Best Cities for Startups – London

By Adriaan Brits Wednesday, October 13, 2021

London is tied with New York as the second-best city for startups in the world, according to Startup Genome. It ranks No. 3 in global ecosystem funding, with early-stage funding of $6 billion and an ecosystem value of $92 billion.

London skyline with the Tower Bridge.

Edtech and fintech are especially big in London, with the UK edtech sector expected to reach $4.4 billion annually by the end of this year. UK education exports currently total $22.8 billion annually, and London has more than 500 edtech companies, Startup Genome says. For its part, London fintech companies benefit mightily from their location in the world’s second-largest financial sector, employing more than 1 million people. 

Moreover, the UK encourages startups in various ways. For example, it offers up to £150,000 worth of income tax relief to investors, which includes a large number of venture capital funds, angel investors, banks, crowdfunding platforms, etc. There’s also the UK’s Seed Enterprise Investment Scheme and Enterprise Investment Scheme, which offer tax incentives to people who invest in new companies. According to London & Partners, Europe attracted a record $43.1 billion in tech investment out of $272 billion worldwide last year, with London receiving the most of any European city at $10.5 billion.  

“London has an established position at the cutting edge of tech,” Suranga Chandratillake, a partner at Balderton Capital, told Startup Genome. “Previously in Fintech, but now also AI and Healthtech. It’s critical we leverage this advantage – attract the best talent and build a supportive ecosystem.”

With all of this in mind, there are many other reasons to start a company in London.

London Has a Huge Talent Pipeline

Like Boston, London hosts or sits in close proximity to many world-class learning institutions, including University College of London, the London School of Economics, King’s College London, and Imperial College London. Of course, Oxford and Cambridge are nearby as well. The UK as a whole boasts 15 of the top universities in the world. Together, these institutions produce thousands of smart, capable graduates every year, most of whom are looking for jobs – and would be happy to land one at a promising startup.

Another London advantage when it comes to talent is the UK’s Global Talent Visa. This permits people to work in the country if they’re considered leaders or potential leaders in areas like fintech, gaming, cybersecurity, or artificial intelligence. Visa recipients can stay for up to five years; work as an employee, own a company, or be self-employed; bring a partner and/or children into the country as dependents, if they’re eligible; and travel abroad and return to the UK. The visa can be renewed if eligibility criteria are met, and applicants can apply to settle permanently. The Global Talent Visa makes the UK more attractive to overseas talent than many other countries and can be of great benefit to London startups.

London Is a Centrally Located Melting Pot

Any business can benefit from a variety of perspectives brought by people from different cultures, ethnicities, and walks of life. It’s no wonder that many multinational corporations choose to do business in London, which is one of the most diverse cities in the world. Not only does its diversity make it an interesting place to live, but it’s perfect for testing new products and services with various demographics. Plus, many workers in London are fluent in at least two languages, which makes them particularly valuable for companies with a global reach.

London startups also benefit from the city’s location on Europe’s western edge. This puts it only two to three hours from most major cities on the continent, as well as eight hours from New York (not much farther than San Francisco is from the Big Apple). London is a hub for people entering Europe, and its location makes it relatively easy to market products and services all over the world.

London has a Supportive Startup Community

The city has become known for its supportive, close-knit community of entrepreneurs. Startups are everywhere in London, and together all of these founders bring an atmosphere of innovation that’s hard to find outside of New York or Silicon Valley. There are many opportunities for networking as well, including formal events like organized meetups and workshops, as well as more informal gatherings. There are also plenty of co-working spaces that provide even more opportunities to interact. Finally, London hosts many of the UK’s hundreds of business accelerators and incubators.

The UK Government Is All-In on Startups

More than the governments of many other countries – including arguably the US – the UK government has taken great pains to make the country an attractive place for startups. For example, the incorporation process is easier and cheaper than in many US states. The UK government also provides generous grants to researchers and small businesses in a variety of fields, as well as grants to companies owned by women and people in other demographic groups. Then there are the aforementioned tax benefits for angel investors, along with a government subsidy of up to 30% for research and development costs of successful applicants. 

Various government bodies also support entrepreneurs. These include the Department of International Trade and its Global Entrepreneur Programme, which offers mentoring, assistance with relocation and business plans, networking opportunities, and other support to non-UK-based founders. Moreover, London & Partners works with the city’s mayor to attract investment and support businesses in various ways. Additional government support for startups comes in the form of:

  • Loans: The British Business Bank offers a government-backed startup loans program under which companies can borrow up to £25,000 at a low interest rate with generous repayment terms. The program also offers free courses for new business owners in areas like entrepreneurship, finance, and marketing. 
  • R&D tax credits: Even companies that don’t qualify for direct cash payments for R&D might qualify for a tax credit.
  • Capital allowances: Companies that buy an asset that qualifies for first-year allowances can deduct the full cost from their profits before tax.
  • Subsidized broadband: Vouchers of up to £3,500 are available for qualifying businesses to help cover the cost of installing gigabit broadband to their buildings.
  • Enterprise centers: These offer assistance to access low-cost flexible workspace for new and existing small or medium businesses in certain parts of London.
  • Programs to support growth: For example, Innovate UK EDGE is a government-backed program that provides expert advice for businesses that want to commercialize new ideas and succeed in international markets.

About the Author

Headshot for author Adriaan Brits

As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

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