One of the annoying things about articles like this is they ignore the fact that ten minutes down the road from the Silicon Roundabout (and I mean literally if you walk from Old Street Tube Station down City Road) you'll walk into London's financial tech hub which is one of the most successful tech-hubs in the world.
Reuters, ICAP, Markit to name just a few have all built multi-billion dollar tech business out of London. There are literally hundreds of financial sector tech startups in the area.
Web startups are only a tiny part of the startup ecosystem and we shouldn't forget that.
I wonder how many people start tech companies in the financial sector these days. The market there is saturated, the competition is strong and the clients are much more conservative. OTOH, web startups can be launched with very little cash and new markets emerge every other day (social, mobile, location, etc.). Most of them fail but the ones that succeed can have potential to earn billions. Web startups are indeed a tiny part of the ecosystem but I think that's exactly the problem. We need more of them, at least in Europe.
There are lots and lots, retail finance is conservative but investment banks are often much more willing to take a risk as are smaller hedge funds, prop shops etc.
There are thousands of unexplored opportunities in the financial sector that are begging to be taken by startups. If you have a clear value proposition, then selling into the financial market is easy. This is especially true if the product you're building helps your customers make money.
Every major investment bank has thousands of developers on payroll building internal systems, they'd love to just be able to buy off-the-shelf solutions that solve their problems instead.
If your product is good than your customers aren't going to be worried about you going out of business, because they know someone will acquire you before that happens. They're more likely to be worried that one of their competitors will buy you.
Sure you need to be more active in doing sales, but because the financial community is relatively tight-knit this is relatively easy. A lot of the time it's basically calling your old colleagues and getting them to make an introduction for you.
When I left the last investment bank I was working for to start my startup, the head of the trading desk pulled me aside and said "if you're building something in our space, come and pitch us first". That's the nature of the sector, everyone wants to get the cool new tech that's going to give them the edge on the market.
Banks and Financial tech firms also tend to be very active when it comes to acquisitions. It's considered a standard way to get exclusive use of a technology or to expand your firm.
Not true. Financial clients spend BIG and invest often in cutting edge tech to develop & advance their quantitative trading and high frequency trading businesses.
The full stack from cables to networking to application needs to be as good as it can be. Your solving problems of big data, real time and it MUST work. Financial tech people are some of THE best in the business, solving some of the most challenging problems out there.
It's probably true to say that some finance institutions are practically software houses - with some of the big IB's employing more tech people than they do business function.
Like others have said, there are huge opportunities in finance, but you need some serious tech to compete.
We did (see http://www.youdevise.com and https://dev.youdevise.com) and we find the environment for our two product niches extremely friendly. You have to be willing to deal with the really Byzantine organisational structures of the banks, of course - I can understand why web startups would be more attractive and fun, but there really is a lot of money to be made in London finance if you figure out how to take care of the traders.
If anyone would like to talk more about this please get in touch with us (or just come see me at London Hacker News events, which we sponsor).
A similar set of properties can be applied to web startups as well: market is saturated, competition is strong, and the consumers are much more conservative than you think (unless if you happen to be in Silicon Valley). Keep in mind that the consumers of web startups have a very short attention time-span.
Sometime there's a good reason why web-startups are tiny part of the European ecosystems. Even if you want to have more, the market doesn't necessarily agree with your personal point of view (I don't mean to criticize you, I'm just pointing out that there might be bias in your view)
We used to rent desk space near the Old St roundabout, which is the place the article discusses. In the winter I used to have to wear gloves at work because it was so cold and draughty in the office (warehouse) we were in. They were running gloves, so I could still type, just about. Happy days.
I second that. Having moved from northern Poland where -20C is nothing extraordinary in winter I was quite surprised by the amounts of energy used to heat typical British homes. I guess that is what you end up with if the majority of houses are >50 years old and zoning laws prevent you from changing the outside appearance of the building by for example installing extra insulation.
That's exactly what the problem was, the building was an old Victorian printing press, with some desks and an internet connection thrown in. Half the windows weren't flush when closed, and there was a big steel door entrance which conducted away the heat with ease. It was cheap though, if I remember correctly we used to pay 65pounds per week for two desks. Normal rates were probably double that. There was a good crowd of people there too.
Silicon Roundabout doesn't have the range of startups from "soft tech" to "hard tech" like Silicon Valley has. Most of the startups in Old Street are startups with links to the creative industry.
McKinsey's "expertise" is most likely to benefit the BigCorps who conduct studies into the strategic benefit of moving their IT departments into the area (a few blocks north in some cases). The impact of that happening on the creatives and their reasonably-priced shared offices might not be neutral...
I'm not sure London is the best place in the UK for a startup. Office and accomodation rent is among the highest in Europe. And in just about every other respect it's an insanely expensive place to live.
Unless your clientiele requires you to be in London (e.g. you do work for the city, or one of the big media companies) you'd be better off elsewhere in the UK if you want a decent runway.
It seems counter intuitive at first, but it's the same way in Canada and the US. Toronto, Montreal, Vancouver, San Francisco, New York, etc.; they're all the best places to grow companies. Rent is a fraction of what start-ups pay in salaries and the talent pools are often focused around those areas. You're right that you'll save money if you're bootstrapping or have a remote team, but if you're taking money and/or growing and hiring, higher rent is just the cost of being in a good location for everything else.
Yeah but by the same logic you could argue the following, yet you would be wrong:
"I'm not sure San Francisco is the best place in North America for a startup. Office and accommodation rent is amongst the highest in North America. And just about every other respect it's an insanely expensive place to live.
Unless your clientiele requires you to be in San Francisco you'd be better off elsewhere in the US if you want a decent runway."
There's a reason HP started in a garage in Palo Alto, not in San Francisco. The city is markedly more expensive yet draws on largely the same talent pool as the valley—there's no shortage of people who commute either direction (including me). I don't think the city makes sense for a startup unless you're planning to interact heavily with Big Media, and there it's hard to argue against a branch in New York instead.
Sure. But high cost of living means higher salaries for your developers too. I've turned down numerous jobs because they're London based (and won't do remote). It's just not worth the drop in income.
And frankly, London isn't California. It's a grim place to live on low pay.
I worked in a hardware startup just off the old street roundabout for a year or two and have lived in Shoreditch for the last 5 years. I'm glad there is a rising tech industry but much like NYC I doubt tech will ever take hold like in the Valley or Oxford and Cambridge simply because there is too much else going on, mostly in the finance sector.
I think this begs this question: How on EARTH has Apture convinced so many companies that yes, cluttering up your site with a useless bar is a great idea?
Reuters, ICAP, Markit to name just a few have all built multi-billion dollar tech business out of London. There are literally hundreds of financial sector tech startups in the area.
Web startups are only a tiny part of the startup ecosystem and we shouldn't forget that.