We’ve been working closely with our partner TechCityInsider to create a report charting out the future of the UK’s Silicon Valley, Tech City. The key finding? The UK needs a lot of digital creatives. Here’s their blog post that’ll give you the key details, including the report itself, plus a video with our very own Mike Berry!
TECH CITY FUTURES: A shortage of skilled tech talent is limiting growth in Tech City, with nearly eight out of 10 tech firms reporting that a skills shortage is limiting business growth, according to Tech City Futures, a new survey by GfK conducted exclusively for TechCityInsider and partners.
The survey reports that a funding gap, caused by a reluctant banking sector and a risk-averse investment community, is further constraining growth. Nearly a third of the people running London tech businesses believe they are missing the chance to grow, with one in five saying they are making people redundant.
These sobering twin findings emerge from the survey of 141 technology business leaders, conducted in March and April. In total, 77% of respondents were CEO/founders. The survey is thought to be the largest opinion poll of the people running London tech businesses to date.
We’ve also made a film about the survey
The Tech City Futures report will make challenging reading for politicians, including prime minister David Cameron and mayor of London Boris Johnson, both of whom are looking to the London tech startup sector for good economic news when the bigger economic picture for the capital and the UK as a whole is bleak.
The survey shows that opinion is sharply divided about the role of government in promoting the tech business sector. Fewer than half believe that the government’s support has been effective so far.
While there are positive feelings among the community about the way the government, through the Tech City Investment Organisation, has shone a light on the startup scene, others feel there has been more PR than action from government.
Doubters points to negatives rising rents and salaries, and the arrival of global firms that are taking the best talent. Some are downright cynical, believing that the government is trying to take the credit for an economic success story that was happening anyway.
Survey respondents represent a cross section of the east London digital cluster, with 41% citing app development as their main business activity, 21% social networking, 17% retailing/ecommerce, 12% publishing, 12% IT consulting and services, 8% data processing/management and 7% gaming.
Thirty per cent had an annual turnover of below 200k, 34% 200,000-999,000, 17% 1-5m, 7% 5-10m and 12% over 10m.
Commenting on the survey response, Ryan Garner, research director for GfK, said: “This survey is a good representation of the businesses that work in Tech City. Respondents include hard tech, app developers, digital agencies, retailers, media companies and consultancies. Its 14% response rate from senior-level executives is extremely high.”
According to the survey, the top five skills most in demand are: coders & developers, specialist marketing & PR, business development, web design and user experience specialists.
The skills shortage means startups are turning to temps and interns to fill the gap. Almost all (94%) of the business leaders interviewed say they use temporary staff in their business – but only 17% prefer to do so. Staff retention is also a challenge. 42% of Tech City businesses find it somewhat, or very difficult, to retain their best talent.
In our film, Bertie Stephens, the co-founder and CEO of e-commerce 3.0 consumer price-beating startup Flubit, says: “Over the last year we’ve gone from nine to 35 people... if you have a one or two-month delay in finding the right person then it does restrict you...it does hold you back if you can’t find people as quick as you’d like.”
The survey shows that Tech City firms use multiple sources of capital, with angel investors, venture capital and borrowing against personal assets being the most popular. Of 43% of firms that have raised further capital, almost a quarter (23%) had experienced problems, from the length of time it took, to investors or banks unwilling to take a risk, to a straight refusal for funds.
Odera Ume-Ezeoke, the co-founder and CEO of offline analytics startup Viewsy, says in our film: “In London the approach is that investors are looking for proven businesses before they go deep and invest in a model. There’s a much more open-to-risk attitude on the other side of the pond.
“I would say that if we’d raised more we’d have been able to hire more, faster, and in multiples, to be able to give back to the London ecosystem much more. We’re very keen on hiring bright young talent, but you can only take on so many of them with the access to funding situation being what it is.”
Steve Leith, who heads up Grant Thornton’s early-stage technology team in Tech City, said: “Many of the startups around Tech City may be early stage, but they are tackling complex funding requirements to fuel rapid expansion. Whilst there is an increasing flow of angel capital, we see a growing gap for businesses requiring investment of 500,000 to 2 million.
“This is in stark contrast to the development of the funding community in the US where the cycle of tech entrepreneurs reinvesting in startups is fully developed and the VC community has a greater appetite for risk.”
Download the full Tech City Futures report here.