Vandaele Capital

Cities for Tech Startups.

Regardless of whether Darwin’s theory of evolution has any real baring on the existence of humanity or otherwise, in our capitalist system, the paradigm of ‘survival of the fittest’ applies to the business world. All start-ups, at one point or another, will feel the worrisome cusp of the abyss of failure, lurking beneath their feat. This isn’t to say, every new business is doomed from the beginning. Convexly, it means that if a business’ idea and production process appeals to the public and has sufficient demand to exist, the operators of said businesses would be lacking diligence if they were not to maximize their chance of survival. Therefor more and more the location becomes the lifeblood of any tech start-up. The perfect fusion of investors, fast internet, cheap office space, tax friendly state and the appropriate number of professionals all lead, when amalgamated, to inexorable success. But as the war between the seemingly inordinate tech organizations blossoms into a full world tech war, there are a few hot spots of activity, where tech start-ups thrive in their attic offices and brimming Starbucks; these cities are global leaders and could be the difference between life and death for a start-up business in the tech industry. Below are some of the best cities to maximize a new tech business’ chances of survival.

Austin, TX
It ranks third with respect to high-growth industries and businesses in the computer software and service industry. San Diego and Denver are the only other cities with equally high concentrations of small businesses across a number of high-growth sectors. Austin also ranked in the top ten for the best-reviewed businesses category. Home to SXSW, Austin is a big-little city and an emerging entrepreneurial hub offering a culture built on collaboration. It continues to rank high on best places to live and work. If that doesn’t do it for you, Texas also has awesome BBQ, fantastic live music, tons of community events and plenty of sunshine. And if you were to strike start-up gold and you end up selling your company Texas is one of only seven states that does not tax individual income. The state’s constitution restricts passage of a personal income tax.

Istanbul, Turkey
The city where the West meets the East, is a surprising entry to this list. With a population nearing 15 million and half of that population yet to reach their 30th birthday. Turkey and its largest city, Istanbul, is strategically positioned to take advantage of the technological advancements of the 21st century. In the city, 84% of the inhabitants own a mobile phone and the population’s educational attainment, seems set, to inordinately incline. With over 30% of universities in the country being situated within the city, and the graduate rate amongst the general population more than doubling every 11 years, Istanbul could promptly being transfigured into the landing spot for Western Companies aiming to enter Eastern markets. With over 2,640 developers and less than 500 start-ups, the demands of start-ups are always met. But furthermore, employees are cheap. The monthly minimum wage being the equivalent of $334. Commercial spaces vary in cost. On the European side of the city, prices can reach an average of around $60 per square foot, per year, however, on the Asian side of the city, prices can less than half. Istanbul is the gateway to the East and with cheap property, labor and an abundance of developers, Istanbul is sure to meet the needs of all and is our ‘catch-all’ city.

São Paulo, Brazil
Brazil’s economic future is promising, entrepreneurs are slowly but surly making a difference to their local economy and changing the landscape of this country’s growth. They have fewer mentors and less funding, but with over 90% of the population owning a smartphone they are more likely to try mobile platforms or adopt new technologies. São Paulo would grow even faster by attracting local talent and capital, becoming “a large home-grown market to test ideas before global expansion. As the main financial center of Latin America, it hosts almost all the offices of multinational corporations present in the region. There is also a big opportunity locally in terms of market size, thanks to São Paulo’s population of 11.8m. The city hosts a number of entrepreneurship, technology and business events, and there are a number of well-regarded universities. São Paulo is the fourth city in the world to get a Google Campus, a space designed to nurture start-ups backed by the US-based technology company.

London, UK
The financial capital of the world, has its own booming tech district in the East end, the home of the world’s fastest 4G – 300 Mb/s. The city is home to over 3,000 tech start-ups in the East end alone. Yet, developers are in no short supply, as nearly 11,000 call the British capital home. London is the best educated city in the UK, with over 60% of working-age people holding a degree. However, such expertise comes at a high cost. Although the minimum wage in London is £6.50 an hour, like the rest of the UK. The living wage commands £9.15 per hour, although many graduates will expect a lot more. Alas, London has some of the most expensive commercial property in the world, with offices in the West End expecting an average of $110 per square foot per year. However, thanks to extremely efficient transport links, it is viable to rent cheaper property outside the city. Regardless of commercial rent costs, London is the richest city in the UK, its economy is equivalent in size to the entire economy of Iran or Sweden and therefore, there is a lot of demand which can mediate the fiscal challenges of renting space in London. London is a rich, skilled and mammoth city and is a petri dish for tech start-ups to grow.

Seattle, WA
The home of Starbucks has long been the home of start-ups in range of industries. With just over a thousand start-up companies in the city Seattle is a hotspot for finding funding in the technology industry. But that’s not to say the only advantage of setting up in Seattle is funding, not by a long shot. There are over 17,300 developers in the city. Not only are the developers and investors abundant, but they are more educated, on average that the rest of the US. As over half of the population of Seattle has a BA degree or more, nearly double the national average. However, with a minimum wage of $15 per hour, staff are expensive but this is balanced out by the low cost of real estate. An average A grade property, the best, goes for $31.08 per square foot, per year, but prices can go as a low as $6 per square foot. Seattle’s average internet speed is also well over the national average, at 41.09 Mb/s; fast enough to meet the demands of any tech start-up. With a huge and skilled workforce amalgamated with cheap office space and an abundance of funding, it is clear to see why Seattle is a world-leader in the technology industry. And if your start-up were to make it big, The state of Washington is one of only nine states that does not levy a personal income tax. Neither does the state collect a corporate income tax.

Singapore City, Singapore
Singapore, a wildly rich city-state in Asia, has become notorious for having no minimum wage, yet having a GDP in excess of $55,000 per capita. This means that although there are no legal regulations that require an employer to pay a minimum wage, due to the wealth in the state, salaries are high. As is competition, with 688 start-ups in a nation only triple the size of Washington DC. Although the competition may seem high, there is an extreme concentration of investors in the city-state, over 534 calling the nation home. Singapore has some of the fastest internet speeds in the world. With an average download speed of 61 Mb/s, which is three times faster than the average speed of internet in the USA. This allows business easy communication with the interconnected globe. This will mean that a business needs developers and Singapore has got thousands of them, more specifically 7,381 of them. Although space is limited, commercial property is available at an average cost of $71.16 per square foot per year. But cheaper property can be found if one were to search enough. Singapore is an ex-emerging/emerged market in the global market place and the Asian tiger is now roaring across the technology industry. This city-state, could well be, the new hub of technology in Asia. Singapore is often cited as the leading example of countries that continues to reduce corporate income tax rates and introduce various tax incentives to attract and keep global investments. Singapore has a single-tier territorial based flat-rate corporate income tax system. Effective flat tax rate of 17% is one of the lowest in the world and the general “business friendliness” of Singapore are the two important factors contributing to the economic growth and foreign investment into the city-state.

Hong Kong, SAR China
Another city-state, with a high number of start-ups. The ex-British colony has now transfigured into an independent nation in which over 450 start-ups operate. It is easy to why. Honk Kong has the fastest average internet speed in the world, with an average download speed of 104.1 Mb/s. This is the best internet connection, on average, available in any country. Their internet speeds may have come from the necessities of over 1,500 developers who will work for a minimum wage equivalent to $4.20 an hour. But not only is labor cheap and abundant, but it is of the highest quality, as 21.9% of people in Hong Kong are educated to a university standard. Hong Kong Profits Tax is a tax levied on the net profits on business. Companies and individuals carrying on business in Hong Kong will be chargeable to Profits Tax given that the profits are sourced in Hong Kong the Profits Tax rate is 16.5% for companies and 15% for individual sole proprietors. You may ask, why is this city paradise not number 1 on the list, simply, the cost of commercial property. Hong Kong, by far, is the most expensive place in the world to rent commercial property, with the average price per square foot per year being a staggering $136.97. This may dissuade many, but with the vastness of the HK market, the skills and cost effectiveness of the labor force, Hong Kong’s allure can be hard to resist.

Bangalore, India
This city at the heart of Indian culture and its rapid development is one of the most cost effective locations on our list. A top rated property in the middle of Bangalore goes for a measly $33.48 per square foot per year, on average. But not only is the property cheap, but so are the employees. The minimum wage in Bangalore is $90 a month. $90 to hire developers in a city with 14 universities. However, the true appeal of Bangalore is the sheer number of developers in the city. There are over 95,000 of them. It is safe to believe that this is the largest collection of developers in the world, but there are only 1,045 technology-based start-ups in the country. Which means that these developers are hungry for work and technology start-ups can take advantages of this situation to get the best deal. Bangalore is the most cost efficient city on our list, yet the cities dwellers are well educated and ready to work.

Riga, Latvia
Riga is in the fun period of a start-up scene on the rise. Riga’s companies are starting to grow, build new infrastructure, and define what it means to be a start-up in Riga without much context. That’s not to say there’s been no history of a start-up scene, especially in social networks. If you were to put Riga’s new generation of start-ups into one box, you could say that they’re seeing B2B as a more clear path to revenue, but cast a wide net as opposed to heavy B2B software. Riga is on the way up, while in other regions a wave of start-ups have turned into a sea of heavily funded growth companies, which after a while will see another wave of start-ups. This hard work has also manifested itself in the start-up scene with co-working spaces like Techhub Riga expanding into a larger space, new co-working spaces like The Mill popping up, and with an online platform like Labs of Latvia launching in the coming months. Traditionally Riga is a city with engineering skills – since Soviet times and before.

Nairobi, Kenya
The Kenyan capital is Africa’s equivalent to the Silicon Glen in Scotland, or Roundabout in London or South Beach in Miami. The city plays host to over 140 start-ups. Commercial property is as low cost as could be, with the average square foot going for around $12 per year. The people of the city have a strong and positive work ethic. The average wage in the city is $157 a month, however many will work for much lower. The low cost of this city is where its appeal lies, and where the bottom line is low, profits can be high.

Berlin, Germany
Berlin has worked hard to shake-off the image of the divided city it was in the past. Out of the Cold War has blossomed a city that is the hub of European industry. With over 30% of the German population being educated to at least degree level, super-fast internet that, on average, downloads at 31 Mb/s and some of the cheapest commercial space in the world. Berlin seems like a plausible solution for all the world’s tech start-ups. The city has been nested by over 700 start-ups who are supported by over 2,500 developers – whose minimum wage is $9.30 an hour. The German capital has played host to some marvelous events in the past fifty years and the future is looking bright for Berlin.

Stockholm, Sweden
The Scandinavian Peninsula is often at the forefront of the global technological arms race. With companies like Nokia originating in this part of the world. The Swedish capital has no minimum wage and offers its present 309 start-ups 2,250 developers. With a graduate rate in the general population at 37% – and rising steadily – the Swedish capital will offer any tech start-up the best in the business.

Toronto, Canada
Toronto’s start-ups are similar to those in Silicon Valley in all of the right ways. Both have high levels of ambition, technology adoption, and mentor support. Toronto, however, employs fewer people per stage and outsources almost twice as much of its product development. It’s also seriously lacking in capital, with 71% less than Silicon Valley. Startup Genome recommended that policy makers help close the funding gap by instituting tax breaks, incentives, and other investor-friendly policies.

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