Tech City, entrepreneurial density, and startup ecosystem health

People often ask me about the importance of Tech City to London’s startup ecosystem. I think it has made a big difference and I usually reply saying something like “It’s great, now that a critical mass of people are in the same place we bump into each other in the streets and it’s much easier for people to come to networking events. Moreover the perceived success of Tech City is good for confidence, which is the underlying driver of so much in the startup world.” If I’m feeling flippant then I might add “And we moved here”.

Now the Kauffman foundation has just published a report which lists indicators of startup ecosystem health (summary here), and it turns out that “density” is top of the list:

Density: density of new and young firms, defined as the number of new and young companies per 1,000 people in a geographic area; share of employment in new and young firms; and high tech (or the region’s preferred sector) density.

The other three indicators are Fluidity, Connectivity, and Diversity.

The report goes on to suggest measures for all the indicators. It would be great to see someone research this properly and publish an index, mostly because it would tell us what we need to work on. The research will need to be thorough though, for example distinguishing between small companies and young companies that can scale.