Science Creates founder Dr Harry Destecroix shares his thoughts on the importance of place for building successful companies.
So, you’ve made the discovery of the century. You’ve had a trailblazing idea that, with just a little nudge on the gas pedal, could change the world forever. You’ve assembled a team of gritty go-getters that Nick Fury would envy, and you’re prepared to work twice as hard as the competition. What could stop you?
Well, apparently, a lot of things. It’s an oft-cited stat, but it bears repeating: nine in ten start-ups fail. There’s a host of reasons why, many of which are beyond our control. But there’s one major decision that you can make early on to give your business the best chance of survival.
The truth is, where a discovery is made will have a profound influence on its chances of making it into the real world. Earlier this year, economists in Spain released the results of their study on the success of start-ups. They interviewed 50 entrepreneurs and 15 VC investors, polled 340 start-ups, and tore through every publication they could find to work out what separates thriving companies from the pack. Their conclusion? The location of a start-up was critical to its chances of achieving revenues of at least €100k.
Data from ONS via NimbleFins: https://www.nimblefins.co.uk/uk-startup-statistics-top-industries-and-regions
In their 2019 analysis, NimbleFins found that the average five-year survival rate for a new company in the UK was 43.2%, but this figure varied considerably depending on where it was based. The South West came out on top: a business built here is 17% more likely to still be standing after five years than if it were based in London. When you’ve poured your energy, time, and passion into a project for so long, that percentage is not to be sniffed at.
Dianna Lesage, of Studio Upstart, coined the term ‘start-up power city’. She defines it as a place that offers the opportunity to start and grow a business with ‘extraordinary speed’. A few big names spring to mind: Silicon Valley, Beijing, and Boston. So what do these places provide that allows start-ups to flourish?
Every year, Startup Genome ranks cities all over the world based on their:
No single entity can provide all of these ingredients. Universities, incubators, local governments, investors, and professional services must cooperate to form an ecosystem that nurtures small businesses. Only then can a city become an economic engine – a start-up power city – that generates innovations and delivers sustainable growth.
In the latest Startup Genome report, Bristol ranked 13th out of the world’s top 100 emerging start-up ecosystems. According to Tech Nation, we attracted the 12th most VC investment in Europe in 2020, beating out Tallinn, which has the most unicorns per capita on the continent. Outside of London, we’re second only to Oxford for UK tech investment, and we’re catching up.
Data from Tech Nation Report 2021: https://technation.io/report2021/
Left image = 2020 VC investment in the top 15 European cities
Right image = 2020 VC investment in the UK clusters, excluding London (£10.5bn)
However, when you dig a little deeper into these numbers, the picture isn’t quite so rosy. If you discount the sum raised by our ‘unicorns’, the amount raised by Bristol tech companies in 2020 more than halves. (Graphcore announced a $222 million round, and OVO Group didn’t announce any funding, although they won $216 million of funding the year before.) These ‘big fish’ companies raise most of their money outside of Bristol: Graphcore’s last round was led by a Canadian pension board and included investors from all over the world. Graphcore’s CEO, Nigel Toon, spoke to Wired about being pursued by a prominent Silicon Valley VC company for an investment opportunity: ‘That’s one of the very few investments they’ve made in the UK, because they’ve got so much opportunity on their doorstep.’ The vast majority of Bristol’s tech startups can’t rely on high profile international investment.
According to Beauhurst, the most prolific investors in Bristol since 2011 are:
These investors are a fantastic asset to the city, but the current capital available is a drop in the ocean compared to what’s needed to supercharge Bristol’s growth as a centre for deep tech. Many of the companies we work with have received angel funding from myself and a network of angel investors, but more is needed. Science Creates Ventures, the VC firm that we launched at the end of 2020, is a great start. But we need to engage more investors and VC funds; start-ups here need their expertise and experience.
In 2019, Startup Genome predicted that there won’t be a next Silicon Valley: there will be 30. Their analysts used Roger Bannister’s four-minute mile to illustrate the impending explosion of start-up ecosystems. Before 1954, the feat was thought to be beyond the bounds of human physiology, but Bannister redefined those limits. Then the floodgates opened: John Landy ran a 3:58 mile just 46 days later, and nearly 1,500 people have broken the barrier since.
A similar cascade is coming for start-up ecosystems. By 2029, 100 cities should break the $4 billion barrier by funding and exiting start-ups of that value over 2.5 years.
Deep tech offers solutions to the biggest problems the world faces today. The companies in this sector are based on genuine scientific advances and have the power to create their own markets. But for all their promise, deep tech companies need more support.
To start and grow a traditional Silicon Valley tech company – a Spotify or Airbnb – you don’t need much more than a desk and an internet connection. Not so with deep tech. To take a discovery off the shelf and turn it into an invention, deep tech start-ups need specialised lab space, infrastructure, capital, and legal support. They need the experience of people who have been there and done it before, as board members and mentors. They need local government legislation to support their growth, and they need to be hooked into universities, the pipelines for talented researchers.
Great cities offer the support and resources that ambitious companies need to push past the impossible and power the economy.
Dr Harry Destecroix, CEO at Science Creates Incubators and General Partner at Science Creates Ventures.
At Science Creates, we want to work with anyone and everyone committed to making Bristol a start-up power city. We all need to collaborate to achieve a critical mass. It isn’t a competition – we all stand to benefit by growing our innovation ecosystem. Connect with us on Twitter and LinkedIn, and follow our progress at sciencecreates.co.uk.