Rent doesn’t matter to startups

Rent doesn’t seem to matter for startups — for the moment

Following yesterday’s post about the factors behind cities like New York, London and San Francisco becoming startup hubs, a friend asked “let me gues — cheap rents?”

In truth it’s the opposite; none of the cities cited as startup centres are cheap places to live or work and London is usually towards the top of the most expensive places on the planet.

That rents aren’t a huge factor is possibly because the typical tech startup is a lean operation with a small team crammed into a crowded location.

One suspects though there are limits to how much a business conserving its cash will pay — you don’t see many startups based in A-grade locations alongside big law firms and banks — and this may be the weaknesses of these big cities.

Certainly in London’s Silicon Alley the complaint is the days of cheap rent are long gone and newer startups have to base themselves in other locations across the city.

Overall, rents are important but they aren’t the critical factor in developing a tech sector hub. Whether that remains the case depends upon how the industry develops.

Similar posts:

Why have cities like New York, London and San Francisco become tech hubs?

What are the ingredients that have driven today’s tech startup centres to prominence?

One of the recurring topics this site keeps returning to is how cities like San Francisco and London have seen an explosion of tech startups in recent years.

Probably the spectacular of all the cities that have shot to prominence is New York;  a decade ago tech startups in the city were a rare thing, today there are thousands.

Today I had the opportunity to visit AlleyNYC, one of New York’s biggest tech accelerators. It’s impressive how a venture two years old can be so successful.

A question I asked was ‘what has driven the change in New York?’ The consensus was the combination of the Great Depression and the success of high profile companies like Facebook.

The success of high profile startups has validated the business model in the eyes of both investors and founders, people who would have been reluctant to leave their jobs and start a business now see the opportunities while investors can see there are returns to be made.

What’s notable about cities like New York, London and San Francisco is the depth of industry expertise, capital, networks, education institutions and diversity. These are key factors in attracting tech startups.

For other cities aspiring to be ‘the next Silicon Valley’, it would be worthwhile considering where their strengths lie compared to these giants.

It’s not a given that any of today’s global leaders will be the future centres of industry, but other cities and regions will need to have a very strong reason for businesses to choose them over the incumbents.

Similar posts:

Building a billion dollar start up

Zendesk founder Mikkel Svane describes the journey of building a billion dollar startup

Two years ago we interviewed Mikkel Svane the founder of cloud service provider Zendesk about modern customer support.

Since we spoke to him Zendesk have had a successful IPO and is now worth over a billion dollars.

In the latest Decoding the New Economy video interview we catch up with Mikkel and discuss the journey from being a three person startup to a billion dollar listed company.

Similar posts:

  • No Related Posts

Spreading the good news – Canva’s Guy Kawasaki

The tools for building new businesses have never been more accessible says Canva’s Chief Evangelist Guy Kawasaki

“My job is to spread good news,” says Guy Kawasaki of his role as Canva’s Chief Evangelist.

Kawasaki was speaking to Decoding the New Economy about his role in popularising the online design tool which he sees as democratising force in the same way that Apple was to computers and Google to search.

Democratisation is a theme consistently raised by startups and businesses disrupting existing industries and Kawasaki continues this theme.

“The world is becoming a meritocracy; it’s not about your pedigree, it’s about your competence,” states Kawasaki.

Falling barriers to entry

What excites Kawasaki about the present business climate are the falling barriers to starting a venture. “Things are getting cheaper and cheaper, in technology you had to buy a room full of servers, have IT staff in multiple cities. Today you call Amazon or Rackspace and host it in the sky.”

“Before you had to buy advertising for a concert, now if you’re adept at using social media – with Google Plus, Facebook,Twitter, Pinterest and Instagram – you have a marketing platform that fast, ubiquitous and cheap.”

“What excites me is there are going to be more technologies, more products and more services because the barriers are so low.”

Creating a valued and viable product

For those businesses starting into this new environment, Kawasaki believes the most important thing a startup should focus on is getting a prototype to market; “at that point you will know you’re truly onto something.”

“If you build a prototype that works you may never have to write a business plan,” says Kawasaki. “You’d never have to make a Powerpoint, you may never have to raise money as you could probably bootstrap.”

Kawasaki view is the MVP – Minimum Viable Product – model of lean product development should have another two ‘V’s added for ‘Valuable’ and “Validated’.

“You can create a product that’s viable, ie you could make money, but is it valuable in that it changes the world?”

“Is your first product going to validate your vision? If it’s not then why are doing it?”

The story Kawasaki tells is the tools to deliver valued and viable products are more accessible than ever before; that’s good news for entrepreneurs and consumers but bad for stodgy incumbents.

Similar posts:

  • No Related Posts

Privacy and mutual respect

Privacy and mutual respect – the assumption underlying the Respect Network and online trust

Tonight was the Australian launch of the Respect Network in Sydney which followed similar events in London and San Francisco. I’ll be writing more on this over the next few days.

One of the key questions when considering the Respect Network is how much the average internet user values privacy; the business model of the service relies upon people being prepared to pay to preserve their privacy.

Another question is how many lies people will tell to get free or cheap stuff – respect is a two way thing.

Similar posts:

  • No Related Posts

Startups as a dream job

Canva co-founder and CEO Melanie Perkins describes the design service’s journey

“It’s my absolute dream job” says Melanie Perkins of her role as CEO and co-founder of online design app Canva in the latest Decoding the New Economy video.

Since being set up ten months ago, Canva has grown to over a half a million people using the tool to create graphics for applications such as books, marketing banners and website logos.

The idea for Canva came out of the difficulties Melanie found in using design software while lecturing at university and it’s growth has been as a result of the idea catching the imagination of investors like Lars Rasmussen, one of the driving forces behind Google Maps, and Guy Kawasaki, Apple’s original Mac evangelist.

“We’ve got some great things coming in the next few months,” says Perkins. “So stay tuned.

Similar posts:

Jumping the queue

Reservation Hop illustrates all that is wrong with the current startup culture

Reservation Hop is a good example of many of the current breed of parasitic startups that want to create a new class of middleman.

The hospitality industry is tough work and something guaranteed to irritate restauranteurs are reservations that don’t show up.

One startup that seems almost certain to attract the ire of the restaurant industry is Reservation Hop – “We make reservations at the hottest restaurants in advance so you don’t have to.”

Reservation Hop makes table reservations at popular restaurants and then sells them through their website.

We book up restaurant reservations in advance. We only book prime-time restaurant reservations at the hottest local establishments, and we mostly list high-demand restaurants that are booked up on other platforms.

This is probably one of the worst examples of the middleman culture that dominates much of the current startup thinking.

Almost certainly there’s a market need for proxy queue jumpers – although one wonders how profitable it is when the transaction fees are under $10 – but this service will deeply irritate restaurant owners and diners who are crowded out by these ‘parasite’ services.

In many ways, Reservation Hop illustrates the problems with this phase of our current startup mania; the rise opportunistic businesses that are more akin to parasites than services that add value.

The Reservation Hop website assures patrons that there’s a 99% chance their booking will be honored by the restaurant on the night, we can expect establishments to start messing with that statistic as they wise up to the business.

Many in the startup sector speak about how new technology improves the world, services like Reservation hop illustrate that not every idea is a step forward.

Similar posts: