October 8, 2013 12:07 am

City clusters thrive as barriers to entry come down

Richard Moross, Moo.com founder©Charlie Bibby

Watch this space: Richard Moross, Moo.com founder

A decade ago, Cambridge was the only start-up cluster of a sufficient scale in the UK to prompt any interest among venture capitalists beyond this small island’s borders. Today, the UK has a host of city clusters, from Aberdeen and Edinburgh in the north to Bristol and Oxford in more southern parts.

Cambridge is no longer the largest hotspot, having been eclipsed by London several years ago.

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The capital boasts the largest collection of tech start-ups and venture capitalists outside the US and is a centre of gravity for Europe’s entrepreneurs.

Shoreditch alone hosted 15,720 new businesses in the 12 months to March 31, according to research by accountancy group UHY Hacker Young.

Growth is happening in other cities, if at a smaller rate.

In Liverpool, a former industrial area on the edge of the city centre now referred to as the Baltic Triangle has witnessed the setting up of dozens of gaming and music businesses.

Not far away in Manchester, the city’s chief executive Sir Howard Bernstein has fostered a similar flourishing of entrepreneurial talent.

Such clusters have arisen in part because of the lower cost of starting companies today, says Jamie Coleman, managing director of Edinburgh’s TechCube, which provides a home and mentoring support for several ambitious start-ups.

“The entrepreneurial culture has always existed,” he says. “It is just that the barriers to entry were higher. It is now cheap to start, certainly in software.”

Another factor has been city leadership, according to Michael Hayman, a co-founder of the StartUp Britain initiative to nurture a more entrepreneurial society. He served on the finance commission looking into the future of cities on behalf of Westminster, Manchester and Birmingham.

“Manchester has proved that the ‘build it and they will come’ message rings true,” Mr Hayman says. “Its Media City stands out as just one of a series of major builds that has helped to fuel a very strong sector cluster.”

Elected mayors in places like Liverpool and Bristol have played a part in building their cities’ confidence, he adds. “Liverpool has been particularly successful in creating a ‘can do’ message for business through major events and this has been fundamental in the creation of a pro-business identity.”

The key ingredients that have led to the growth in UK clusters are education, research and access to capital, according to Philip Letts, founder and chief executive of Blur Group, the Aim-listed technology company.

He notes that the UK is actually a lot more like the US than many may appreciate in its creation of multiple clusters. “If you look at the west coast in the US, you can see that there are actually a number of clusters there – Vancouver, Seattle, Silicon Valley, San Francisco and so on,” Mr Letts explains.

“The UK is obviously a much smaller space and, as long as our spaces don’t geographically cluster, which they don’t, then we’re fine.”

The UK’s city clusters, like their counterparts in the US and across Europe, exist because they offer homes to different types of businesses, TechCube’s Mr Coleman notes.

He believes that they should not, and do not, stand alone. “Interconnected cities [are] acting as nodes of innovation,” he says.

“Different local strengths and weaknesses are reflected in the sorts of companies we build.”

Richard Moross, founder of online stationery business Moo.com, helped foster the Shoreditch community by letting ambitious founders share his company’s office space when setting up their own ventures.

It was one of these tenants, Matt Biddulph, co-founder of travel website Dopplr, who jokingly nicknamed the area Silicon Roundabout, a moniker that has lasted beyond the UK government’s attempt to rebrand the neighbourhood as Tech City.

Mr Moross notes that the growth of start-up centres is a good thing for job creation and innovation.

“It would be sad if London was the only place where exciting new technology stuff was going on,” he says. “I think the competition is good.”

Mr Moross agrees with Mr Coleman that companies benefit by networking with their peers in other city clusters. However, he does not see a need to network with his counterparts in other UK cities. “To be perfectly honest I haven’t spent any time in any British clusters outside London,” he says. “But we have certainly done a lot of that with cities in America.”

There is a logic to this for Moo.com, Mr Moross notes, because 60 per cent of its sales are to the US. Only 20 per cent of its sales are in the UK and most of these are in London.

“We should be thinking about what is best for the UK as a rival to the rest of the world,” he says.

In that case, government policy should focus on making the most successful city cluster as big as possible so that it can compete on a global stage with the likes of San Francisco, New York, Boston, Berlin and Tel Aviv, Mr Moross adds.

“London beats the socks off Berlin or San Francisco,” he claims. “We see our real rival as New York.

“The UK has an amazing trump card in Europe because you can get on a plane and be in 20 different countries in a couple of hours.

“But if you start to talk about the UK as a multiple cluster environment, you start to lose some of that power.”

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