Even in the age of the internet, place still matters to digital firms

The Factory, Berlin's startup hub. Image: Getty.

Does place still matter in the age of the internet? Do digital startups care about their physical surroundings?

It is tempting to think that, for digital businesses and online services, the virtual world is all that matters. However, one of the propositions of the European Digital City Index (EDCi) – Nesta’s ranking of EU cities, for startups and scale-ups – is that environmental conditions within cities have a strong impact on business innovation.

 The index, which is funded by the European Commission, was launched in 2015 before being updated this year as part of Global Entrepreneurship Week. The revised index, which expands the number of cities from 35 to 60, reinforces our previous findings. It illustrates striking differences across Europe in the “fertility” or receptiveness of cities towards digital entrepreneurs.

One reason why place still matters, at least for entrepreneurship, is that local cultural attitudes vary a great deal with geography and thus influence the number of people who are willing to take the risk to set up a new business. With echoes of Weber’s Protestant Ethic and the Spirit of Capitalism, there still seems to be a significant North-South divide here. In particular, Northern/Western European respondents state that they are less risk averse and have more trust than their Southern/Eastern counterparts.

Another reason why location can matter for digital startups is skill and talent acquisition. As the House of Lords reported earlier this year, the UK faces a digital skills crisis. In contrast, several eastern European cities such as Bucharest and Zagreb are producing technical talent that is not only well-trained but also affordable.

Some organisations are clearly taking advantage of this cheap, overseas talent through outsourcing, virtual companies or distributed teams. One example is Buffer, a startup which changed base several times before becoming fully distributed internationally. However, if place really were irrelevant, why would all UK firms not be doing the same, instead of worrying about the need for highly-skilled immigration?

The answer, of course, if that for many roles, proximity and collocation are still hugely important. Notwithstanding the increase in remote working over the past two decades, most organisations find that some direct personal connections are still necessary for establishing trust, rapport and common understanding. This is true not only among co-workers, but for other business relationships, such as mentoring.

Similar concerns affect access to capital. This is the life-blood of young and growing businesses and, despite the global nature of capital flows, physical connections between people are significant in forging business relationships. Many business angels and venture capitalists prefer to invest in specific regions, and research shows that reducing the travel time between VC firms and their portfolio companies does indeed lead to more attention and better performance. Access to capital is one of the primary reasons why London tops our 2016 Index, as it did in 2015. 

Place also matters to those digital firms that rely upon local network effects, even if only at the initial stages. For instance, many “sharing economy” businesses and other firms based on peer-to-peer interaction only work if there is a sufficient concentration of local users; this is why Uber aims to grow city-by-city, in geographically-bound markets, rather than going global all at once.

Local markets can also matter where physical installations and pilot projects are required – after all, digital does not necessarily mean software only. Some city authorities have gone out of their way to make their town’s infrastructure available to startups, as with the Smart London Infrastructure Network, Datacity Paris, Barcelona Open Challenge, and Bristol is Open. Each is a different example of a city council working with startups and larger companies to fast-track installation of technologies such as smart sensors, hopefully for the benefit of all concerned.

In addition to the above, the performance of local digital infrastructure is obviously of concern to digital firms, and an area where the UK lags much of Europe, as is the cost of renting or purchasing office space. This is a particularly difficult conundrum for cities like London, Stockholm and those in the Netherlands, where real estate prices have rocketed in recent years.

As the nature of work continues to change, and as communication technology inexorably improves, perhaps fully distributed organisations may become the norm – at which point, it may not even make sense to talk of firms being located in a specific town.

Until that time, however, local predispositions and attitudes towards entrepreneurship, a readily-available pool of skilled talent, region-specific investments, robust digital infrastructure and affordable office space will all still continue to matter deeply to digital companies. Only cities which address these physical factors will find that they also harness the power of the virtual world.

Siddharth Bannerjee is a researcher, and Chris Haley head of start ups, at Nesta, the innovation foundation.

The European Digital City Index is a project managed by Nesta, as part of the European Digital Forum with funding from the European Commission.


To beat rising temperatures, Vienna launches a network of 'Cool Streets'

A Vienna resident cools off at one of the city's new Cool Streets installations. (Courtesy Christian Fürthner/Mobilitätsagentur Wien)

Over the past several months, Austria has recorded its highest unemployment rate since World War II, thanks to the economic aftermath of the Covid-19 pandemic. With no job or a suddenly smaller income – not to mention the continued threat of the virus – many Viennese will opt for a staycation this summer.  

At the same time, last year, Austria’s capital experienced 39 days with temperatures of over 30°C (86°F), one of its hottest summers in history according to the Central Institute for Meteorology and Geodynamics.

Climate experts expect a similarly sizzling 2020 season, and city officials are now doubling down on efforts to combat the heat by launching a “Cool Streets” initiative as well as a new, state-of-the-art cooling park.

“As the city councilwoman in charge of climate, it is my job to ensure local cooling,” Vienna’s deputy mayor Birgit Hebein proclaimed at the opening of one of 22 new “Cool Streets” on 22 June.

“In Austria, there are already more heat deaths than traffic fatalities,” she added.

Hebein was referring to the 766 people the Austrian Agency for Health and Food Security included in its 2018 heat-associated mortality statistics. The number was up by 31% compared to 2017, and in contrast to the 409 people who died in traffic collisions the same year.

The project includes 18 temporary Cool Streets located across the city, plus four roads that will be redesigned permanently and designated as “Cool Streets Plus”.

“The Plus version includes the planting of trees. Brighter surfaces, which reflect less heat, replace asphalt in addition to the installation of shadow or water elements,” said Kathrin Ivancsits, spokeswoman for the city-owned bureau Mobilitätsagentur, which is coordinating the project.

Vienna's seasonal Cool Streets provide shady places to rest and are closed to cars. (Petra Loho for CityMetric)

In addition to mobile shade dispensers and seating possibilities amid more greenery provided by potted plants, each street features a steel column offering drinking water and spray cooling. The temporary Cool Streets will also remain car-free until 20 September.

A sensor in the granite base releases drinking water and pushes it through 34 nozzles whenever the outside temperature reaches 25°C (77°F) . As soon as the ambient temperature drops to 23°C (73°F), the sensor, which operates from 10 a.m. to 8 p.m., turns off the water supply.

The sensors were included in part to allay concerns about legionella, a pathogenic bacteria that can reproduce in water.  

“When the spray stops, the system drains, and therefore no microbial contamination can develop,” said Dr. Hans-Peter Hutter, deputy head of the Department of Environmental Health at the Center for Public Health at Medical University Vienna, in a televised interview.

Hutter also assured the public that there is no increased risk of a Covid-19 infection from the spray as long as people adhere to the one-meter social distance requirement.

But Samer Bagaeen of the University of Kent's School of Architecture and Planning notes that air cooling systems, like the ones used in Germany at abattoirs, have been found recently to be a risk factor for Covid-19 outbreaks.

“The same could be said for spay devices,” he warned.

Vienna’s district councils selected the 22 Cool Street locations with the help of the city’s Urban Heat Vulnerability Index. The map shows where most people suffer from heat by evaluating temperature data, green and water-related infrastructure, and demographic data.

“Urban heat islands can occur when cities replace the natural land cover with dense concentrations of pavement, buildings, and other surfaces that absorb and retain heat,” as the US Environmental Protection Agency states.

A rendering of Vienna's planned park featuring a Coolspot, which is scheduled to open in August. Click to expand.
(Courtesy Carla Lo Landscape Architecture)

Vienna’s sixth district, Mariahilf, is such an area. The construction of the capital’s first “Cooling Park”, a €1 million project covering the 10,600 square-metre Esterházypark, is designed to provide relief. 

Green4Cities, a centre of excellence for green infrastructure in urban areas, designed the park’s main attraction, the “Coolspot”. The nearly 3.40-metre high steel trellis holds three rings equipped with spray nozzles. Textile shading slats, tensioned with steel cables, cover them.

The effects of evaporation and evapotranspiration create a cooler microclimate around the 30 square-metre seating area, alongside other spray spots selectively scattered across the park.

The high-pressure spray also deposits tiny droplets on plant and tree leaves, which stimulates them to sweat even more. All together, these collective measures help to cool their surroundings by up to six degrees.

The landscape architect Carla Lo and her team planned what she calls the “low-tech” park components. “Plants are an essential design element of the Cooling Park,” Lo says. “By unsealing the [soil], we can add new grass, herbaceous beds, and more climate-resistant trees to the existing cultivation”.

Light-coloured, natural stone punctuated by grass seams replaces the old concrete surfaces, and wooden benches meander throughout the park.

Living near the park and yearning for an urban escape close by, Lo says she’s motivated to ensure the park is completed by mid-August.

“If we don't do anything, Vienna will be another eight degrees Celsius hotter in 2050 than it already is,” Hebein said.

Vienna recently came in first in the World's 10 Greenest Cities Index by the consulting agency Resonance.

“There is no one size fits all on how cities respond to urban heat,” says the University of Kent’s Bagaeen, who points out that Vienna was one of the first European cities to set up an Urban Heat Islands Strategic Plan in 2015.

In the short term, prognoses on the city’s future development may be more difficult: Vienna votes this autumn.

Petra Loho is a journalist and photographer based in Austria.