The Difference Engine aims to bring the YCombinator or TechStars mentality to European startups

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The Difference Engine is shaping up to be the kind of raw, Web 2.0 incubator the UK has lacked for some time. Whereas Seedcamp tends to take more fully formed early stage startups on, The Difference Engine is closer to having a hacker mentality. When you want to just go and build a product, this might be the kind of programme that appeals. Word on the street is that the programme is sidlign up to the TechStars programme in the US, but nothing is confirmed as yet.

Based in the north-east of the UK, TDE has £200,000 of public funds to put into 10 start ups from anywhere in Europe. Closer to Y Combinator (Silicon Valley) and TechStars (Boulder, Colorado), this is a full time programme to accelerate early stage digital start-ups from an idea to version one of a product/service during a 16 week programme. The equity funding comes down to £20k for up to 10% of the business, but comes with mentoring, coaching and training. The new start-ups are typically 2 to 3 members of which at least 2 are developers.

Afterwards the the businesses are expected to be investor ready. There will be a demo day of the startups it’s incubating next month in London.

I’ve visited The Difference Engine guys who are based out of Middlesbrough in a funky building built by the local authority to attract new digital businesses. I have to say I was impressed, not just by building and the teams, but by this very simple idea: it’s outside London.

Frankly I think that’s more important that it sounds. When all you need to be doing is coding, eating and sleeping, London’s bright lights can be a distraction. It’s not for nothing that some of Europe’s best startups come out of places where, especially in Winter, things can be pretty low key. Dopplr? Helsinki. Spotify? Stockholm. Sure, these are actually great cities, but they are not big and crucially, the temptation to just stay indoors and get on with the job is strong.

Middlesbrough? Believe me, there is not a hell of a lot to entertain you in Middlesbrough. Which makes it perfect for iterating-up a startup. The second phase will start in July and be based in nearby Sunderland.

Here’s a deeper insight into the programme, courtesy of three videos the teams have made.

Update: BTW, I’m not saying being in Middlesbrough is perfect. The best conditions are still in London. However, for getting that crucial *focus* it’s hard to beat.

The Difference Engine Episode 1 from The Difference Engine on Vimeo.

The Difference Engine Episode 3 from The Difference Engine on Vimeo.

  • bcurdy

    Sure people in Middlesbrough are going to love this article :) Now if you look at the Silicon Valley, Palo Alto and Mountain View are not exactly the most exciting places on earth… Quite the contrary. So I think the argument of looking for a quite place to build a company makes sense.

  • Stefan Glaenzer

    Mike, have you ever been in Stockholm? I mean “nothing else to do” is quite a bold statement, and so untrue. But other than that – great to see this happening in the UK

  • valto

    Just on the weekend I wrote about this topic – building the local startup ecosystems

    I think this kind of model is one of the must have components to have in any region that is serious of building a working ecosystem. Great to see more and more of these popping up.

  • Bastian Lehmann

    We’re now 10 weeks in the program and it has been our most productive time ever. Initially, we needed to get used to the idea to come up to the North East. Today, i’m certain that we would be nowhere near were we are today, if we would have stayed in London. We’re simply able to get more things done faster here!

    I still have my flat in London, but i’m spending more and more time up North. While the travel time is not quite comparable to a short Caltrain ride through the Valley (it takes about 3 hours from London to Middlesbrough), the environment we’re working in reminds me a lot of the places i know in the Valley. What i always liked about them and what i like about our place here, is that everything is designed to help you concentrate and get your stuff done. Many people might not have a problem with that, but for me being in a place where i don’t have to worry about too many other things, helps me a lot and let’s me ultimately achieve more. I like the idea of just getting on with work, having little distractions throughout the day, and being able to follow that rhythm for more than just a few days. Continuity is king when it comes to a good workflow.

    London is still up there, when it comes to the overall quality of startups, the connected tech scene and the variety of events but if you’re an early stage startup, the benefits you can get out of programs like the Difference Engine are huge.

  • Kirk Wylie

    This is, to me, an example of exactly how economically distorting regional development funds can really be. Would anyone in their right minds argue that this type of thing should be done outside an existing tech cluster like London? No. But the presence of tax dollars attempting to prop up undesirable councils in politically important regions has led to spending money on region-based politics at the expense of solidifying London’s place at the centre of the European startup culture.

    For those of you thinking of the “I get more done because I’m not in London” part, you’re going to need more discipline if you want to be long-term successful. Plus, you could do that ANYWHERE that isn’t your home; what’s so special about the North East except that it’s a cultural and economic dead zone? I wonder if Sunderland and Middlesbrough realize that this is getting sold to people as “Yes, our areas are complete crap; but the fact that there’s absolutely nothing to do here will allow you to completely ignore the fact you’re in North-East England and work on your startup to the expense of everything else.” Doesn’t sound so great when you see it like that really.

    For those of you thinking about the Free Money you get, do you really think it’s a surprise the local councils have to bribe people to spend time in Middlesbrough and Sunderland?

    Ultimately, here are two questions:
    – From the point of view of the UK Taxpayer (ultimately paying for this), does it really deliver value to do this program in Middlesbrough rather than London?
    – For the point of view of founders, isn’t this just gambling on the livelihood of founders needing an initial bit of help for the sake of inter-regional, intra-UK economic politics?

    I don’t agree this is a great program, and I think that if the people organizing The Difference Engine really cared about the founders involved, they’d immediately shut the program down and move it to London.

    That’s is why I blogged about this earlier today.

    • Bastian Lehmann

      You seem to know an awful lot about the London tech scene. It’s a shame we’ve never met, anywhere.

      • Kirk Wylie

        Bastian, indeed it is a shame that we’ve not met. I’m not nearly as bad a guy as you’ve probably assumed I am. :-)

    • fmu

      This is a rather insightful observation.

      Another issue: Will these companies, in case they hit on a market and need to grow, be able to attract talent in such an unfavorable location?

      It is one thing for a founder to spend some time in a place where there is nothing else to do. For an employee with limited upside this makes no sense.

      • Kirk Wylie

        I think you’ve hit the nail on the head for me, which is that the long-term best interests of any European startup lie in where the best ecosystem (for talent, publicity, funding, exits, advice, …) is. That’s not in Middlesbrough, and it won’t be. Could you get some of that in Middlesbrough? Certainly, given enough time and RDA money. Is it in the best interests of the UK as a whole or the European tech community? Doubtful. To get to the big ecosystem you’ve got to get to London basically, and anything that stalls that happening is probably of dubious benefit long term.

    • andy munarriz


      I would expect that nurturing talent is the most important point of this program. If only one of the founders decides to develop their company further in the region then its a double bonus and success for the region.

      Social responsibility is as important as anything we do in technology.

      Andy Munarriz

  • Scott Jones

    Several things wrong with this..£200K of our money to invest? If you cannot raise £20K from a “normal” source then your idea is rubbish and/or you have zero business sense. Secondly, Borough?? Has anyone ever been to borough? It’s a complete and utter dive. Nothing will come of this and you won’t hear of it in 6 months time..i’ve offered a bet to Mike B of the same. No doubt a load of spunked cash into rubbish business ideas who have no cash making plans apart from praying google buys them once again.


    • Bastian Lehmann

      Hey Scott, i’m more than happy to discuss our and the other” rubbish” business ideas with you any time. Come up to see us in Middlesbrough or give me a call: 07590 193926

    • Kirk Wylie

      Pretty harsh there. No doubt there are good business plans and founders in the inaugural batch, and rubbish ones, just as you’d find in any YC batch of founding teams.

      I think it’s probably more constructive to focus on the program itself rather than criticizing the founders. Personally, I have nothing but the best wishes for the founders, which is why I fervently believe that they should be in London.

  • plc

    Will these public funds still be about under conservative government? I read they were closing RDAs down?

  • Reshma

    Actually, just to clarify… we do invest in a lot of raw, not so formed startups from all over Europe :-). Just ask the Seedcamp winners. Startups in Europe are definitely getting more and more early support compared to when we kicked off 3 years ago. Great to see the ecosystem working together.

    • jon bradford

      Hear, hear.

      Seedcamp have constantly supported early stage businesses across Europe and without their efforts and leadership there are a significant number of businesses which would not exist today.

      Its all about working together and improving the ecosystem for early stage businesses.

  • Scott Allison

    Education in the UK is focused on improving people’s weaknesses, rather than focusing and encouraging their strengths. That’s the wrong way round. Similarly I believe economic development should focus on a region’s strengths and not weaknesses. I am assuming, without actually knowing, that Middlesbrough has a strength in something. That being the case let’s make Middlesbrough the best place in the UK for that something, meanwhile let’s keep developing London for the things it’s good at.

    I say this as someone who has recently located to London from Scotland. But that’s because it’s much easier for me to relocate here than go where I really want to, which is the San Francisco bay area. Over there everyone is living and breathing tech start-ups every day of the week and the encouragement and inspiration this provides the aspiring entrepreneur is simply fantastic. It’s priceless. You’re never going to get that in Middlesbrough.

    In Scotland there is not a bad cluster of start-ups and tech companies, and Informatics Ventures do a great job supporting the scene, but there’s still more events and resources in London in a month than in Scotland in an entire year.

    What has London got:

    – the UK’s most populous city
    – the UK’s commercial centre
    – the greatest concentration of tech businesses
    – the greatest concentration of VC

    Of course it’s not perfect, but let’s make it even stronger rather than trying to kid ourselves somewhere else can even come close.

    The reason Europe doesn’t have an eco system like silicon valley is that the tech scene here is too disparate with each country trying to build their own cluster (or multiple clusters). That’s never going to create the size and scale which can rival the west coast of the USA.

    While I think the intentions behind The Difference Engine are admirable, we need less, not more fragmentation in Europe’s tech scene.

    • fmu

      The reason Europe does not have an ecosystem like Silicon Valley may have something to do with geography or other barriers but the true cause, in my opinion, is that entrepreneurs here simply lack in ambition, greed, and chutzpah.

      I am currently based in Cambridge, UK, which is nominally a perfect location for startups. World-class university, great quality of life with few unwelcome distractions, 40 minutes until London KGX, reasonable cost of living and salaries (as an expense), a number of people who have had big exits. And still it comes nowhere close to the hustle and bustle of Silicon Valley.

      Maybe if more Europeans read Atlas Shrugged things would be different — and i’m only half-kidding here.

      • Kirk Wylie

        I’d partially agree with you there. Hiring for a startup here in London is somewhat challenging, in that you see a lot of people who don’t want to take the risk/reward tradeoff that a startup entails. Part of that probably goes back to old, bad cultural aversion to failure (see the old laws regarding bankrupt company directors), and part of that probably goes back to the old, bad cultural wars (read: class system and mobility).

        Silicon Valley wasn’t built in a generation, and neither will an SV-level of startup culture. But having every single micro-region of Europe attempting to build a startup culture will block the ultimate density and repeated success that you need to change the culture and build a proper cluster.

  • Tristan Watson

    I would recommend that anyone planning on founding a web startup comes and does it in the North East. Between Newcastle, Sunderland and Middlesbrough you’ll find some of the most forward thinking tech businesses, accessible mentors, business support and advice, actual funding, incredible monthly events like Supermondays and annual ones like DiBi and Thinking Digital. You can afford to pay your rent and even buy a drink or two whilst you’re starting up, as well as base yourself in affordable incubator space like Boho One or i6. If you do need to meet an investor or client in London – no problem – jump on the train and work away the 3 hours using the onboard wifi (as I am now). Any potential investors will be far more impressed that you are spending their money on creating value rather than using it to buy aero chairs for your office on Old St.
    I think the misconception here is that the money which is being invested into the North East is to create a tech cluster – it isn’t – it is to support and develop the already existing scene. The talent, the ideas, the infrastructure and now the money are all here. The proof will be in the quality of the businesses that appear over the next few years, and with arguably the most exciting UK startup – – choosing to base themselves in Middlesbrough I think the indicators are good.

  • James Burke

    Whilst I am supportive of the programme (see blog post when the initiative launched last year –, there remain many unanswered questions about how the programme has been funded, who holds the equity etc.

    As this is a public funded initiative (and not a private VC fund) requests to clarify these unanswered questions can be obtained under the Freedom of Information Act (FOI) – further background information, including responses received to date, that includes the business case behind this initiative, is available at and a final response should be no later than 26th May 2010.

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