10 years ago, before hipsters, hackers and co-working hubs, Shoreditch was known for a different type of creativity. Low rents and warehouse spaces made this corner of East London the perfect home for artists, media companies and film-makers.
Just down the road in the City of London, the largest financial centre in Europe, bankers started crossing the tracks to go out in Shoreditch and entrepreneurial types could take a short walk to meet potential investors in the City. Shoreditch was soon full of great pubs, shops and restaurants - making it a place people wanted to live, work and spend time.
This proved to be the perfect breeding ground for entrepreneurs and the network effect kicked in - a fledgling community of young tech companies started to form. With events and meet-ups launching all over town, Shoreditch had become a destination that people wanted to be part of.
The recession of 2008 was a catalyst for further growth as the rental market softened making office space more affordable when compared with other areas of London at the time. Smart people started their own companies as traditional job opportunities dried up and investors looked for ventures that would give more significant returns than the flat or falling stock market.
The government shone a light on the growing tech scene in 2010 with their Tech City initiative and soon after introduced the Seed Enterprise Investment Scheme to encourage early-stage investments. Google opened the influential Campus space near Old Street in 2012 and the network effect had fully kicked in, encouraging thousands of startups based in the neighbourhood. From 2012 to 2014, the number of new companies started in Shoreditch each year exploded and Venture Capital investment soared.
However, over the past couple of years, that number has started to drop. As rents sky rocket it’s hard for small businesses to justify paying for space. It seems that tech startups are facing the same fate as the artists who came before them and are getting priced out of the community they helped to create.
As technology and startups become an ever-greater part of the economy, it’s natural that the tech scene will spread far beyond its spiritual home of Shoreditch. Many are already choosing their location because of other considerations such as proximity to key partners or clients: health tech startups want to be near training hospitals they can embed in, ad tech companies are drawn to the brands they sell their services too.
It seems that tech startups are facing the same fate as the artists who came before them.
New hubs are springing up all over London as local councils are furiously vying to attract companies priced out of Shoreditch. Camden has creative, a regeneration project providing subsidised co-working and tech training to startups; Lambeth Council support the co-working space Impact Hub in return for agreed social targets; Croydon now has its own 'Tech City' to foster their fledgling startup community; and beyond London there is a huge push to create tech hubs outside of the capital.
Office rent isn’t the only challenge. In the same way that artists spark gentrification wherever they go, scalable tech companies drive the local economy as they grow and hire smart young people.
As the cost of living goes up the young people startups employ move to cheaper parts of London. Finding good talent is one of the biggest challenges faced by growing companies and so being closer to them is appealing. The new Here East hub in the Olympic Park hopes to take advantage of the fact that more young people have moved further east to attract companies there.
It might sound like the end of the Shoreditch tech startup bubble, however, the recent boom in co-working spaces has mitigated the risk and costs of renting office space to some degree. Entrepreneurs just starting out can find affordable hot-desking memberships and start building their network and when they need a more permanent space they are no longer faced with long leases and hidden costs. There are also fantastic subsidised spaces such as IDEALondon, Bathtub 2 Boardroom and our own non-profit business incubator Accelerator London, which offer space and support to the most promising young companies.
While some startups will leave for cheaper outer boroughs or other parts of the country, the opportunity for Shoreditch is now with the scale-up companies who value the powerful network, proximity to investors and the vibrancy of central London. For those that can afford it, these benefits are still worth the extra rental and costs.
Shoreditch will always be one of the focal points for the London startup scene but the tech economy has outgrown being defined by just one part of the city. Ecosystems of tech companies and startups are developing in King’s Cross, Soho and Holborn. This is good news for the capital as a whole as it cements London’s reputation as the startup capital of Europe, attracting talent and investment from around the world.