The pandemic has taught technology startups that generating their own revenue is more important than relying on investor cash, as it gives them more security and options in a tumultuous business environment, according to Here East CEO Gavin Poole.
Located in Queen Elizabeth Olympic Park, Here East is an ‘innovation campus’ for technology-driven and creative businesses (with a particular focus on esports, cyber security and mobility tech) that houses both startups and large corporates, as well as academic institutions.
It is partnered with onsite innovation centre and co-working space providers Plexal, which facilitates collaboration between different organisations on the wider campus and runs an ‘innovation consultancy’ to deliver programmes for clients such as Innovate UK and Transport for London.
Speaking to Computer Weekly, Poole said many of the businesses on the campus have enjoyed “incredible growth” during the pandemic, something he primarily attributes to the sectors they operate in.
“All of these businesses are on a high-growth trajectory – we don’t see them being hit very much and they are talking very positively about their future,” he said.
“I think people are being sensible and prudent with cash, they are looking ahead, looking at a potential unknown and what this means for their business. We’ve got businesses here that have not furloughed anybody, and we’ve got businesses here that’ve furloughed a lot, it’s been what works for them – what we’re not seeing is a mass collapse of businesses in Plexal… or a massive downturn of business in Here East.”
He added that companies seeking security from the dual uncertainty of the pandemic and recession should look at generating their own revenue streams outside of external investment first.
“We’ve got a number of companies here that have taken no money, they’ve just grown the revenues themselves. While it might be slower, it does give you control – a lot of control – and it gives you a lot of options later as well,” he said.
“It’s something we spend a lot of time talking about, particularly to students looking at starting businesses from Masters programmes. It’s always exciting to go and get seed funding, a follow-up funding, a Series B funding, but if you’ve got a product and you’re ready to go and you can get revenue, then go for that first because you’re in a much stronger position to negotiate if you are cash flow positive with revenue flowing.”
He added if this was not possible, and the startup needed a big injection of cash for whatever reason, it should “cast its net wide”.
While many startups are worried about being able to secure their own investment or revenue streams, Poole added that it is at least much easier for them to return to normal working patterns than it is for larger corporates.
“Startups are more agile and active, and are coming back to their offices faster than corporates because they’re not tied up in, in a nice way, corporate bureaucracy,” he said. “They can make very rapid decisions and implement quickly to one distinct unit, as opposed to across a wider national or international community.”
Here East gives startups certainty
Here East, which has remained open throughout the pandemic, also offers security to many startups as it provides them with certainty they will have a physical space to operate in.
Poole said this was possible because it has diversified its own business model from being a pure co-working space, which now includes innovation consultancy and the delivery of innovation projects for a range of companies and government agencies.
“It is a significantly different model that we’ve got here compared to just leasing space and then subletting, which is valid in normal times, but you need flexibility and good landlords,” he said.
This proved fatal for co-working space TechHub, which went into administration after massive revenue reductions, due to the fact that most of its income was from member companies renting the physical workspace, something that was no longer viable in the midst of a deadly pandemic.
Poole added that the 1.2 million ft2 campus Here East operates on gives it a strong asset base, which provides the business with decision-making flexibility.
“Is real estate your enemy or your friend? Is having an asset like this going to tie you down, or is it going to see you through gruelling times? We’ve always said that having a large asset base is useful because it allows you to grow people and make decisions on your support of businesses to grow while looking at the overall value proposition,” he said.
On 27 August, Here East released its second annual Impact report, which announced that the organisation had reached its goal of creating a tech corridor in East London as part of a post-2012 Olympic vision.
Tenants include BT Sport, Plexal, Fiit.tv, Sports Interactive, Ford Smart Mobility, Matchesfashion, and The Trampery, which provides 21 studios for local artists, businesses and designers.
On any given day, Poole said 120 businesses were working on the innovation campus, with a total of 4,500 people working and studying onsite.