Sign up with your email address to be the first to read new stories, exclusives, VIP offers, blog features & more.

The Fickle Fortunes Of London’s Start-up Accelerator / Incubators Laid Bare As Hackney Council Pushes Business Rates Up by 46%

The story of Second Home

Many amongst London’s start-up eco-system were in celebratory mood last week as Creative accelerator Second Home, led by ex-Special Advisor for tech to David Cameron and columnist Rohan Silva, secured £20m investment from Bebo founder Michael Birch, Facebook investor Yuri Milner and the Sainsbury family, to expand its business model into Lisbon, Portugal, and the US.

Second Home London can be found just off Brick Lane, opposite the bookshop Libreria which it also owns, and represents a perfect example of all that is achingly cool about London’s Tech City project – affordable rents for exciting hipster start-ups in the prop-tech, fash-tech or fin-tech spaces, a new model of working, with break out areas, yoga classes and a café / bar on-site, a never-ending supply of after-hours debates and discussions, wry and penetrative social media commentary across practically any channel or platform you can think of, and a welcoming hand extended to a range of social enterprises.

In fact, the list of angel investors into Second Home’s latest round reads like a who’s who of London’s early stage investment power-brokers; Robin Klein, once of Index Ventures, ITV chairman Sir Peter Bazalgette, Skype founder Nikolas Zennstrom – the “techerati”, as they are often referred to.

Second Home is, however, and through no fault of its own, also illustrative of another trend currently changing the way London’s start-up eco-system operates.

The truth is, start-ups are struggling to survive or thrive without the help of large Corporates. Witness the “Barclays accelerator powered by Techstars”; one of the most renowned start-up accelerators of them all – a byword for all that is lean and agile – needs a corporate sponsor. A bank, to boot.

Second Home, a recent article in the Times revealed, leases its office space to some disruptive start-ups like 3-year-old VR production studio Visualise – it’s also home to the Italian Fashion Label Ermenegildo Zegna, the advertising agency Wieden & Kennedy, and the auditing giant Ernst and Young.

Last time I checked, being disruptive and “making the world a better place” were not top of the latter company’s priority lists. Making a bigger profit is top of their agendas, because that is how capitalist companies function; any economics text-book will tell you that.

To stress, there’s nothing wrong with Corporates (even banks!) and accelerators working side by side. Nothing whatsoever. It’s when that is the only option available to the start-up community, who have nowhere else to turn, that it starts to become an issue, surely?

The story of Launch 22

Over on the other side of East London, a chap called Eddie Holmes runs a charity called Launch 22. Launch 22 is an accelerator / incubator, like Second Home, staffed by volunteers, and mentoring is provided by distinguished professionals who are happy to give their valuable time away for free.

Launch 22 has helped support 464 member entrepreneurs from its very pleasant and serviceable headquarters on Corsham Street, not far from the Silicon Roundabout.  Its members have created 90 jobs, and Launch 22 has hosted more than 327 free, educational business events.

Mentors at Launch 22 have provided more than 2,000 hours of support to start-ups without asking anything in return, and 42 interns have been supported into full-time paid employment or education.

Not a bad track record. The charity’s business model makes sense as well – by charging those members who can afford to pay, Launch 22 reserves 30% of its space to provide free space for those who cannot afford to pay. Many of these are people who desperately need a helping hand. Single “mumpreneurs”, people who suffer from learning difficulties; people fighting back after having suffered debilitating social problems.

But not for much longer, it seems, because Hackney Council, in its infinite wisdom, has decided to put business rates in the area up by 46% – which will put Launch 22’s business model – and it’s cashflow – under severe, unsustainable strain.

In a recent blog-post, Holmes wrote about the devastating effects the increased business rates will have on the local start-up community.

“Not only is such an increase clearly extortionate profiteering but it comes hot on the heels of Hackney’s refusal to grant us discretionary rates relief, which would reduce our rates bill to zero. This is a relief that is available to any charity but whether you qualify comes down to the magnanimity of the Council to grant it (or not, in our case!).”

Holmes points out that in Liverpool, where Launch 22 also run a similar centre, full discretionary relief has been granted by the council.

He concludes: “So, what does it mean for us? Simply put, we may well go out of business. That means the jobs that we create for our own team will be lost and it means one of London’s vital support networks of mentoring and educational events will be disbanded.”

Launch 22 doesn’t have a Corporate backer – its companies have not gone on to raise hundreds of millions of funding, so perhaps it is less interesting in that regard to the “techerati”.

What it does do well is nurture entrepreneurs, young and old, experienced or novice, rich or poor, privileged or underprivileged, giving them a chance to prove themselves.

Wouldn’t it be shame if that last sentence begins “what it did do” in a few months’ time?

Back Launch 22 With a (small) donation – whatever you can afford!

Hopefully that sentence will not have to be re-written because Launch 22 have come up with an innovative solution; they are asking if people can make a small monthly donation, or make a one-off donation, to help them continue to do what they do so well, whilst making sure Hackney Council get their pound of flesh every month. You can do so here. It worked for Wikipedia.

Does London have a start-up scene any more?

There has been much discussion recently about whether the emergence of Uber, Airbnb, the “sharing economy” and “the gig economy” are beginning to erode the democratic model our ancestors fought so hard to leave us as a legacy, as none other than George Osborne argued last night at an event hosted by early stage investors Force Over Mass at Bloomberg in Finsbury Circus.

Maybe, maybe not, but what it hasn’t made a jot of difference to is our tolerance of rampant capitalism – if you’re poor, or not immediately successful, it’s because you aren’t trying hard enough, or you don’t know the right people. So it’s your fault.

Utter nonsense, of course – that doesn’t mean we should carp at the success of the likes of Second Home – which deserves every penny of its investment and will almost certainly go on to spend it in a considered and socially productive manner. It’s great to see a British start-up making a name overseas. Particularly now that we can’t move for WeWorks in London.

But what are Hackney Council playing at? Is it not enough to quietly and effectively do good work in the neighbourhood, or do we now have to trumpet it to all and sundry, prioritising PR over performance, just to stay alive?

What a sad state of affairs that would be. It would be fascinating to hear how the Council are justifying this one. Perhaps some column inches from an independent tech blog will stir them into action and persuade them to enlighten us all.

But until we find ourselves a ball busting corporate sponsor, or a tech billionaire to back us, there’s just as great a chance it won’t.

 

No Comments Yet.

Leave a Reply

%d bloggers like this: