In interviews with young entrepreneurs from the UK’s top startup hot-spots, the Virgin not-for-profit company, set up to promote entrepreneurship, shows how generation Y are exploiting opportunities and overcoming difficult challenges in their home towns to build a whole variety of businesses.
The research coincides with Virgin StartUp’s HotHouse Tour of England, a series of regional workshops for budding entrepreneurs.
Across the country, school-leavers, graduates and those with just a few years of work under their belts are among the growing band of young entrepreneurs, often drawing on support from government-backed initiatives and charities – in the form of expert advice and loans – and small investors.
Figures from the national enterprise campaign StartUp Britain shows 526,446 new businesses were registered in 2013, compared with 484,224 in 2012. The top 7 hot-spots last year were Greater London 136,939 with new companies; Birmingham 16,281; Manchester 11,765; Glasgow 8085; Bristol 7589; Brighton 7499; and Edinburgh 7112.
According to a survey by the Global Entrepreneurship Monitor, 5 per cent of those under the age of 30 were starting business in 2010. The figure had almost doubled by 2012.
Rising youth unemployment, workplace insecurity and disillusionment with dead-end jobs are some of the factors prompting many to strike out on their own, in sectors ranging from traditional trades, design, fashion to technology and digital marketing.
With little experience of business and modest start-up funds, many rely on their wits and learn from mistakes. For most, it’s a steep learning curve, and not everyone survives. According to one estimate, a third don’t make it through their first year of trading. But a willingness to share experiences and knowledge with others through networking groups gives them a fighting chance.
Glasgow-based Craig McAuley, 26, managing director of the Boiler Change Company, a boiler replacement service, says he and other young entrepreneurs in Glasgow have learnt how to use their social media skills and offer good value to steel a march on rivals.
“The biggest challenge is competing against more established businesses, which rely on recommendations, referrals and newspaper advertisements. I and others like me get around this by being more internet savvy. We generate leads from Facebook pages and online review sites, and use tactics like search engine optimisation to get our company websites higher up the Google rankings,” he says.
“Customers are open to using start-ups, especially those run by young people, as we tend to have low overheads and can offer more competitive rates. Reputation is important, especially in my line of work, which has a lot of health and safety issues. But you can build this up as long as you are confident and have self-belief.”
Amy Dolan, 23, founder of Ziggy Sawdust, a furniture redesign business in Edinburgh, says young people in the Scottish capital have established a vibrant hand-craft and creative design sector, encouraged by good local markets, design fairs and independent retailers that allow them to promote their products.
She says few young entrepreneurs are able to set up shop in the city, as office rents are too high. “Many of these new businesses are like me – one-man bands. We all have quite small budgets. I work from home so my costs are minimal. But there are helpful organisations like Entrepreneurial Spark which offer other young people desk space, access to computers, phones and WIFI which also helps to keep down overheads,” she says.
“The high office rents in the city are a problem but also an opportunity. I think this forces you to be more creative and unconventional. You can set up pop-up shops, put up stalls in design fairs. In the future, I think young entrepreneurs would benefit from being able to occupy abandoned retail spaces; landlords supplying short-term leases for pop-ups; and more independent shops offering space to promote our work.”
At the other end of the country, Maria Allen, 24, who runs an online jewellery boutique in Brighton, Maria Allen Boutique, says young entrepreneurs running artisan businesses also benefit from being able to work closely with independent shops in the city.
“There are some fantastic independent boutiques, shops and galleries in Brighton which were some of my first stockists for both my handmade cards and jewellery,” she says. “I started selling my cards when I was 14 and still at school, so I was very inexperienced and just starting to learn about how businesses worked.
“I approached many shop owners with my products in the first few years and generally found them to be very friendly and helpful. They gave me good feedback about my products and helped me learn a lot about various aspects of running a business, from invoicing to time planning for my ranges. I am incredibly grateful to have met so many different people back then and for them to have given me their time, it taught me a lot about people skills too.”
New sources of funding
For Ash Phillips, 24, founder of the Midas Creative Group, a Bristol-based brand consultancy, the huge growth in crowdfunding over the last five years has been a critical development for young entrepreneurs, as it has provided more finance options.
“Starting with Kickstarter, you’ve now got Seedrs, Crowdcube and so many others. They have fostered a generation of younger investors in Bristol, not necessarily with huge amounts of money,“ he says. “An investor used to have to be a millionaire, but now you only need 10 to 20 thousand pounds.
“And rather than putting it into stocks and shares, they’ll invest in a private company because at the moment that looks like a feasible investment. So there are now government-backed, council-backed and privately-backed options available, which makes it easier for people.”
But he points out that budding entrepreneurs need to be made more aware of these funding options. He says there are networking associations – he set one up himself – and funding groups like Web Spark and Set Square which discuss finance opportunities, though people tend to hear about them through word-of-mouth. Coming up with a business idea is one thing, but knowing who to speak to about funds is critical, he believes.
In Manchester, an entrepreneurial environment and inspirational digital businesses have influenced many young people, says Justin Blackhurst, 31, co-founder of Digital Next, an online marketing agency. Launched from his bedroom five years ago, the company is now a multi-million pound operation.
“We’re based at the Sharp Project, home to the north-west of England’s top digital entrepreneurs, so we are surrounded by cutting edge digital creativity. We struggled to find anywhere in the right place at the right price and the Sharp Project is the technological hub of Manchester so we learn new things everyday as we are surrounded by digital,“ he says.
“I think Manchester has developed many excellent digital start-ups over the past decade and many have blossomed into massive companies now. I would say that these business successes have inspired many young entrepreneurs like myself to try and pave a way into the market and make a success of what you plan on doing.”
Exploiting local talent pools
Having a pool of talent on his doorstep was a key consideration for Apprentice runner-up Nick Holzherr, 27, when he set up his Birmingham-based online food app business, Whisk.
“There are lots of universities in a relatively small space and people who are good at software engineering, as well as creative elements – basically all the skills required for a tech start-up. I’d also say that in Birmingham there is a lot less competition for talent, so we’re able to get the best people who are out there,” he says.
“Having the core business in Birmingham as opposed to London means we can attract lots of really great people without having to fight against lots of other companies who are just as cool as you.
“The second reason Birmingham seemed like the right choice is cost. The cost of living in Birmingham is probably half of that in London. Housing costs are a third, eating costs are about half. It means that wages here are lower as well – and as a startup, your burn rate is really important.”
London’s high costs, according to Henry Hales, 25, the owner of Sir Plus, which makes luxury clothing using off cuts and surplus, are the only drawback for young people wanting to set up in fashion.
“It’s the fashion capital of the UK, perhaps even the world. Being based in London helps you access your customers. There are some brilliant markets where you can test your products. I have a stall at Portobello and used to sell at Spitalfields,” he says.
“London in particular has a great network of factories that can make good quality garments in small runs. An efficient supply chain is essential to the growth of a business. When you’ve not got the resources of a buying team, or the volumes to order offshore, being able to get to the factory in 40 minutes and push runs through production in 3 weeks gives you flexibility and a competitive advantage.
“The only downside I can think of (a fairly significant one) is cost. Everything in London is more expensive. A start up is like a student and being a student in London must be tough!”