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Are Founders in the North West at a Disadvantage Compared to Their London Counterparts?

Are Founders in the North West at a Disadvantage Compared to Their London Counterparts?

Megan McLatchie

Marketing Executive

Updated 22 July 20

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The reports and data show a positive story for the North West startup ecosystem, with Tech Nation recently citing Manchester as Europe’s fastest-growing major tech cluster, with investment as growing from £48m in 2018 to £181m in 2019. As well as startup genome ranking the region in the top 10 globally

 

Despite this, the comparison to London and it’s ecosystem still raises some questions. With the North West having a comparatively small number of new businesses formed versus the capital last year (11,000 vs 221,373), with a population sizes of 7m and 8.9m respectively. Whether a measure of Unicorns produced is a good indicator or not is a debate for another day, however the 5 to 43 comparison (NW to London) does still provoke thoughts as to ‘why!?’.  

 

Is the ecosystem stronger in London stronger than that of the North? Does that impact success rate? Do Londoners have better access to funding, talent etc? And post-pandemic will this be the same?  

 

The truth is, we don’t really know. But in an attempt to be better informed we decided to ask four influential North West tech and startup stakeholders their opinions on the subject; and whether founders here are at a disadvantage to their London counterparts.

 

 

Manoj Ranaweeram, Founder & CEO of Techcelerate Copy of Copy of MASTER - Nova social media assets

 

Some founders may believe that it's easier to set up and grow a tech company in San Francisco than it is in London. And for those in the North West may believe it's easier for Londoners to establish themselves than us. But not that long ago it was extremely hard to build a tech company in San Francisco as ‘the place to be’ was Silicon Valley. In fact when I first visited San Francisco in 2008, the VCs I spoke to would not invest in a company unless it was less than 30 to 40 minutes drive away from them.  

 

For a tech company to succeed it isn’t a matter of where they are based, they need these five things: 

  1. A scalable product
  2. The ability to commercialise it
  3. The funding to support scaling
  4. A highly skilled and knowledgeable team
  5. The right regulatory environment

 

We have plenty of all above in the North West so what is there to moan about? Most startups fail not because of bad ideas, but due to their inability to execute on those ideas regardless of whether they are in Liverpool, Manchester or Silicon Valley. 

 

If we look back at the North West startup ecosystem 10 to 15 years ago, there were only a small number of those courageous enough to embark on building tech startups. The very few who did, kept their heads down and got on with it. There were no networking events for founders and very few understood the difference between job creation and wealth creation. They didn't understand the opportunity tech startups presented. 

 

Today, the North West has changed drastically. We have £1bn+ valued tech companies such as Blue Prism, eCommerce giants like The Hut Group, and plenty of angel investors who have exited from tech companies. We now have the knowledge and talent within our region to produce successful digital tech unicorns so there's no reason why anyone would feel they are disadvantaged being based in the North West. 

 

With remote working well proven now as well, there is nothing to stop you running a multinational tech startup from your kitchen table… as long as you have decent connectivity to the Internet.

 

 

Jo Morfee, Entrepreneur and co-founder of InnovateHer 

 

There are benefits to starting a social enterprise in a city like Liverpool. The community network here is thriving, full of people with big hearts and open minds. If you’re known for being a passionate, decent person who has created an organisation to help members of the community, people here will support you. Another benefit to being based in the North is undoubtedly the lower living costs, which can enable you to personally take more risks as you get through the start up phase.

 

The flip side to that is one we’ve experienced acutely; access to funding is limited in comparison to some of the more affluent areas in the UK. For example, organisations who are doing similar work to us in London have found funding from private sector companies with ease, which has enabled them to scale and make more impact rapidly. At Innovateher, we struggled to access the same level of investment, with private sector companies telling us that they’ll consider supporting our work ‘once we have a London offer’ but they’re not interested in supporting our efforts in the North. This is frustrating given that we’re two women from the North who are hugely passionate about addressing the inequalities that we see everyday in our neighbourhoods and in the schools that we serve here. 

 

For us, it's not just geography which causes disadvantage though. There’s the added dimension of gender. As female co-founders working on women’s issues (our aim is to improve the gender balance in tech/ STEM industries), we’ve also experienced additional issues accessing funding. Some of the finance options we’ve explored involve persuading male dominated investment teams to understand the issues facing women and the equality agenda at large. 

 

I wonder if post-pandemic this funding landscape will start to shift. Geography and location of your team may become less important, with remote working becoming more widely adopted and accepted across the country. We’ve had to pivot our educational programmes to be offered online instead of in schools; with this comes big opportunities to offer access to students globally. Perhaps funders, investors and companies will start to shift how they think about geography and start to see the value in supporting initiatives, regardless of where they are based. 

 

My advice to anyone starting a business in the North West is to build a community around your idea or initiative first; it's even better if you can co-create the solution with the community. This is one thing that smaller towns and cities can offer which can really help you take your idea to the next level, because the community here is tight knit and can be willing to help you shape and deliver your idea. It’s about building those personal connections and there is more chance of doing that in a meaningful way in regions like the North I think. 

 

Secondly, consider how the region might look post Covid-19. There will be a need to rebuild and rethink our local economy. Make sure that what you’re thinking of providing can be of help to the community over the coming months as initiatives with that kind of purpose will be welcomed.

 

 

Matt Latham, Co-founder of Tickr

I don’t think there are necessarily specific difficulties that come with starting a company in the North West. However, it might depend on what specific market area you are working in. I would say regardless of where you base your business, you need to be open to looking far and wide for customers, funding and talent.

 

It will be interesting to see how this changes once the coronavirus recovery happens, now that people are being forced to work remotely and have video calls rather than face to face meetings. I expect this could make founder and company HQ locations even less important. And any geographical advantage of being in the capital less important too. 

 

 

Andy Davidson, CEO at NOVA

It’s a great question, and as someone born and bred in Liverpool I’m trying not to impart any bias, civic pride or defensiveness to give an immediate ‘no’. So my balanced take on it is that there is more freely available capital for startups in London, there’s more VC’s, Angels, Funds and High Net Worth individuals that are investing in startups. This, in addition to a bigger pool of talent due to the big tech firms located there has made it a thriving ecosystem and an attractive option for many founders. 

 

However with these advantages there’s also more competition, higher operational costs and lifestyle factors that translate into low staff retention rates across the capital. Whereas the mirror of this can be said for the North West, but with a smaller pool of investors and on-site talent. So perhaps the answer isn’t that one location is better than the other, more that each has it’s pro’s and con’s that founders need to be aware of and adapt to. 

 

I believe geography is becoming much less of a factor, and will continue to hold even less importance post Covid. I predict that because of this we’ll see a broader spread of talent and investment throughout the UK over the coming years, and that the already expanding regional tech and startup ecosystems will continue to boom. 

 

The additional improvements in regional STEM academic infrastructure now means that we’ll have an increased talent pool locally for the coming years too. I feel very secure and confident about our positioning here in the North West for the future, and I think it’s a great place, and a really exciting time, for a founder to start a startup here. 

 

 

 

The feedback above has offered us some understanding of the challenges and opportunities for founders in the North West. It feels as though we’re moving toward a more homogeneous investment and talent pool, that’s been expedited by Covid. And that location is becoming less important, and that no matter the town or city, the UK as a whole right now is a good place to start a startup.  

 

Working with tech startups, it often means that their business models are built to scale quickly by not requiring founders to be physically close to their customers. Our feeling is that increasingly this is also now true of colleagues, investors and suppliers too. With the ‘where’ you’re based becoming increasingly irrelevant. 

 

It would be interesting to get others thoughts and particularly a London perspective on this too, so any additional views on the above please drop them in the comments. 👇

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