Why Startup Hubs are beneficial to high-growth startups?
5 things to consider when picking a startup hub
“Startup hubs are preventing startups from failing.” Paul Graham
Startup hubs are one of the biggest buzz words of the past years. There’s not a single week without an article that presents a statistic about rising hubs like Amsterdam. My experience of building, accelerating, advising, mentoring and investing startups in hubs of different maturity levels and regions like Austria, San Francisco & the Bay Area, London, and Amsterdam helped me to understand how different ecosystems can benefit a startup at different times in their lives.
A startup hub’s biggest value add is the entrepreneurial mindset that helps founders increase their chances of growing their business successfully. Though the motivations to move vary, all hubs have one aspect in common: Startup hubs are environments where you’ll find like-minded individuals and people you can learn from. These days, theming hubs like FinTech for London & New York, are a common method to draw startups in. There is a huge interest for stakeholders of all kinds like venture capital investors and co-working spaces, private wealthy individuals, event spaces, governments and municipalities to step into the game as the economic upside of having successful technology companies in their region is a big plus for the future welfare of any region.
What startup hub is best for your company? Below are considerations for founders before making the move.
Know your stage It is necessary to understand that going to a startup hub doesn’t make any sense when you are just about to build your business. Everything in the “idea and concept” stage is not worth of moving at all. Don’t get me wrong. Fly to San Francisco, Berlin, Amsterdam or any other place to get in touch with your peers, build relationships and inhale the startup vibe. But without a MVP, moving will only increase your burn rate and you’ll lose time & focus. In fact, hit a MVP with actual users, then fly there to develop it further, grow your user base and network. As soon as you have found a repeatable use case, you are able to go from ‘tested idea to scalable company’, it is time to move.
Set your goals Each startup needs to identify their most critical challenges for the coming 6–12 months to narrow down which startup hub can best save them from failing. For instance, if you have a market place startup and it is key to go international, attract peers and raise funds to grow even faster, an international hub like Amsterdam would be a great choice. Companies like Booking.com, Treatwell and TravelBird, have already made Amsterdam their home-base and you’ll find a wealth of knowledge, experience and a broad international network already in place. As great as startup hubs can help you growing your business successfully, the lifestyle of going to meet ups & events, working from trendy co-working spaces, hanging out at cafes, etc. can be distracting. Staying focused and setting your goals accordingly is crucial. A few broad examples are: - Meet peers of your industry to validate your concept - Get in touch with early adopters to gain traction - Build relationships with relevant angel investors and VCs for funding purposes - Become active in communities to attract future talent
Know your industry & peers Every startup hub has a special set of resources, a certain level of maturity and a specific environment that can prevent startups from failing. At a certain stage, it is necessary to be on-site where the industry peers are and the most activity is in order to be on the fore front of technology, talent and knowledge. According to your goals, startups need to analyze their industry activity in each environment. It is important to have access to mature startups of the industry to benefit from their knowledge and experience, not only through employees acting as advisors, but also through investors in the early and growth stages. Additionally, having competition in your own field sharpens your focus and keeps your team motivated. Staying with the marketplace startup examples of Amsterdam, the afore-mentioned success stories are already putting a lot of support into the city’s fast growing ecosystem and newcomers like Peerby, CrowdyHouse and Fashiolista are a sign that this ecosystem is able to help startups succeed. Additionally, investors are feeling confident due to local successes, and already have the experience and network to push you even further internationally.
Check the ecosystem Along with an active industry, startups need to dive into the existing ecosystem and identify if there are enough relevant organisations to make a healthy startup environment flourish. Every startup hub needs to grow itself and therefore, tries to add value and resources to the ecosystem through various ways. In the Netherlands, startup accelerators like Rockstart, corporate venture activities like the IBM Innovation Space, the entrepreneurship space B.Amsterdam, the University incubator YES!Delft, as well as governmental initiatives like Startup Delta are vital for the long term success of any ecosystem and show another relevant ingredient: the adoption of the entrepreneurial mindset. This is also recognised by leading technology companies like Netflix, Uber, Tesla, Google and Facebook, among others. For a combination of these and other reasons, like the beneficial corporate taxation, they’ve set up their overseas offices in the Netherlands. These companies attract highly-skilled people and big salaries. They are, over time, passing on their knowledge and expertise to the rest of the ecosystem, helping startups become successful by advising, investing or building them.
Define your personal lifestyle Another important factor is to make sure the area you’re moving to suits your current and near future lifestyle. Choosing another country when having a family doesn’t only mean cultural differences in work habits, but also changes in how you will raise your kids, how to plan for your retirement and health care. Cities like New York, London, San Francisco or Seoul might not suit your lifestyle when you are used to a more relaxed environment or don’t want to deal with a long commute. Not to mention, the much higher living expenses in such places. Dealing with an environment that doesn’t suit your lifestyle is a distraction you don’t need when your own time & resource management is so crucial. Additionally, keep in mind your company culture. Different hubs mean you’ll find different types of people to join your team. For instance, in the Netherlands 90% of the population is able to hold a conversation in English and with 180 nationalities it is voted the most international country in the world which stands for a very diverse workforce. Another important consideration is a city’s public transportation and how easy and affordable it is to access other cities.
Moving to the right startup hub is a critical business decision these days as it can put you ahead or behind your competition. This July, Compass published their most recent report of the world’s fastest growing startup hubs showing another metric for the first time: from 2012–2014, the number of startups that either opened second offices or moved their headquarters from to another ecosystem rose 8.4 times. Top tier talent is already moving to these hubs too, as foreign employees working at startups within the top 20 ecosystems represent 29% of those company’s workforces. In addition, CITIE, the initiative for technology, innovation and entrepreneurship, evaluates cities from all around the world by their openness to new ideas & businesses, infrastructure for high-growth businesses, and own innovative activities, where again Amsterdam is highlighted among the top 5.
Summing up, locating your business in an entrepreneurial environment, a startup hub, is beneficial for a variety of reasons — access to experienced mentors, competitors, venture capital and most of all the energy like-minded individuals bring. This entrepreneurial and collaborative mindset, where people are not willing to accept the status quo, and have passion, perseverance, tenacity, ambiguity, and strong visions are the key ingredients to prevent startups from failing.