A skills shortage and a lack of access to capital are the two biggest challenges facing start-ups in Tech City a new survey has found. Rising commercial property rents in Shoreditch are also a factor hindering growth according to industry insiders.
The report, by research firm GfK, found that over 50 per cent of the 141 technology business leaders surveyed listed a lack of web developers and programmers as the greatest problem they are currently facing.
They claim this is because of the difficulties in recruiting talent in the face of competition from established companies which are able to offer greater incentives. In addition, 42 per cent report difficulties in retaining staff.
“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 the people as quick as you’d like,” Bertie Stephens, CEO of consumer service start-up Flubit, explained.
The problems raising capital are blamed on a ‘tech credit crunch.’ With banks still reluctant to lend to businesses, tech start-ups have traditionally relied on private investment. However they are finding that, as opposed to the situation in the US, investors are increasingly risk-averse.
“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,” said Odera Ume-Ezeoke of analytics start-up Viewsy.
The survey also reveals that opinions are divided over the government’s promotion of Tech City. In 2010 the government backed the establishment of the Tech City Investment Organisation (TCIO), a body designed to assist the area in becoming a global industry leader.
This was followed by the announcement of a £50 million investment last December that Prime Minister David Cameron described as ‘creating an aspiration nation.’
While some are positive about the spotlight the initiative has shone on the area, others accuse the government of trying to take the credit for an economic success story that was underway before their intervention.
They also blame the hype it has generated for pushing-up rents, to the extent that some small businesses have had to move out of Tech City altogether. A spokesman for the TCIO accepts that rents are rising, but insists efforts are being made to facilitate planning consents to increase supply.
