Will the pandemic see traditional global tech hubs being abandoned by tech’s most ambitious start-ups?
Whilst the coronavirus pandemic has become a catalyst for many tech businesses to ditch the office altogether in favour of an entirely remote working environment (think Buffer & Basecamp) and increasing numbers are implementing permanent work from anywhere policies (think Slack, Twitter and Google) many more are saying ‘hang on a minute, not so fast.’
An even greater number – especially start-ups and those looking to scale – are seeing the shift in working practices as an opportunity to challenge the dominance of Europe’s and Silicon Valley’s tech centres in favour of moving their operations to one or more of the many new hubs that are emerging – Austin, Boston and Toronto in North America, along with the likes of Leeds, Marseille and the Baltic States in Europe to name but a few.
Despite the media headlines, it is unlikely we’ll see the major tech hubs of Europe (London, Paris, Berlin, Barcelona, Stockholm etc.) witnessing a sudden exodus of talent anytime soon. However, what is likely will be a rise in the number of new so-called ‘sub-hubs’ emerging. This opens up a much wider range of location opportunities for tech firms – especially those still in start-up mode who might not be able to compete on salary with those firms based in the likes of London or Munich, for example.
But the ability to access much wider talent pools is perhaps the greatest positive to take away from the last 12 months. Where one is physically located has become less relevant than it might have been pre-pandemic, and this has created a shift in mindset not just among founders and more seasoned tech leaders, but private equity and venture capital firms too.
Indeed, while being ‘in the Valley’ or based in London, for example, were historically perceived as critical to attracting funding (and talent), the pandemic has opened the eyes of many technology and software businesses. They’re fast beginning to see that any move away from these traditional hubs won’t negatively impact them. In fact, it will likely improve their margins and bottom line if located in areas where the supply of talent is both readily available and more affordable, too.
Of course, the decision as to where to base a business is not limited to the availability of talent – it’s also about access to customers and a broader partner eco-system. Take Facebook as an example. The social media behemoth has been expanding its footprint in Israel as part of its drive to bring free internet access to a region that has long been under-connected with an unconnected population. This represents a major opportunity for Facebook to reach tens of millions of potential new customers and users, using Israel as a springboard to that success.
While the likes of London, Paris, Amsterdam or Silicon Valley have built world-class ecosystems that have seduced thousands of tech companies to set up shop there, the cost of living, and the cost of hiring, in these areas have rocketed. With a decade of hypergrowth, the tech landscape is now beginning to shift.
The pandemic has prompted people to rethink what is really important to them and the allure of working in larger city locations is no longer what it once was. Workers are seeking a better quality of life and that is most likely to be found in the newly emerging hubs where daily commutes are often shorter, housing is more affordable, and the overall quality of life is… well, better. This in turn is where we will start to see venture capital interest being focused too.
As is the nature of the tech industry, understanding how tomorrow’s workforce will want to work today gives savvy tech leaders that all-important strategic advantage over their competitors. Now all they need to do is decide what location will be the right one for them.