London start-ups are struggling from increasing financial strain because of the wage demands of local software developers.
The problem is particularly bad in the Tech City area, even though this is where a quarter of all London's technology professionals are based, according to job site Adzuna.
Adzuna data, shared exclusively with V3, shows that employers are willing to pay developers and other technical staff in London an average of £48,307 per year, while the average salary nationally for technology professionals is £38,185 and the average salary for non-tech professionals nationally is 15 percent lower than this.
Meanwhile, developers with C++, SQL and Java skills are in highest demand, while those fluent in Perl are the highest paid. However, the industry is suffering from a particular shortage of Ruby and Python developers.
To avoid the high costs of developers, some London start-ups have taken to running their research and development teams elsewhere in Europe.
For example Adzuna, which is itself a London start-up, has 17 staff but chooses to employ its team of five developers out in Greece. The start-up has two co-founders, Andrew Hunter and Doug Monro, so while Monro concentrates his efforts in London, Hunter manages the team in Greece.
"It is difficult to build a team and launch a product without the necessary developer skills. As a consequence of this shortage we're currently experiencing, salaries are getting pushed up and developers become very expensive. Start-ups don't have much money - so can't afford the people they need," said Adzuna marketing executive, Flora Lowther.
"London needs to be seen as more of a centre of excellence for development. Tech City is starting to move us in the right direction, but we're still not attracting enough overseas tech talent to London."
Similarly to Adzuna, crowd-funding start-up Seedrs has one of its co-founders, Jeff Lyn, managing commercial and legal aspects of the business in London while Carlos Silva, Seedrs' other co-founder, is based in Portugal, managing a seven-person team of developers.
Lyn told V3 that this set-up allows Seedrs to save costs to the business but that it only really works if start-ups have more than one founder.
Funding Circle, a three-year-old online marketplace start-up based in Blackfriars, told V3 it had been on a constant hunt to find good developers, and according to the firm's chief technology officer, Andy Mendelsohn, the Tech City initiative is partly the reason for this shortage of skills.
"There are lots of high-tech start-ups all launching in London, jumping onto the Tech City bandwagon, without the same sort of growth in the developer pool," said Mandelsohn.
"Developer salaries are sky-high right now and many good developers are looking at even higher paid contract roles because their skills are in such high demand. This can have a significant impact on the ability of growing companies to hire very best talent."
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