How can regional economies retain their talent? Develop startup ecosystems in their sectors of expertise

#LevellingUp – 90% of UK’s richest tech millionaires are based in London 

People don’t have to go to university to be successful.

People don’t have to live in London to be successful.

However, having crunched the data, new research from Be The Best Communications can reveal that the new generation of Britain’s tech entrepreneurs are overwhelmingly choosing to do both – go to university and base themselves in London and the South East.

90 of Britain’s 100 richest tech entrepreneurs live and work in London and the South East, despite a third choosing to study at universities outside of the capital.

We researched the academic profiles of successful start-up founders in the Telegraph’s Tech Hot 100 list, including the country’s first fintech billionaire.

88 people on the list graduated from university but just one – Liverpool-based Neil Briggs chose to base their company in the North of England.

Our research raises questions about how cities in the UK outside of London can retain their talent, and develop tech-based economies that can rival the capital and attract ambitious start-up founders.

Seven entrepreneurs studied at universities in the North of England. With Neill’s firm Briggs Automotive Company being the sole representative to develop his business in the north – in Speke in Liverpool.

Most Tech Entrepreneurs are Degree Educated

Almost all of the UK’s most successful entrepreneurs on the Tech Hot 100 list went to university. Nine in ten of the entrepreneurs have a degree. Nik Storonsky, who founded Revolut in 2015 tops the Hot 100 list with a personal net worth of £1.06 billion. Storonsky studied in his native Russia before moving to London and eventually becoming the country’s first fintech billionaire.

Interestingly, two of the top five dropped out of their studies. Gymshark’s Ben Francis left a business and management degree at Aston University to focus on developing his company, and TransferWise’s co-founder Taavet Hinrikus dropped out of Tallinn University of Technology to join Skype when it first launched in 2003.

Majority of tech’s richest have postgraduate education

More than half of these entrepreneurs have postgraduate degrees. More than half of entrepreneurs on the Hot 100 (53%) have a Masters Degree or higher, compared to just 4% of those in the Sunday Times Rich List. 

Among those is Rishi Khosla – the fourth-ranked entrepreneur worth £750m. With a BSc in Economics from UCL, Khlosla met his business partner, Joel Perlman while studying a Masters in accountancy and finance at LSE.The two went on to set-up OakNorth Bank in 2013, which recently added former Chancellor Phillip Hammond to the payroll.

As one might expect, business and economics degrees were popular among those in the Hot 100 – with almost a quarter (23 entrepreneurs) studying an economics/finance Masters or an MBA. 

Research from the Forte Foundation estimates that an MBA can increase a candidate’s salary by as much as 65% after five years of graduation which can help entrepreneurs to accumulate enough wealth to start their own business.

Oxbridge or … Manchester?

Just over one in ten (12%) of entrepreneurs on the Hot 100 list with a degree studied at either Oxford or Cambridge universities, compared with almost a quarter of the Sunday Times Rich List. In total 63 different institutions have alumni in the Hot 100, including 24 in the UK.

The University of Manchester was the third most popular choice for tech entrepreneurs after Oxbridge, with four graduates among the tech elite. Welsh pharmatech entrepreneur Andrew Hopkins, who revolutionised the use of AI in drug discovery, studied chemistry in Manchester in the early 1990s. 

Analysis: Want to start a tech unicorn? Move to London

Although we can see more diversity reflected in the academic background of Britain’s tech entrepreneurs, there is one common pattern: 90 entrepreneurs listed in the Hot 100 are based in London or South East England.

Naturally, London’s place as a global financial capital helps nurture fintech growth with the next generation of entrepreneurs. The Global Startup Ecosystem Report by Startup Genome ranked London as the second-best location for new ventures, just behind Silicon Valley and on a par with New York with an estimated value of $92bn.

However, talent isn’t being retained at the highest level, with entrepreneurs drawn towards the many advantages and connections offered by Canary Wharf and the Square Mile.

For many businesses outside of London infrastructure is a barrier. Transport spending in London is two and a half times higher than in the North of England. Ambitious projects like High Speed Two and Northern Powerhouse Rail seek to rectify this, but remain decades away from seeing tangible benefits to the economy.

London naturally benefits from a larger pool of talent with higher salaries. The median yearly pay in London is £41,000 p/a, and this rises to £47,000 p/a for software developers. Here in Manchester, the median salary is around £29,500 p/a, with software developers earning just under £34,000 p/a.

How significant a problem is this, and in keeping with the Government’s levelling up agenda, how can the rest of the UK capitalise on the wave of investment currently sweeping UK tech? 

London start-ups have a big advantage when it comes to incubator and accelerator programmes. 

Companies like Revolut have benefited directly from accelerators like Level 39, which house themselves in the offices of Canary Wharf specifically to nurture and drive venture capital funding to the next high-growth start-up. A government-commissioned report from 2017 found that the capital has more than half (51%) of all start-up accelerators in the UK – with just 6% in the North West.

There is some hope for the regions. The Global Startup Ecosystem report named the Manchester-Liverpool tech cluster among its 100 emerging ecosystems, with a total value of $9.2bn. The list also cited Edinburgh-Glasgow, Birmingham and Durham as emerging ecosystems. 

However, if these economies are to thrive, cities should take advantage of the diversity of industry so that each city can develop startup ecosystems in their sectors of expertise. 

Charlie Hoult, Chair of Dynamo North East and former Conservative candidate for Mayor of North of Tyne said:

“If the government wants levelling up to happen, it needs to champion the diversity of industry in Britain so that each city can develop startup ecosystems in their sectors of expertise. Every city wants to be a tech start-up hub, but enabling cities to fund and build specialist startup ecosystems will increase the quality, quantity and diversity of Britain’s tech expertise and increase the quality and diversity of Britain’s regional economies.

“Cities like Newcastle and Manchester have traditionally found success in attracting students from London and the South East, but retaining talented graduates has often been the issue. If these cities become global hubs for specific areas like payment processing, construction, cloud computing – areas where the North East is particularly strong, they are more likely to attract and retain graduates.

“The Covid-19 pandemic has presented a new opportunity for businesses to decentralise their operations. While London will be hard to beat in terms of market size, start-ups don’t need to necessarily base themselves in the capital to attract the talent as hybrid working becomes more popular”.

Tom Arnold, Research Associate at the Heseltine Institute for Public Policy, Practice and Place at the University of Liverpool, said:

“London’s status as a global megacity will always attract businesses. Nevertheless, there are significant opportunities for England’s medium-sized cities such as Manchester, Leeds and Liverpool to attract startups and SMEs, particularly in sectors such as media, fintech and clean energy where there are existing strengths.

“However, elected metro mayors and combined authorities across England currently have limited powers to attract entrepreneurs and investors. If the government is serious about ‘levelling up’ and reducing regional inequalities, local leaders should be given more power and resources to attract new business and particularly increase capacity to support local firms in accessing innovation funding.

“Moving parts of some government departments out of London is a start but local and regional institutions also need to be empowered to develop ecosystems around the sectors with most potential to grow and provide good jobs over the coming years.”