Bootstrapping Tech City

After San Francisco Shoreditch in London is probably the most ludicrously expensive place to run a startup. Here is how it can be done.

Like many others I got drawn by the shiny lights of London’s tech city over three years ago. In the process of starting two companies I’ve made enough mistakes to learn how to save money in one of the most expensive startup hubs in the World.

Nestled between the riches of the City of London and the proudly working class East End is Shoreditch, an ambigously defined territory divided between three local councils: Hackney, Islington, and Tower Hamlets. Shoreditch is home to possibly the greatest microlevel difference of income distribution in Europe, where neighbouring streets are inhabited by affluent city bankers and penniless immigrants Shoreditch is also home of an unprecedented real-estate boom, where the wealth and development of the financial center of London is rapidly expanding eastwards to what just five years ago were some of the most deprived areas of the East End. While the streets of Shoreditch may still exhibit the shabby chic characteristics of urban life, the prices in local boutique stores would make Oxford Street merchants blush. Tech City is already costly and all signs point to things getting a whole lot more expensive in the future.

Swings and Roundabouts

I moved my previous company Timgu to the grand address of “152-160 City Road” after reading a few articles about the miracle of London’s Silicon Roundabout at the Old Street Underground Station. I remember how we were not particularly impressed by the look of the place, but what excited us more about the area was that lots and lots of other small creative companies were moving to the area. Anyone who has read the work of Richard Florida will know that “the creative class” will naturally huddle in certain areas, so where Soho became a base for London media agencies in the 1980s and Silicon Valley became a base for tech companies in the 1990s, it was a safe bet to say that Shoreditch would emerge as the definitive place for digital startups in Europe by the 2010s. While some pioneers like Moo.com and Dopplr were originally motivated to move to Shoreditch by cheaper rents, the concentration of startups to a local area has only gathered momentum. To get an idea of how hot the startup scene has become, check out the Tech City map and you will struggle to find a square meter in Shoreditch that isn’t packed with tech startups.

Don’t rent an office

The first thing you should know about Tech City is that the overheating real-estate market has made it extremely unfavourable to rent office space. From experience I can say that the cost per square meter of renting near Old Street is equivalent to the more expensive areas of London and the killer deal is that most rents come with 5 year contracts.

At my first startup, we rented out a space large enough for 20 people only to soon realise that most of our growth came internationally. We literally became slaves to our rental contract as we had to sub-let office space to other startups to cover the insanely high quarterly cost of renting office space in central London.

If you prefer to work from home, you can find some reasonably priced local virtual offices for your official address.

If you are a one or two person team, your best bet is to register for a shared office space like TechHub or Central Working. In shared office spaces you can either hot-desk a day a week or rent a your own desk on an affordable annual rate.

If you have a bigger team, I would seriously consider staying away from Shoreditch, but if you must, you can find plenty of sub-let offers on Gumtree.

Whatever you do, don’t sign up for a 5 year office let. I don’t know any startup or growth company that hasn’t had to regularly change their tenancy agreements. Also, if we don’t force the system to change now, the London office rental market will never begin to accomodate the needs of startups.

Don’t live there

You should also consider that the overall real-estate market in East London is booming thanks to a combination of government incentives encouraging first time buyers, buy-to-letting and overseas investors. As a consequence average house prices in Hackney are currently close to £500,000 and rising by almost 10% month-on-month.

For the last three years I’ve been renting a one bedroom flat near Brick Lane for close to £1500, but I expect rents to go up by at least 30% in the next 2 to 3 years.

If you have a family the smart move is to live anywhere on the Northern Line north of Camden Town. You should be able to get to Old Street Station in 15-20 minutes from places like Archway, Highgate and East Finchley and still get a lot more for your money.

If you don’t have a family, you can be more adventurous and check out Bethnal Green, Dalston or Hackney Central. While these areas are mostly safe to live in, there are some dodgy areas even locals won’t visit.

Don’t get phone contracts

Another surprisingly costly aspect of running a company in the UK is that the business mobile phone market is surprisingly uncompetitive. For example, we signed up for O2 as a small business only to find out later that they had a cap on 5 contracts per company. For this reason we had to sign up for a second provider for our subsequent phone contracts and in both cases the monthly cost of business mobile phones was much higher than having regular, private phone numbers. The phone operators were extremely unflexible about changing the terms of our contract, so we were forced to wait up to 24 months until we could find a better deal by cancelling the contracts.

My suggestion is that if possible, each employee keeps their existing phones and numbers on a flexible rate. My particular favourite is GiffGaff which allows you to have regular direct debits without contract and modify your pricing plan as your circumstances change. While I do currently have the unlimited data package for GiffGaff, I don’t think I’ve ever used 3G that much, as after a few months in the area I’ve built up a list of free and fast wifi hotspots in the area.

Don’t Expect Fiberoptic Broadband

On the topic of data plans, you may be amased by the lack of infrastructure in Tech City. While some streets around “Silicon Roundabout” boast some of the fastest internet connections in Europe, we struggled to get any form of fiberoptic broadband just 200 meters away. From what we understood, BT will not make exceptions for small businesses, so internet speed will be a post code lottery. For my first startup the option of a private fiberoptic cable was also considered, but at a rate of £600 per month for a 500 mb/s connection, it was hardly bootstrap budget friendly.

If your company is data-hungry, don’t sign any leases until you have a firm guarantee on broadband speeds. Otherwise, be resigned to having a maximum of 15 mb/s standard BT broadband.

Be careful where you dine out

Shoreditch is famous for having one of the most vibrant night lifes of London and also some of the costliest restaurants. The tricky thing is that from the outside you won’t really know which restaurants and bars are pricey, so if you are having a team night out, I’d strongly consider looking around for a budget option.

My favourite pick for going out with big groups is the Vietnamese restaurants on Kingsland Road. I’ve had many a great night out in Vietnamese diners like Song Que but I wouldn’t recommend any of the famous curry houses on Brick Lane.

While many of the pubs and clubs in Shoreditch do have private hires for office events, they are currently so popular with companies from across town that I wouldn’t even bother getting a quote. You are probably better off sticking to a traditional pub crawl down from Hackey Square to Old Street and Rivington Street.

Virtually there

One good thing about Shoreditch startup life is how open it is to outsiders. Most of the people I come across in Shoreditch are coming and going from places across the world, so it feels very much like an airport departures lounge.

Most of the events I go to are publicly visible on Meetup or Eventbrite, so one good idea before you arrive here is to sign up to a few events ahead of time. Some of the popular events are the Lions’ Cage pitch events, Silicon Roundabout meetups and the more socially lubricated Silicon Drinkabout. It is a good idea to sign up for both Meetup.com and Eventbrite and search with keywords like “Tech City” or “Shoreditch” to see if there are any alternative events arranged.

London has a huge amount of high-net-worth individuals, but they are also famously impatient to strangers wasting their time. If you are in town to meet potential investors, you should make sure your startup is registered to Angel list, F6S.com, Capital List, where you can get introductions to relevant angel investors and VCs for your industry.

Sign up for Campus London

The final of advice I’d like to offer is that anyone interested in startups in Shoreditch should sign up to Google’s Campus London. Essentially it is a massive co-working space funded by Google where many of the events are totally free to attend. Once you’ve signed up to Campus, you’ll get plenty of invitations to events ranging from one-to-one mentoring sessions with Googlers to popular events and lessons covering the most important areas of startup life, such as legal, fundraising and growth hacking.

At Campus London you can also make use of a very active basement cafe, where many startup founders I know take advantage of free fast broadband and decently priced coffee. They won’t tell you off for bringing your own snacks to the cafe, as they know most of the visitors are bootstrapping hungry entrepreneurs.

Conclusion

After living in Shoreditch for over three years I can confirm that this can be one of the most expensive places to run a startup, but you can still find ways to save costs. Now that companies like Google and Microsoft have also moved into the area, it is inevitable that Tech City will continue to attract some of the best technology companies and investors in Europe. While you may cringe at the cost of running your company from the viscinity of Silicon Roundabout, you should probably plan to be active in the area in one way or another.

I hope you found these tips useful. Let me know if you’ve got any more to share!