TOWNS AS MICROHUBS

Start-ups are creating a large proportion of new jobs, which is why global cities are vying to attract nimble young companies. Yet, these same cities are creating barriers for those wishing to set up business and this provides opportunity for smaller towns to become MicroHubs. (5min read)


Job Creation

It is claimed that start-up businesses are now the top engine of job creation and economic growth in the world, and not only in Silicon Valley. (World Economic Forum) Although numbers can be disputed** it is clear that new companies, particularly in tech, are creating jobs and there is increasing demand from employees to work in the start-up sector.

Barriers

New York, London, Paris are all making grand claims about numbers of new companies setting up in their cities, however for young companies to grow requires good people on salaries that allows for a sustainable lifestyle. The sustainable part of the equation is becoming increasingly difficult due to the sheer expense of just being in a city like London, never mind living there. In previous decades, people moving to the suburbs and taking the train or tube into the centre to work overcame this problem. An annual train ticket to travel 19miles from Dartford to Central London is now more than £5,500, with 2-3% average annual increases, making this option less and less viable. In addition, even suburban house prices, rented or freehold are becoming unsustainable for many workers. 

MicroHubs

Tech start-ups are different to most previous industry start-ups in that there is no intrinsic reason to be located in a specific place. Coal mining had to be where there were coal seams whereas tech can generally work anywhere there is connection to the Internet. This is of course a bit blunt, there are factors why tech companies cluster in certain locations like London but the business model can be much more fluid than say manufacturing production for example.

This presents an opportunity for more deprived towns and villages that are presently struggling to develop a unique selling point (USP) strategy and attract inward investment. By understanding what assets already exists in the area, a local authority could pivot the many levers of government investment and procurement to focus on attracting specific strands of the start-up sector. Locations where property is relatively low cost and have a small number of positive aspects, natural park, nice pubs, welcoming population, a beach or good transport connections, can all be reconfigured to appeal to start-up businesses and their employees.

Rethinking Town Centres. Ipswich | John McKiernan

Analogy: Rethinking the MicroHubs

Cities will always have the size, wealth and connection over small deprived towns but if we change the analogy maybe this can be considered in a different way. Imagine cities as global car companies and deprived towns as Formula 1 racing teams, always scraping around for money.

Where has much of the engine innovation come from in car manufacturing over the last 30 years? Answer: F1.

And who builds the sexier cars and what is more exciting to watch? No answer required!

Get in touch to discuss further, and for more on Global City Hubs read the World Economic Forum’s assessment below…

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The next start-up cities that will transform the global economy

23 Jul 2013, World Economic Forum, Marc Penzel, Founder and COO, Startup Genome

During the past decade, much of the discussion about start-up ecosystems has been centered on the question of which city or region will become “the next Silicon Valley”. Although there are several places with promising growth trajectories, we frankly think this view is short-sided. It implies there needs to be a new champion overshadowing the old one.

In fact, there will be no “next Silicon Valley”. Instead, new research from Startup Genome’s 2019 Global Startup Ecosystem Report (GSER) points to there being 30 “next” hubs that will reach critical mass and reshape the state of the global economy. While none of them will be as big as Silicon Valley in the foreseeable future, each will thrive due to either regional dominance or start-up sub-sector leadership. 

Now, it’s not obvious which ecosystems will end up as the global change agents we predict, but we have some big clues. The first place we should look to determine the next hotspots is at present start-up ecosystem rankings. We rank 150 leading start-up ecosystems each year, incorporating data on more than a million companies globally. The newest list shows Silicon Valley is at the top, but following it are New York City, London, Beijing, Boston, Tel Aviv, Los Angeles, Shanghai, Paris and Berlin.

These 10 globally leading hubs have built a strong reputation for having plentiful start-ups and small businesses. New York City, for example, owns the number two slot for start-up ecosystems in part because it has more than 9,000 start-ups, numerous unicorns and high global connectedness (a measure of how much founders are connected with other top global ecosystems). Alternately, Beijing has been steadily moving up the ecosystem ranks in part to being home to more than 1,000 AI companies, which is one of the four fastest-growing startup sub-sectors globally.

While the 10 ecosystems outlined above are some of the more obvious leaders in the global start-up revolution, it’s worth looking at the fastest growing hubs beyond them. Startup Genome dubs these “Challenger Ecosystems” and 12 such ecosystems are identified, in alphabetical order:

  • Greater Helsinki, Finland
  • Hangzhou, China
  • Jakarta, Indonesia
  • Lagos, Nigeria
  • Melbourne, Australia
  • Montreal, Canada
  • Moscow, Russia
  • Mumbai, India
  • São Paulo, Brazil
  • Seoul, South Korea
  • Shenzhen, China
  • Tokyo, Japan

Among this list, we can easily point to Lagos as a top contestant for regional leadership in the African continent. Given the wider economic context and the current momentum, several indicators point to the fact that even a spot in the global top 10 is not out of reach. Indicators include that it is the largest city in Africa and one of the fastest growing cities in the world, it has the largest tech hub in Africa, global titans like Google and Facebook have invested there, and young entrepreneurs there are on the cutting edge when it comes to running mobile-first businesses.

When it comes to specific start-up sub-sector leadership, we see Montreal emerge as one of the global hotspots for artificial intelligence (AI) start-ups. Since 2016, more than $1 billion has been invested in AI companies located there (including notable startup Element AI), and it has the largest concentration of AI academic researchers in the world. Montreal also hosts the NeurIPS conference, the largest AI event held annually in the world. 

Other “Challenger” ecosystems on our list have not created such a strong brand, or ecosystem identity, for themselves yet. But that is changing rapidly, partly due to aggressive government investment. In Asia-Pacific, for example, Seoul Metropolitan Government stands out with a recent pledge of $1.6 billion in funding for start-ups by 2022. South Korea is also notable for its R&D spending-to-GDP ratio, which is the highest in the world at 4.55%.

The global start-up community is now the top engine of job creation and economic growth in the world, not only in Silicon Valley. The next hubs, partly predicted above, will be where the bulk of that growth is occurring and they are where the global economy will be remade, especially in the areas of advanced manufacturing, agricultural tech, AI and blockchain.

https://www.weforum.org/agenda/2019/07/the-next-startup-cities-that-will-transform-the-global-economy/

** Are startups creating jobs? It’s complicated, Tech Republic, Dec 2015 https://www.techrepublic.com/article/are-startups-creating-jobs-its-complicated/

Please feel free to comment below, negative or positive, and join the discussion.

Blog posts connected to this article, include Secondary Ai Ecosystem, Ai Hub, Innovation Hub, Collaborative Hub, and Leiston and Sizewell

John M

Image: Dawn Over St Paul’s | John McKiernan

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