Ready for international expansion? Don’t make any decisions before reading this. Because when it comes to choosing a location, it pays to look beyond the obvious.
How much does location matter? If you're a producer of a geographically protected product - Champagne or Parmesan cheese - you've pretty much got to be 'in the zone'. But what about the rest of us?
Does moving away from our industry's heartland mean sabotaging our chances of success? Or, now that technology lets us work from almost anywhere, is the location of your business irrelevant?
The rise of the megacity
Despite the recent increase in remote working, our cities are attracting more people and businesses than ever. By 2050, it's estimated that around 70% of the world’s population will live in urban areas*. Global urbanization - the creation of vast, concentrated, populations - will lead to increased demand and spending in transport, construction, utilities and commodities, and technology.
If it no longer matters where we do business, why do we all seem to want to operate from the same few places?
There are now 31 megacities with a population of over 10 million. In 2012, there were only 23. If it no longer matters where we do business, why do we all seem to want to operate from the same few places? And this includes tech companies, the very people we might expect to buck the trend.
Lessons from Silicon Valley
Silicon Valley is heralded as proof that bringing related companies together in one region can be good for business. Competition drives progress. Diversity inspires new ideas. Demand ensures the infrastructure keeps up. But this famous success story also has a less optimistic sub-plot.
The population boom in Silicon Valley has shifted the balance of supply and demand in jobs and housing. The result is a financial bubble in which only the top earners can thrive, and where the costs of entry escalate on an almost logarithmic scale. Start-ups now don't get a look-in, thanks to the six-figure salaries routinely offered by the big players. The market is no longer working the way it should.
Scraping by on six figures
The money on offer is undeniably attractive: average earnings for a software developer are $112,000 (£89,364). But that's only half the story. The average house price in Silicon Valley is over a million dollars. It's these figures that, in 2015, caused Business Insider UK to label the region "unaffordable even for software engineers".
So what happens next? Perhaps incomes and house prices plateau as megacities become the norm, but somehow that seems unlikely, at least in the short term. More likely we'll see them both continue their ascent: cities populated by workers who constantly need to earn more, just to afford to work there.
Beyond the megacity
Megacity inflation can be seen closer to home too. London is now impossibly expensive for many, causing more and more businesses to look for opportunities outside the capital.
The savings on offer are substantial. The cost of living in Manchester or Glasgow is a full 35% lower than that of London. Birmingham, the UK's second-largest city, is lower still.
Investment across the board
That's not to say that these 'standard' cities aren’t keeping up with the world’s megacities. Far from it, in fact. Manchester has just doubled its infrastructure fund, while Glasgow is leading the way in technology-driven growth, thanks to a £24 million investment from the Technology Strategy Board (now Innovate UK). For those looking to find a balance between urban infrastructure and out-of-town convenience, this is it.
And isn't that what life is all about? Finding the optimum balance between the things you must do (work) and the things you want to do (enjoy life).
The last census taken in Britain revealed that those living near the sea are happier than those living inland.
Strange that we would consider proximity to the sea a major bonus when buying a home, but when it comes to locating a place of work, it’s not even on the radar.
MoneyDashboard's success story
Edinburgh's tech start-up scene has shown that you don't need a heaving metropolis to attract investment and build products. MoneyDashboard, a fintech company located in Edinburgh's CodeBase tech incubation centre, has drawn interest from investors from around the world.
"Edinburgh's very much on the map for VCs," says Steve Tigar, the company's CEO.
"We've been successful because of the supportive early stage investment we received here, and we've now raised over £10 million."
We've got people from all over Europe, Asia and America. They're drawn to Edinburgh, and they stay here because they fall in love with it.
Steve Tigar, CEO MoneyDashboard
Despite not being located in a megacity, has Steve found it difficult to get the people he needs?"We've had no problem at all," he says.
"We're very fortunate to have a deep talent pool, and a constant pipeline of people coming through from the universities and places like Code Clan. And our workforce is international: we've got people from all over Europe, Asia and America. They're drawn to Edinburgh, and they stay here because they fall in love with it."
Making the destination decision for yourself
Undoubtedly, megacities are here to stay. But that doesn't necessarily make them the right base for your business. For most businesses, surely the world is our oyster.
When vetting locations for your overseas expansion, it's essential to look beyond a region's biggest city or the location choices of your competitors. Many of the world's smaller cities offer the collaborative culture of Silicon Valley, but with a more affordable price tag. They combine opportunities, infrastructure and work-life balance.
Yet more proof that going against the grain gives you a competitive advantage.
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*State of the World's Cities 2010/2011, UN-HABITAT, Bridging the Urban Divide.