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What Makes a Tech Hub? A Look at The North East Startup ecosystem

close up of a bunch of fibre optic cables showing a green light through the end.

According to a controversial article in The Guardian it’s grim up North, and has been ever since the end of the Blair era. That was back when Downing Street was aware of the region, if only thanks to the Prime Ministers constituency being Sedgefield, a small town in County Durham.

Besides producing a collective groan from the whole business and startup community, the article served to highlight a Lannister and Starks sized North – South divide. Northern wolves struggling in a cold bleak, jobless landscape. Compared to well fed, rich gainfully employed lions basking in the comfortable warmth of the capital.

Let’s not deny there is a divide. Unemployment in the North is still around 10%, average house prices are £122,917, and the regions contribution to GDP is only around 2%. However, the observations of Andy Beckett in the article were selective at best. One Teesside business park was described as having more “To Let” signs than corporate tenants; given this author is a stones throw from that area I can confidently confirm that to be utter nonsense. Darlington station, far from being haunted by lonely passengers and ghost trains is busy from dawn till dusk. Everywhere one looks there’s a buzz of economic regeneration, job creation from startups, new investment, building works and infrastructure projects. Which takes us to the startup community in the region.

Silicon Shore?

Early in 2013 the BBC sent a camera crew from their Washington DC office to survey the scene. They spent time in the VC backed ignite100 accelerator, confirming the existence of a ‘critical mass.’ Since then The Independent and Financial Times have come away with equally positive impressions. One brave BuzzFeed journalist spent even more time in Newcastle, the heart of the regions startup scene, gaining a realistic appreciation for what people in the community are trying to achieve.

In many ways that’s the same as other aspiring tech hubs. The creation of an ecosystem which is self-sustaining and profitable; with angel investors and VCs putting money back into a market which has already generated outsized returns in the form of successful exits. Sage, a FTSE100 traded accountancy software firm used worldwide, is one example, but to thrive the region needs many more. Compared to Silicon Valley so does London and New York.

In order for these kinds of wins to happen an ecosystem has to support the entire process, from ideation through to exit. Can the North East do that?

The Architecture of Entrepreneurial Support

One good reason to start-up in the North East: “Five words: Cost of beer is cheap,” said Paul Rawlings, CEO of ScreachTV, a VC backed startup with offices in Newcastle, London, New York and Europe.

Beer is cheaper, housing is cheaper, travel is cheaper – living on a shoestring in the North is far easier than London.

The regions universities – Durham, Newcastle, Northumbria, Teesside and Sunderland – produce technical and business minded graduates at the same rate as those in the south. All of them offer schemes which can slash the cost of a graduate (within the last three years) hire in half for the first 6 to 12 months.

The problem, as Sage’s Paul Lancaster explained in the BuzzFeed article is still one of perception: “Too many people, particularly young people, still believe that they have to move outside the region — London being the obvious example — to find ‘a good job’ and forge a career.”

Mentors and Money

Organisations which provide mentoring and low cost office space include DigitalCity Business and Digital House in the Tees Valley, the Ignite Accelerator (and their 10,000 square foot new home – Campus North) and Software City in Sunderland. Office space and mentoring is as useful as angel or VC investment, which can also be picked up with the same ease as in London.

Government funding, which according to The Guardian article, has all but collapsed, leaving the region desolate, is actually still pouring in at the same rate as ever. Much of it comes from European Regional Development Fund sources, which can fund marketing and other R&D expenditures.

The Future?

Paul Smith, Co-founder of Ignite100, is upbeat about the region, but that’s because he’s working every day to make things better for startups: “Can we try and fix what’s in our control? Yes. Do we want to? Actually yes.”

Smith said in BuzzFeed: “We can’t be Silicon Valley. But we can be a centre for innovation, excellence, and entrepreneurism in the U.K. that doesn’t try and rival London, but exists in harmony with it. And realistically, I think if we get our shit together, in five years time we’re top 10 in Europe.”