least for UK. The concept of charity is well established in the day to day life, so it seems that social startups are something that can actually “shine”.

People are eager to work for charities, being many times preferred instead of other alternatives such as internships to gain some work experience while entering the work force. So the talent in the sector is of the same calibre and capability as in conventional businesses, maybe less experienced.

There is also increased awareness for some issues and motivation. Charity is an integral part of the British lifestyle, as I recently found out by talking to people and reading the “Living in UK” companion book.

Funding is eased by tax breaks, as in other countries with similar culture/approach. Concluding there is also fertile ground for social startups (again please contact if you have hard data).

You might end getting dressed in this costume though…

Summary

We discussed briefly most startup types, excluding the ones aiming at high growth or acquisition, discussed on the second part, https://medium.com/@dimist/on-london-startups-485ea5c34ce6.

Thanks: Andrew Keats for editing and proof reading.