Where are all the UK start-ups?

I find myself thinking of my country and my industry – and what I see confuses and confounds me. This is a tiny little country that remains a world power, one of the few trillion dollar economies in the world. It has 50% take-up of broadband, some huge telecommunications companies and thousands of people working on and around the internet. But still our industry seems dominated by a few moribund and clumsy giants leading a culture that’s inarticulate, unadventurous and profoundly constrained. There’s something very wrong here.

My main question is this: Where are all the bloody start-ups? Where are the small passionate groups of creative technologists (people with clue) getting together to build web applications and public-facing products that push things forward? Where is the Blogger or Flickr or Odeo or Six Apart of the UK? What aspect of this country is it that confounds these aspirations? And I know that Audioscrobbler is wonderful. I really love it. But eventually you have to ask – is that really all we can do?

So is it a lack of money or a poverty of ambition? The UK has some of the world’s best and most creative film directors – but they don’t make films in the UK, they make adverts. Some of the world’s best (and most expensive) advertisements are made in this country, arranged around home-made TV programming that costs a fraction of the price. But when film directors get bored of selling sugar water they move on to make their proper movies. And for the most part, they go to the States.

The same seems true online. The web industry over here is dominated by advertising and marketing because London is dominated by advertising and marketing. People think that the States is the home of this stuff, but it’s not true – American advertising is clumsy and blatant compared to the calculating work done over here. Everything is put to the end of selling something else and I’m routinely surprised by what is for sale. Every event is sponsored by one multi-national or another, from the BAFTAs to the equivalent of the Grammys. On the web, some of the work is absolutely stunning – but it’s all bloody agency stuff – support sites, brochureware, Flash. There’s money all around the place to make things, but still such boring stuff gets made. It’s all just another shiny thing on a conveyer belt already groaning under the weight of shiny things – an environment where the only way to innovate is to get shinier and more illusory, rather than more useful.

All this work is churned out by the ton by great people (and not so great people) hired by marketeers – because apparently there is no one else out there who will harness them to make neat new things that the world could use. The major internet companies have presences in the UK of course, but they’re mostly localisation departments / sales departments / advertising departments. They have technical and creative people working for them, but on the whole they’re not making new products. They’re just selling and supporting the existing ones. The whole bloody place seems to be about selling things made elsewhere, working for the unambitious.

There are exceptions of course – but even then the tiny fragments of things that we do create seem resolutely parochial – little products aimed at exploiting the tiny idiosyncratic spaces in British culture that huge initiatives from the major net powers have missed – albeit momentarily.

So what is it that stops us making great things, starting start-ups and building for money? I contend that in part it’s shame. Certainly the business people of Britain seem to be – at a certain level – highly uncomfortable with the existence of technical people. They’re not a resource to be exploited, or people to collaborate with. The nerdy people who make and create seem to be shuffled to the side, kept in the background, so as not to curdle the canapés at the business meet and greets that are the real motivators of British business. The businessman and the creative technologist seem to be forced into two camps so repulsed by one another (betrayed by that they just circle at a distance, each almost refusing to admit the other exists. So the business people look towards the stable money and wait for the innovations to come in from abroad, or leap clumsily onto bandwagons with the help of the visionless, while the technologists dogmatically avoid anything that looks like it might have been sullied with the hint of a business model.

I look at many of my peers and I’m delighted by the projects that they get involved in – they’ve connected people with politics, connected people with their representatives, found ways for people to work together to make the world better, opened up the writings of incredible diarists, created incredible local information services and worked on open calendaring projects. But would it really be so bad for them to spend some of their time building products that were aimed at changing the world by changing how people do everyday things all over the world, or opened up new spaces for creativity or sharing or self-expression or shopping or whatever? There’s a wonderful creative culture here that cannot commercialise itself. But we all use Flickr and so we can’t have that much trouble with people trying to make a business out of being great, surely? Or is it just when the British do it that we’re all expected to rend and tear?

What is it about this place that there is so little energy in these directions – are we so hamstrung by geography or history or culture that we cannot innovate, build and then commercialise? I look around and I see some of the brightest and best people I know in the world creating world-class ideas that get exploited elsewhere, or are simply thrown away. It’s not right and we should do something about it – I’m just unclear about whether that’s stand up and be counted, or burn it all down and never look back.

103 replies on “Where are all the UK start-ups?”

Here, here. We brits are known as inventors, or have been for a long time, so where are the UK innovators now? Nice post, Tom.

Hi Tom —
I think about this a lot, from the Irish perspective — I’m an Irish hacker, currently living in the US, but planning to return soon.
I think it fundamentally comes down to a failure on the part of the VC community. When I meet Silicon Valley VCs, they generally seem to have a solid technical clue to go with their banking knowledge; they can tell the promising start-ups from the’s, and fund appropriately.
In contrast, Ireland (and, as far as I can see, the UK) has *lots* of promising people with good ideas, *definitely* as many as can be found in the Valley, but no funding. I know of cases where very promising start-ups have had their funding withdrawn early, resulting in the winding-up of the venture; I know of others where the investors have demanded that the company take new directions that turn them into worthless web development shops instead of making something interesting; and I know of plenty more where companies that were obviously making shiny-but-useless things, with a charismatic set of officers, got plenty of moolah to piddle down the drain. (again, see
There’s no shortage of open-source and small-scale free projects in Ireland and the UK. What is in shortage, is this know-how being backed effectively with investment.
Perhaps there’s just *more* investment going around in the Bay Area, alternatively — I don’t know. But savvy investors who can tell a good high-tech product from a shiny-but-useless one definitely appear to be in short supply.
There is also an issue that software innovators often have to move to the Valley to improve their career — but in my opinion, that’s a related issue; solve the money issue, and they can afford to stay without damaging their prospects.

oh, btw, I think conferences like OpenTech look very promising as a way to help. Looking forward to turning up for the next one, once I’m back on that side of the pond 😉

Is it difficult to start a business in the UK? (In comparison to the US, I guess.) I remember a post on Olivier Travers’ site (which I can’t locate right now) about why he decided to move from France and one of the big reasons was his frustration of all of the crap you had to go through to start a business in France. In the US, all you need to do to start a business is pretty much file the right tax form (for a sole proprietorship).

Deloitte did some research on just this recently – why British entrepreneurs set their sights lower than their American counterparts. Helpfully, I can’t find a link to it online but I spoke to the guy who was putting it together a while back and I know it’s been launched.
There’s almost an embarrassment about success in the UK though, combined with a disdain for the people who actually *do stuff*. Maybe this stems from the decline in manufacturing industries in the UK, I don’t really know enough to speculate.
I guess the university science parks – e.g. the St Johns Innovation Centre in Cambridge, or the Sussex Innovation Centre at Sussex are the closest we have to clusters of tech innovation. Actually, looking at the list of companies there, maybe the problem is not the lack of start-ups, but the lack of shouting about start-ups…
But who says you need investment to start a small business anyway?

I’m an American programmer, hope you don’t mind me butting in. I Understand the call for startups, particularly because of the job creation aspect.
However, as you might know, the UK has a great tradition in some advanced programming language research and development, particularly related to the Haskell and ML languages, especially at Glasgow and Cambridge. That’s certainly something to be proud of, I’m a little jeolous for yall in that regard. It may not be the most popular subject area, but it’s certainly is having an influence on the future of programming, e.g. in the newer Java derivites like Scala and Nice which borrow directly from Haskell and ML. Here’s to hoping that these more advanced languages can make their way into the mainstream, and free us programmers from the conundrum that we’re in!

As someone with a failed internet start-up behind her, I can tell you one or two reasons why there are so few around. (Warning: Sorry, this turned into a bit of a rant.)
Firstly, the banks don’t understand technology and they don’t believe that anyone can do anything useful with it anyway. They’ll say things like, and here I am quoting verbatim from my ex-bank manager: “I don’t understand what you are doing, and I don’t see how you could possibly be successful.”
Secondly, novice entrepreneurs (i.e. people who’ve never started a business before) have very little support or training here. If it’s just you, or even you and a mate, and you’ve got hardly any money or experience behind you, you’re fucked. You’re going to spend your life dealing with BusinessLink, who will give you at best mediocre advice, and at worst they will take your good idea and your enthusiasm and they will wring its neck so that you feel like the worthless piece of crap they know you to be.
Whether it’s the banks or BusinessLink, you will spend the majority of your time fucking about writing pointless business plans, profit and loss spreadsheets, balance reports, blah blah blah, when you really should be actually running your business. Or you will spend your time writing applications for grants or loans from funds that turn out only to support one-legged, blind Croatian single mothers under 25 who live on the Isle of Man.
When I bought my first bonsai, I did some research online and found a website. It said this: ‘Congratulations. You’ve bought your first bonsai. It is going to die.’
Of course, it did die. And I bought another.
But having a failed business behind you here is seen as humiliating, as something to be ashamed of. It’s not seen as ‘oh, fucked that one up, ok, now I know better and on to the next thing’. Instead, people say ‘oh, fucked that one up, better not do that again then. Better go get a job.’
We have no money, no support, and no training. We have a risk averse culture permeating the banks, business angels and venture capitalists. We have a lack of expertise in how to tease out the great ideas from our tech community and turn them into something viable, and an equal lack of trust from the geeks in the business community to not fuck it up.
Oh, and we’re crap at marketing. I’ve read that two out of three businesses fail because they were crap at marketing. That’d seem like an easy hole to fill, right? Yet no one does.
We really could be great at tech start-ups. We have some astonishing talent around, people who scare me, they are so intelligent. But until we can find a way to marry the business savvy with the tech savvy and the investment savvy which doesn’t cause any of the parties to explode, we’re going to be stuck with watching our best talent bugger off to San Francisco where all the fun is.

A few thoughts, Tom:

  1. The BBC. Love it or hate it, it’s always been there as a (somewhat) supportive environment for the kind of work that’s often supported by angels and VCs in North America, and then turned into businesses. (Flickr’s an interesting exception, I think: GNE got a grant from the Canadian government.)
  2. Public-mindedness. You’ve mentioned TWfY et al. As a culture, the British are rubbish at taking money for things like that.
  3. (In)tolerance of failure. As Suw said, failed businesses are seen as character-building in the US; in the UK, they’re like leprosy.

But the all-encompassing nature of London — centre for politics, arts, advertising, finance and technology — has a lot to do with it, I think. Didn’t the recent Reith Lectures touch on this, though, especially when James Dyson asked a couple of questions about Britain’s history of innovators who couldn’t capitalise on innovation.

Lots of good points.
I’m in the US for a while (Silicon Valley, actually). Here, I hear “he’s a great engineer”.
In the UK, I’d hear “he’s a great engineer…”. The implicit “but” seconds Suw’s experience: there’s less faith in basing a business on technology, or a fear of it, or something.

Hmmm… Seemingly plentiful technical talent with great creative minds. I know there are U.S. VC firms that will fund in Europe. If bashful around success is an issue, bring in some unbashful American blood looking for scarce talent in the U.S. This sounds on the very top of things to be a decent match on the face of it.
I am now curious why some of the good innovative companies have closed, beyond Suw’s wonderful responses.
It seems some homegrown talent that has gone abroad and been a success comes home, and can draw money to nourish the projects, there could be a boom (or boomlet). There are some brilliant people in the UK I would love to work with and could turn out some killer products.
Britain has many things going for it, one of them is connectivity that is ahead of the paltry offerings in the U.S. The mobile usage is better and more advanced and could get proven in Britain then jump to the States and make a killing, when it catches up. The broadband penetration rates are higher in the UK and could do the same. But, where it really makes sense is in the areas where mobile and broadband converge. American designers (for the large part) only think of designing for the desktop/laptop browser and they will not be relevant in a converged world. Smart solutions will provide access to resources in the best manner dependent on the device. You have the advantage and should take advantage of it (and bring some of us that want to play that game along and get our hands dirty in an advanced environment).

I’ve had basically the same experience as Suw above, except I was working for the exciting startup. Our route was the alternative one, we went for all these “Government Interested In Technology” type grants.
We eventually had to employ one coder (me), one designer and two admin staff to deal with all the crap resulting in attempting to get VCs and Governments on board. You couldn’t get decent money without a working prototype, which recursed.
Did you know there are government grants to employ companies who write goverment grant applications to write your government grant applications? It’s silly.

As an American who’s built a startup in the UK, I’ve had an interesting viewpoint into this issue. We’re about to launch a new web app in September and we’ve had a hell of a time getting support from our bank (or any other bank, for that matter) or from the UK government.

We weren’t trying to get VC or a loan (we worked very hard last year and have used our profits to build this new web app). We were just trying to get an online merchant account. Come on Natwest, this isn’t rocket science. People subscribe to a web app on a monthly basis, and it’s taken from their credit card. There are a ton of businesses like this in the States: WebSideStory, Basecamp, Backpack, and many, many more. Hell, even Microsoft bills this way for its web analytics tool, FastCounter Pro.

You wouldn’t believe the brick walls we ran in to. Our new web app is insanely simple – it solves a very basic problem that we had run in to, and had discovered millions of other people had encountered as well. Take that, and multiply it by thousands (hopefully) of monthly subscribers. What do you get? PROFIT. They wouldn’t give us an online merchant account because taking credit cards online was a “high risk area that they wouldn’t go in to”. What?! We’re not talking about a loan here; we’re talking about an online merchant account. We’re trying to give the bank a 3% cut of our profits. It’s insane.

Anyway, we’ve re-applied to another bank, with a huge stack of business plans, P&L statements, cash flow projects – the lot.

If that’s not a reason why there are so few small business innovators here in the UK, I don’t know what is.

I think Suw sums it all up perfectly. Tom, great article and from somewhere around paragraph 2, I was thinking “risk averse”. In all my dealings with the Brits, that has always been my impression. Risk averse.
To us outsiders, Brits have a stereotypical image of being “stodgy”, “conservative” etc etc. This is most definitely not always the case, but because of the dominance of certain industries such as banking, this image is portrayed.
As an example, I have clients in London who use our software (they are a huge, publicly listed company [not a bank]) and everyone, including the developers wear jacket and tie to work. All 300 of the people who work with me here go to work in shorts, T-shirt and often barefoot. The culture is so different it’s difficult to fit in.
Tom, I believe you live in a risk averse culture.

love the point about the BBC. ha ha. indeed- that is where innovation is happening, in the benign bosom of the semi-public sector.
isnt skype based in soho?
the banks are wank, its true.
blaming VA culture doesn’t really cut it. a lot of the new services have bootstrapped. its a mindset issue, imho.
Tom – any interest in getting a beers and innovation evening together? we could talk about the issue you raise. perhaps it would be a bit first tuesday, but without face to face nothing gets done. there is a wine bar downstairs with a nice sized air-conditioned room, and wi-fi reaches from the office down there.

Having been involved with a few startup ventures in my time (and being in one now) I think people have correctly identified the lack of infrastructure for funding as one big problem.
Also, there is an issue of mindset. Brits tend to be charmingly cerebral. We spend a lot of time analysing and discussing and formulating theories, but stop short of actually writing a line of code or producing your first prototype. I call it death by business plan or specification document malaise. Conversely, I find North Americans to be very much able to “hang stuff out to dry” very quickly. I don’t believe it’s necessarily a symptom of risk averseness, Chris, but I do agree with elements of what you say.
But we do have very nice dinner parties.
Audioscrobbler is a good innovative British startup idea, though I wonder at the possible revenue streams for the service.

I think, from my POV, Britain “feels” risky, it used to be so different, e.g. 2000.
“there is an issue of mindset. Brits tend to be charmingly cerebral. We spend a lot of time analysing and discussing and formulating theories, but stop short of actually writing a line of code or producing your first prototype”
In the main, I think your right, but personally I’m the opposite. I’ve got a dozen proof of concepts, working un-polished sites and ideas, but I’m not, call it, business “startup” savvy.

It’s part of the general malaise of Brit culture generally, and its abject failure to embrace anything new.
Outside of the hotbed of London and things like OpenTech, the reality is that most of us are trying to persuade our bosses that the internet can be a good thing, and not something that’ll rip apart their so-called business model and marriages.
We’ve embraced the notion of online shopping and online form-filling because it mirrors what we do off-line. But there is no mainstream cyberculture here that encourages people to think up new ways of working.
And the attitude of ye fuddy duddy banks and VCs doesn’t help either.

A few points:
I’ve come across plenty of startups in Britain, but you don’t hear much about them: perhaps because nobody wants to report on “hey, look at this great new business” after the dotcom nonsense. Perhaps because few of them are killer businesses, but clever units that need to grow. Also, many startups exist outside the London bubble, in Cambridge, the home counties, the north-east etc. That doesn’t mean they don’t exist at all!
The BBC does have a big, big effect on these issues. That’s not necessarily a bad thing, but it is a Thing.
What there isn’t in the UK is a “startup community”. There’s no communication between lots of these innovators, or across sectors. In turn, this doesn’t breed connections, and it doesn’t breed the hype. Go to St Johns Innovation Centre in Cambridge, for example, and you do feel that incubator atmosphere.
There’s plenty of space for innovation in areas like mobile, web apps, backend development, where the UK is as developed as most of its competitor nations. But for generations we’ve been good at inventing, not necessarily company building. I don’t think this is a new problem.
I’d be very happy to see an innovation network, and put time and energy into it. Should we all put our heads together and try and get something off the ground? After all, these things only happen if someone makes them happen.
And, finally, Tom’s figure on broadband being over 50% is a misunderstanding of the figures: broadband is now more than 50% *of existing connections*… I think it’s somewhere in the 30th percentile overall.

Sorry about the figure – I think I was quoting an article I read in the Guardian or Observer over the last week or so. I can’t remember precisely where I sourced it from. That’s sloppy of me. Sorry.

I have lived in this country all my life, I had to fund my own way through college and got in a pile of debt to get my BSc (which I recieved today!! 2:1, nice). The gist of what I am saying, without going too much into a rant is this: to get anywhere in this country, you have to mess people around, ie, the banks. Unless you have rich parents willing to pay your way. So, becuase I went to college, my credit rating is screwed, I will never get a mortgage, business loan or anything. So why should I utilise my skills in this country? Why should I stay here and pay off my student loan like a twat? It is my heritage to go to college in this country, my parents paid tax all their life for just that reason (just like I am paying national insurance for a pension that wont exist when I am old enough to claim it). I am off, I am NOT staying in this country to be a slave to the system. It seems to me that this country is geared up to support idle lazy un-cultured chavs who claim dole and live in a house paid for ny the state. If you work and have an inch of ambition, you get stompped out like the freak you are!!!! That is why I will never contribute willingly to this country and I know plenty of people in my shoes.
Sorry, turned into a bit of a rant.

I think this is due to differences in mentality between the USA and UK. As has already been pointed out, people in the UK are more risk adverse. But I think more importantly, there isn’t the social pressure to be a success here – where success is defined by how rich you are. Also, Brits tend not to “blow their own trumpet” as much as is usual in the USA — there are some fantastic technology startups from the UK that if they were in the USA would get a lot of coverage in the general press, but in the UK few people have heard of them.

There are incubators springing up all over the place as well as face-to-face networks that support them (and networks that support innovation in general, not just incubators). Perhaps these need to be encouraged more and more to get the word out. If you’re in the Bristol/Bath area I know there are quite a few options around.
As for banks, I did see a presentation recently by a Technology Manager for HSBC – he basically said that banks have no idea about technology and his role is to try and bridge the gulf between tech-entrepreneurs and the old-school banking mentality, which, needless to say, is really really hard. Methinks this is going to be slow slog towards change?

I think you miss the biggest issue, and that’s motivation: I work in my spare time doing fun stuff which is hugely fulfilling over and above any financial reward, several of which you list as examples. (Even UpMyStreet was conceived as an interesting demo. I never believed it could be a significant business. Still don’t.)
For me, the fun bit is the making. The inventing. The creating. The playing.
Doing a start up is none of these things. It’s a bloody tough grind. Running the business comes first, second and third; making interesting stuff comes way down the list.
It’s down to what gets you out of bed in the morning. The prospect of relinquishing a lot of fun for the slim prospect of making millions doesn’t do it enough for me – something which is possibly a sign of the UK’s economic delinquancy. It’s certainly not something to be proud of.
The Economist reader in me wishes I had the fortitude to forgoe all the fun I can have making interesting stuff with zero or minimal investment and knuckle down to the graft of creating monetary value.
But I just don’t want it enough. Or, more hopefully, maybe I’ve just not yet come up with an idea with sufficient commercial potential for me to overcome the downsides.

Wayneo, congratulations on your degree. But don’t despair – you may think you’ll never get a mortgage etc, but that’s not the case. Most of us have had to fund our way through university, and get into huge amounts of debt because of it. But there’s light at the end of the tunnel.
Crucially, funding for college isn’t easier in the US, in fact many argue that it’s worse. Taxes are higher in the UK thanks to a larger welfare state, but I don’t think that’s necessarily got much to do with the success of startups… look at the success of Scandinavian technology firms.
Government red tape (usually same ball park as tax) possibly does play its part, however.

The crap weather and “islander” attitude is obviously the cause.

James Johnson hits the nail on the head as far as I’m concerned, so I won’t turn this comment into “me too”…

All I will say is that my experience of programmers / developers / web experts in the UK is that the visible ones tend to work for small outfits that allow “this, that and the other”. There’s certainly no lack of experience, knowledge or effort.

It all comes down to agility. I work for a stupidly big firm, and you can’t do *anything* without going through loops, unless you know how to play the system. It’s a miserable existence, and something that many guys have us beat on, particularly in the US.

As a case in point, in my firm we have no version control, no defect tracking and no mirrored staging / development / production environments. Without wishing to be offensive, how fucking stupid is that? If the basics aren’t in place, how are we supposed to move beyond fire-fighting and loathsome troubleshooting efforts?

Sorry, rant over :o)

LOL, I’ve visited .com startups all over Europe, and the Brits are not alone.
“The Netherlands is also the fastest growing country for broadband with the UK, France, Denmark, and Finland also growing rapidly. Among the new Member States, Estonia is performing very well.” (See page 5)
(Flounces off)

As someone who has started my own business within the last 30 months (not in IT, but in IP), I can endorse some of the comments above. I’ll particularly pick up a few points others have made (warning – may turn into a rant):

– the banks are not keen to support small start-ups, particularly if they are in more esoteric areas of the business world. My industry is miniscule – there are about 50 people worldwide doing what I do, working in no more than 15 businesses (even those figures might be an over-estimate). Most people, bankers included, do not understand what I do – and they don’t always thoroughly read the business plans you give them in order to try and explain the idea that you have. I was lucky – my bank gave me a current account, largely because I had the support of a client who uses the same bank and has a multi-million turnover. But my bank manager was honest enough to tell me that, without that support (or pressure, depending on your point of view), I would have been laughed out the door.

– the support for small businesses is poor. Business Link is there, but it seems to be geared (like the banks) towards business ideas that involve tangibles. If your business is based on an idea rather than goods with a capital value, then they are far less keen or able to look out for you. Business Link also seems to be a more local scheme than might be desirable, with a fairly narrow world view. I’m told that their mentoring scheme can be useful if you have the right mentor, although I have no experience of this.

– wider public attitude is a problem. If you’re self-employed, many people seem to imagine that you spend most of the day drinking tea and fiddling your tax return. The fact that you might start work as soon as you’re dressed in the morning and finish work when you sign off the last email with your cocoa in hand at bed time doesn’t enter their head. Maybe slacker plumbers and self-employed builders that never turn up have indelibly tarnished the reputation of the self-employed in the UK?

– oh, and did I mention the banks? You try and get a mortgage or a personal loan if you’re self employed. I’m forced to seriously massage my accounts so that I’ll ever have any prospect of getting further funding for my business or for anything like a replacement for my car that is currently held together with sticking plasters.

On the plus side, there is not too much red tape involved in starting a business. Register a few trademarks, set up a limited company, file the correct tax returns – a few hundred quid in fees and accountant charges and you’re home and dry. Of course, after you set up there is an absolute ton of red tape – health and safety nonsense (I’m all for protection, but some of it is complete nannying), customs and excise nonsense (in my world, herb plants are zero-rated for VAT. But, the question is, what exactly is a herb?), obscure legislation nonsense (Community Plant Varieties Office anyone? not to mention Plant Health law) and taxation nonsense (deal with overseas income do you? have you checked your liability for Witholding Tax?).

But, the biggest barrier to small business success in my view is small business people themselves. Too many people that I have met in my careers have got into something because they "thought it would be a good idea" and then charged in with all guns blazing. My advice to anyone considering starting a business would be to write a proper business plan (including doing a proper market survey), a proper marketing plan (marketing is not a dirty word – without it, your business will die a grisly death) and a proper financial forecast for the first five years. Then write a few alternative plans and imagine that some of your assumptions are wrong and that the unexpected might occur (someone else has a similar idea? fire at your premises? terrorist attack in your street? hell, even something simple like you getting knocked off your bike on your way to work and being laid up in hospital for a fortnight!). If you don’t plan properly (and most people don’t) then you can not measure your own success and change your plans to react to changing circumstances. And without a proper plan, you’ll never convince someone to support you. Especially the banks.

Rant over. Thanks for the space to vent my spleen, Tom.

This is a great post.
I think you’re spot on: there are a lot of institutional reasons – human/financial capital is scarce, etc. And cultural ones – geeks vs beancounters is a big deal in London.
I think this is all down to one thing: the innovation community in London has little social capital. We meet rarely, and mostly for no good reason.
I’ve spent time in Silicon Valley and London. Silicon Valley works because it’s a cluster; everyone’s a couple of degrees away from everyone else (at most) – and this happens because everyone’s meeting each other literally *all the time*. The result is the almost exponential growth of human/financial/institutional capital: cool things realize increasing returns.
I find this outcome amazing, because London is the most creative place in the world (really). Hands down, no contest. The Valley doesn’t even have 10% of London’s creative capital.
But to expose this capital, it’s necessary to be able to *find* it. To do that, we need to build a much stronger community – social capital. I think an innovation + pints evening is a great start – I would attend.
I can set one up if you guys are interested in attending – just email me (via bubblegen).

My words-of-wisdom of pure anecdotal personal experience. They are thus: I’ve worked for several years in the USA and currently several years in the UK, both as an immigrant. 1) UK workers work much less than their US counterparts, in terms of raw hours. They earn far MORE per hour than their US counterparts. I moved effortlessly from a 6-figure USD earning to a 6-figure UKP earning (exchange rate 1.7-1.9, on top), and work 30% less hours. I cant stress enough that this is standard earning etc for people with moderate-to-high tech skills and business skills. For 7 hours a day, I earn a handsome income. 2) UK society values high income much less than their US counterpart. You can be a 25k year pleb or a 100k year hotshot and this matters for nowt over a pint. That is generally not the case in the US. Again, maybe just my experience.
In the US I’d have entertained the risk of startup, but here, I’m just sailing along.

Suw, you said it all and then some, BBC chapeau !

you lucky lucky b…….s we lived in a cardboard box in the middle of’t motoway….etc, etc and you are still not happy. Try starting a business in France. France not crappy enough, try Spain where you think limited liability means just that till you are sued by the state for social security payments after your company has gone under and in fact it is illegal for a company to go under till the state has been paid, which means the shareholders get sued by the state………you people don’t know you’re born.
…………rant escape. I live in South of France but have a UK business so everything is relative.

More constructively, it is simply about belief boys, girls and fellow small islanders. The Americans believe and we don’t (loss of Empire etc etc). However when they lose belief the americans can run faster backwards than the French and Italians combined. (I am allowed to say that as I have a half french/german wife who speaks fluent italian).
….even more constructively combine Belgian banking culture with UK business practises and you have something interesting (we did for 10 years). The UK banks are the worst in the World (I think having pitched a six figure turnoever business to ALL the uk banks and been offered a max of 15k in credit really proves this point).
Good luck and God Bless

I’ve got tons of thoughts on this, but ironically enough I am trying to pack to go to a “thing” for graduate entrepreneurs, which I believe is Gordon Browns pet project. I’ll probably write more in a few days on my own blog.
Someone linked to this post and talked about the class system in the UK. I think there’s a lot in that. If you’re working class, there’s a tendency for people to think you’re getting above your station if you want to work for yourself. Especially if you want to do something different like a web business.
Then a lot of more middle-class people look down on business owners as being “in trade, darling”. ie. it’s better to have a professional job like a doctor or lawyer. So as other commenters have said, people from this sort of background creative strengths often end up in academia or at the BBC or whatever.
The whole London-centric thing in this country gets me down too. If I didn’t have parents and in-laws who have businesses, I would seriously have no one to talk to about even the basics of running a business. I certainly don’t have anyone I can pick up the phone to and talk about webby things. I suspect that might be different if I lived in London and not South Wales but I don’t know. Already in this thread people are talking about networking groups, but again, you’re all in London. Anyone in Swansea here?

Just a comment on the different type of businesses that can succeed this (the European) side of the Atlantic.
I think that for Business to Consumer Apps (like the web app mentioned above), funding and conservatism and all the other reasons ring true, since the selling model is simply over the web, with online/phone support, and no need to be close to the customer.
For Business to Business technology companies – of which a large proportion of techy companies are, I think being located on this side of the Atlantic is perceived as a definite negative from all sides – the customer, the VC and the bank. When choosing a technology supplier to run a business on, there’s a lot of comfort in local support and relationships. Sure, you can use sales channels and partners, but it takes time to build the relationships and is logistically challenging. I think this hinders the growth of a lot of technology start ups in Europe – at the end of the day, the majority of the business is still in the USA.

We’re here! RSS Digest has some 5000 backlinks on Google mostly from the blogosphere, and 10,000 users.. and now Feed Digest is about to come out which should shoot us past FeedBurner in the next year. Oh, and get this.. I’m based in Lincolnshire! A lot of people in the UK don’t even know where it is 😉
The UK is a great place to get into business. Taxes aren’t bad, the environment is good, but the ONE thing which isn’t good.. very very low interest in investing. I’ve had a lot of US investment groups in touch with me, but no-one from the UK! The UK’s investors aren’t interested in the net, but given their prudishness, that’s not a surprise.
Still, never mind, I don’t care if some investor wants to give me money or not.. as long as the CUSTOMERS do, that’s all that counts.

You could say the same about Ireland – Ireland has a real strong tech scene – but that is primarily driven by the likes of Microsoft, Intel, Dell, eBay, Google, Yahoo, etc who all have bases in Ireland.
The start-up scene is getting better – but to pose the question in the context “Where is the Blogger or Flickr or Odeo or Six Apart of Ireland?” – all who are web2.0 companies – they are thin on the ground.
Here is an insight into the struggles of doing a “web2.0” in Europe
We (at Nooked) hope to change that !!

there is a lot going on in this area though, both in UK governmental circles and the EU.
UK Gov: Small Business Services, designed to help/mentor/grow SMEs etc etc
DTI: business links, mentioned earlier – yes they are local but on the whole so are SMEs
OGC: hugely interested in ‘plugging in’ to SMEs in govt procurement, both to make real cost savings & to meet central govt targets
RDAs: these are designed to act as integrators and regional authorities, working with & thru the BLs
EU: only a week ago the Commission published the ‘Common Action for Growth and Employment: The Community Lisbon Programme,’ interested people should look at what is called Framework Programme 7 (FP7) which is meant to promote regional R&D clusters. Even more relevant to tech-orientated startups is the Competitiveness & Innovation Framework Programme, geared toward SMEs & entrepreneurs (‘gazelles’)
the EU is rewriting State Aid laws so that startups can be partly funded thru state support and also trying to improve SMEs access to VC funding. people who have problems getting funding thru the banks may like to think about goin to the VCs (they do exist!) and taking a good business plan.
Europe in general is pretty shit at innovation/ SMEs etc, but policy makers want to change that around otherwise their economy is going to stagnate even more than it is already!

Blogger, Flickr, Odeo and Six Apart are definitely good; and certainly in US style. I’m not too keen to see their equivalence in any other territories, I would love to see UK’s own style.

An excellent and very thought provoking post Tom.
I agree totally with what Mary-Ann says. My experience has been that coming from a working-class background certainly did not help during the potential start-up of a business. I definately experienced the “you are getting above your station” comments. It is a real struggle to get family, friends and indeed banks to acknowledge that what you do is “real”.
Even when I inform them that I have spent the last 8 years writing some of best systems in my field you get a “thats nice”. I have ideas and projects I have worked on that I know would work; but getting someone to take a gamble on what they perseve as a working-class person is not easy. The fact that I have been very successful is irrelevant to them.
Also, like Mary-Ann, I do not live or work in London and that certainly does not help. I certainly have nobody at all to talk to about running a business.
Despite all this I have decided to ignore these people. I know I can be a success without them. It may take longer as everything has to be done outside of work but, hey, I’ll get there. It is just about how much you “really” want it I think.

I left a PhD in Artificial Intelligence at Oxford 17 months ago to start the type of RSS-tech company I hope you’re talking about. I have to echo a lot of the sentiments of the people who have alredy posted, esp with regard to banks. There are some other things that I think are also very significant though.
One of the reasons we don’t have such startups is that we don’t have the inspiration for such startups. I imagine that there are more software billionaires in one good restaurant in San Francisco than you see in the whole of the UK rich list. We don’t have a heritage of consumer-software success stories and we don’t imagine we will develop one.
The lack of such heritage also ties in in a far more immediate way though. Most of the SV startups are being done by people trained at MS/Yahoo/Apple/Oracle/HP etc. These people know the industry well, know how to develop and ship software and have excellent managerial training. Their chances of getting something to market are far greater than the average enthusiast. Furthermore, and perhaps even more significantly, there are enough retired VP’s turned VC’s of such companies that the money in Silicon Valley is smart enough to know such ventures are worth funding.
Software development here is not cool either. Developers here do not have obvious top-tier companies to go to. Financially speaking, the best option for a developer by a long way is most often to go to an investment bank. I was talking with Jeremy Zawodny at the weekend and he said a grad joining yahoo would be paid between $50-$100k. The Oxford computer science graduates expected to be paid £22k. If however, they go to a bank they could start on £40k and see that rise strongly.
Small may be the new big in Silicon Valley but small is definitely the current no-hoper in the UK. I have always believed in building a business as organically as possible but that’s hard. I have watched my contemporaries buy cars, buy houses, aquire status and become significant to others all whilst I’m stuck in out dining room writing code alone. There may be everything to play for but doing things efficiently will hit your bank balance, your status and your confidence.
Software development is not cool and doesn’t pay in the UK. Web development is far less cool and pays less still. I think we are stuck in a vicious circle where we don’t have cool companies because cool companies are most often spawned from the bowels of other cool companies and we’ve missed the boat.
I would love the UK to have homegrown firms like Apple/Yahoo/MS/Google but if my product were to kick off big time I have to say that I would seriously think of moving to the States. I know there are going to be better trained people available, smarter funding and perhaps most important of all, a domestic market which is six times the size of the UK’s market.
I would love this country to have more cutting edge consumer software companies but after having gambled my money, my status, my employability and several years of my life, I’m not going to sacrifice my company to a better funded, better trained, better connected company from San Francisco to see that happen.

Well, personally I’m currently working for a start-up company with the potential to turn a major bit of media industry on its head. Whether it will take off, we don’t know yet – but it won’t be for either want of trying, or for lack of a decent product.
I’ve also worked for four other start-ups now, two of which were and Ebookers – of the other two, one went under without trace, and the other survived for two years before being swallowed by crap management.
However, the UK does have an attitude of wanting to snipe at any who stand out from the crowd – I’ve had personal experience of it through being self-employed, and corporate experience through start-ups and so on.
Anyone who wants to do something differently, or in a way that’s “not normal” is immediately a target, and a constant line of “so when are you going to get a proper job” comments.
As other commenters have already written, Banks and financial institutions don’t like small start-ups either – too much risk for the corporate bean-counters. VCs are sometimes the only way to go, and they can be just as bad.

Hi Tom,
Great post.
A couple of things to add, as well as the Ad world in London there is also the legacy of the 8bit micro, which has lead indirectly to the huge games industry in the UK.
Also the BBC does have an impact, even if this is simply from the numbers of people it draws in. It also sets the pov of a lot of people in that it is better to do good than make money. Look at the lack of advertising on UK based weblogs vs US based ones.
There are some places for innovation in London, the ICA tries with the Club events, but they are focused on creative people in arts and fashion and their funders, not building web apps.
Still, 37signals and textdrive show that international collaborations are possible, so one can live here and work with others, doesn’t solve the problem, but widens the possibilities.

There is a lot of sense talked above. Especially about the difference in mentality between the UK and America.
There is just a different attitude to risk and risk-takers in America. If this was America, there’s no way Suw would have to explain how having a company blow up was a good learning experience. They just accept it over there.
It’s partly paranoia for entrepreneurs, and it’s partly true, but people do snigger at you behind your back when a company blows up in Europe. It’s not as bad as it used to be, and the people who really matter don’t do it, but it does happen, and it’s a little hard to take. You have to just ignore it.
But there are a few other things.
America works on networks, just like here in Ireland/UK. The networks are a bit different, but it’s still all about networks. Issues about class are definitely an issue, but you just have to find a network that you can fit into.
Banks don’t fund tech startups, anywhere. It’s just not an economic proposition. (That isn’t to say that banks aren’t too conservative dealing with tech service companies, and others.)
Investing small sums (less than GBP 1m, say) isn’t an economic proposition. A VC just can’t manage a portfolio of investments this small. It doesn’t make sense. The only way to make it really work is through ‘angel’ investment or ‘friends and family’. Angel investment is very poor in Europe. ‘Friends and Family’ …? Well remember that sniggering thing I was talking about …?
Europe is just a series of fairly small markets. It’s a lot harder to get critical mass in the UK (say) than it is in the US, which has 5 times the population. This is a sad fact.
There’s also a question of perception. We are all talking about companies like flickr and technorati like they were wildly successful. They are famous among us funky digerati folk, for sure, but they’re not exactly economic paradises. None of these companies have returned a cent to their investors yet, and there’s still a pretty good chance that they never will. Sorry to be pessimistic, but I’m just making the point that Europe isn’t that far behind in real terms.
But certainly, there is a big problem here. If nothing else, there are no ‘brands’, nascent or otherwise emerging from Europe on the Internet.
Something else. Purchasers in Europe are inherently conservative. Part of this is because state industries are a large part of the economy. The local government outsourced sector alone is worth billions, for instance. It’s hard for start-ups to contribute anything meaningful to this though.

A new startup takes more time than you plan for, uses more cash than you expect and requires at least a ten year experience path before setting out.
Nine out of ten new specialist publications fail within two years in the US. However, happily the tenth one makes a huge dollop of money.
The UK provides incredible opportunities for new success stories. The south east of England is probably one of the best places in Europe to be an entrepreneur. At last count the area ranked in the top 20 highest GNP areas in the world.
Here is a brand new start up……
It offers the very latest independent marketing news to 25,000 readers in the UK. Sections such as Best of the marketing blogs, Movers and groovers, Laughter spot, NPD, CRM and Best marketing blunders ensure depth of readership.
The pilot issue was posted yesterday so it is fresh, very fresh.
Read it today…your time will not be wasted.

I really don’t think it’s anything to do with the London marketing industry:
“The web industry over here is dominated by advertising and marketing because London is dominated by advertising and marketing.”
It’s just as ‘dominated’ over in the US.
I think there are two reasons:
1. We’ve never been as good as the US at being entrepreneurial because we don’t value personal ‘commercial’ success as highly. We just don’t – it’s a cliche but people who are commercially ambitious are seen negatively. Usually because they become arseholes along the way :-O
2. There are not a lot of examples of internet start-ups actually making money and venture capital in the UK is wary of this – they are I believe, more risk averse. The revenue models are, aside from advertising, are in their infancy. And a lot of internet start-ups place a value on their endeavours that is just out of all proportion to their possible revenue / IPO.

The point Mary-Ann makes about having people to talk to (not just about webby things, but business things too) is also really important, and I think easily underestimated.
I was a lone entrepreneur, which meant that for two years I made pretty much every decision to do with my business on my own. After a while, that gets really wearing. You start to crave someone else’s opionion, just for a sanity check. Even small decisions become difficult. Soon, making any sort of decision at all becomes an emotional minefield.
Talking about that sort of business problem was impossible, because people do tend to think that you’re losing the plot/stupid/weak. The thing is, when you have a support network in place – people you can talk to about your business – you don’t notice how much additional emotional support they are giving you (intentionally or not). It’s only when you are working in isolation, probably for 12-16 hours a day, 6 or 7 days a week, that the lack of that support becomes an issue.
I think the biggest lessons I learnt from my dead (or rather, was that next time, I will not start a business unless I have at least two or three other people doing it with me, and I won’t do it if I’m underfunded. The other problems that sank me, such as lack of marketing knowledge, are things I have since learnt a lot about, so I think I would do better in those areas second time round.
The other point is that when my business went under, I felt so amazingly humiliated, it was the worst thing that had ever happened to me. Now I am almost pleased it happened, as I wouldn’t be doing what I’m doing now if it hadn’t, and I love what I do.

Suw, you are totally right about needing a sanity check and needing someone elses opinion. I’ve bored my poor flatmates, friends and family rotten with questions and postulates about what I do.
Tom, this post and the following discussion has been really inspiring. It’s so nice to see that there are so many people in the UK wanting to do this sort of thing and it’s nice to see how many people are actually doing this sort of thing.
Antoin’s right about the dearth of Angel investors here. There are a dearth of them. A big reason that there aren’t many of them is that we don’t have huge companies spinning off incredibly wealthy individuals.
The only real millionaire-forges in the UK are the city institutions and their produce are certainly not tech-smart. Look at the States and last I heard, Microsoft had made well over 1000 millionaires and that was a while back.
Guess we just need to build some 😉

I’ve been working for and/or consulting with various UK startups since 1999, with some exposure to the US side as well.
The startup culture is here in the UK, but people tend to be a little more isolated than in the US, in part because the press here is less clued up to startups, and because startups are less clued up to the press. A lot of UK startups are aiming at niche markets (investment banking is a favourite), so they don’t reach general attention anyway.
I don’t think there’s that much difference between here and the States. Of course the US may have some advantage in terms of entrepeneurial culture and availability funding, but not a really significant one (i.e. less than an order of magnitude, and probably much less).
Admittedly, we haven’t had a flickr here recently, but as soon as one comes along, the score, given the UK’s population relative to the US , will be about even …

I agree with Carson/BD4D’s idea that the class system is partly to blame. Tech has been seen as white coat /lower middle class, something ancillary to be bought in when necessary, rather than a core activity. . . . The London attitude is “Oh, that’s done by our IT man. He’ll be in on Wednesday.” whereas in Tokyo it would be “I’ll ask my colleagues and we’ll get back to you this afternoon”.
However there’s something else. Following on from the industrial revolution and for most of the last century, Britain was still seen as a ‘hardware nation’. Looking back to the 1970s, we can see Britain as ideally placed – because of the universality of the English language, the sophistication of the arts, the huge publishing industry in London etc. – to be a leading ‘software nation’, but it never happened. Instead the country pursued its destiny of hardware production failure.
Perhaps it is too late to reverse this now. The government have told everybody that we have a successful economy and a hard working labour force etc., so few people are motivated to look at alternative styles of economic behaviour (involving higher productivity etc.), based on practices in other countries.
The bottom line is that Britain is conservative.
I’ve written a response, including the comments above, on the Skakagrall at:
(I assume trackbacks are not enabled here.)

hey, a US webhead chiming in. I am in New York, and after the dot com bust i ended up involved in online advertising stuff mostly.
Its funny because i ask myself this same question all the time. Except its “where are all the New York startups.” It really is all about silicon valley, not the US. The NY state of mind is totally different from bay area and its all about marketing and advertising here as well.
that cali tradition goes way back past dot com, past microsoft, to HP. like 40 years of tech riches sloshing around. NYC is all banks and madison ave.
so 1) dont be so hard on yourselves, and 2) give the west coast its respect.
ummm, and unless im mistaken. flickr was started by a bunch of kids from vancouver. thats 1 for the queen at least.

I think there are so few – because it just too bloody hard – I have don’t have an internet start-up but do own a software company which provides title/publishing management software for publishers and is now five years old.
You have little or no help from banks and all the businesslink type stuff take so long and so useless that quite frankly you lose the will to live and if you can just get on with it.
I lived literally hand to mouth for nearly two years – sleeping on the floor of the office after selling my house (sorry to sound a bit Monty Python (I were born in box etc.).
Coupled with the company house regime, accounting requirements etc etc are just so onerous for a small company – in the first year literally didn’t have the fifteen quid to file an annual return – so what do companies house do? oh, fine you £100 and then £500 – cos thats gonna help! Oh and don’t get me started on business rates which were more than the rent on the office. And don’t get me started on banks and worldpay etc.
However, you stick around for a bit and make a bit of money and you can’t keep any of the buggers off your phone offering you money – oh, the irony. Oh, and big high street bank sendng spotty youths round to your office to explain ‘cashflow’ to you because they’ve been ‘on a course’ is just enough to send a hard pressed start-up into the homicidal axe wielding maniac territory.
Oh, and make a bit of money after all that and reward yourself with car/house and people in the street in UK will call you a wanker – therein is the difference between UK and US somewhere. And why we have always done 70% of our turnover on that side of the water.

And what is the approach taken by many of these “success stories” like Blogger, Flickr, Furl, Technorati etc?
1) Build something useful and free but with little hope of any revenue (web users aren’t used to paying for anything)
2) Wait for a Yahoo/Google monolith to buy you as another billboard for their ads
Thats a risky plan.
Its a monstrous game of “chicken” – how much are you prepared to give away for free to attract the punters? The boldest, most generous provider gets the most eyeballs and then becomes the most attractive advertising proposition.

hi Tom. What a beautiful rant. I was saying much the same the other day in an interview. it was about london’s creative community and why it’s such a hotbed of talent. My first question – “Is It?”
THE CREATIVE FUEL OF LONDON IS FRUSTRATION, not support, understanding and encouragement.
The problem as i see it is there is no value placed on and no understanding of creativity. the business community seem blind to the fact that behind most money spinning businesses is an idea and that ideas are spurned from creative thinking not a number crunching machine in accenture’s boiler room
i must admit though, i like the frustration. but there’s a reason why so far i’ve tried to finance my own stuff
nicolas roope – hulger and poke

The US may not be very class conscious in a traditional ëBritishí sense but donít be fooled into thinking that it is classless. The New York Times recently concluded ñ following a searching series of articles ñ that there might now be less social mobility in the US than in Europe. The Economist also had some telling points to make on the subject a week or so ago.
And yet, America continues to produce more internet start-ups and industry success stories than we do. If class is really holding us back, as some of your contributors claim, shouldnít it now be holding them back as well?
The answer, it seems to me, is a disjunction between some individual mindsets and much longer term social trends. In the States for instance you could come from a trailer park in flyover country but you probably wouldnít associate that with your pile of business plan rejection slips. Youíd maybe think thereís something wrong with the business plan. However, your optimism may well be constructed on an idea of America, which is very slowly ceasing to exist. Here in the UK many have the opposite mindset problem; a permanent cynicism founded on an equal and opposite fantasy about Britain as completely snobby and moribund. Again, thatís surely too pessimistic.
Tectonically, it is perhaps the UK thatís now making the interesting shifts ñ Opening up in ways which would have been impossible even fifty years ago. Socially the US may be doing the opposite and becoming more sclerotic. Perhaps the really prescient thing would be to move to the UK? (Although you might have to put up with a few people droning on about how they could have been a contenderÖ).
After university I worked successfully for many years for different blue chip companies despite being black and of working class origin. Now I am going it alone as an internet entrepeneur. ( should you be interested). With my background I understand the temptation to be negative. I also know it is completely futile.

I was at the Emerging Technology Conference and there were hoardes of foreigners, mainly from the UK. I think there are an unusually large number of Angel investors over here. Rich indivduals that don’t have as much money as a VC firm but have enough to pay your salary for a year and have some left over for cheap servers.
I liveblogged from the VC session at the Emerging Tech Conference, read it here….

A good business plan, professionally created and well-researched will always get a good audience. While pure start-up funding isn’t easy to come by, VC money is not as difficult as many make out. IF you’re prepared to pay their ‘tax.’
But why would you want to stay in the UK given the relative size of potential markets on either side of the Pond?
But don’t forget, the US investment market between 2000-4 was very weak. It isn’t always easy over there, as many burnt investors have found to their cost.

jm’s comments were very interesting, that banks and vc’s in the uk don’t have the technical ability to determine what is a good investment or not.
I have a suggestion jm, how about setting up a training camp for the vcís and bankers? Maybe some kind souls would even give their free time as long at the vcís promise to throw in $0.5 million. At the end of the training session we could also have 3-4 tech companies give presentations.
Letís hold the event in Manchester, Birmingham, or Dublin. If London has failed to develop the vc market lets try and seed the effort else where. Plus rents will be cheaper out of the capital. Though maybe Southampton would be a better place, Hampshire has such a strong tech focus already.

I have been based in the uk for seven years and have noticed the public’s attitude to starting a new business is not postive as one lady earlier mentioned in the states a failed business is thought of a learning curve here you are thought a failure.

Where are the Richard Bransons in all of this? Seems to me there are a few successful risk takers in the UK who could be the catalyst for changing the entrepreneurial landscape over there.

Mike Butcher — taking a look at NetImperative, I see a lot of advertising and marketing — the “digital media news” thing, with emphasis on the “media”. plus plenty of press releases from BT, Yahoo! and Amazon.
where’s the “new companies in the internet and mobile space”? To reiterate what Tom asked right at the top — “Where is the Blogger or Flickr or Odeo or Six Apart of the UK?”

I have to admit that I am one of those dreaded UK VCs that seems to have such a hard time understanding great technology. I have been a VC for 10 years so have seen the good times and bad and been involved in businesses in both the UK and US.
My honest belief is that most companies are successful because of commercial acumen, not technical prowess. The vast majority of companies that I have to turn down for funding are because they don’t have the faintest idea how to run a company, or what makes a company valuable (i.e. have a backable strategy). This is particularly marked in the UK – US entrepreneurs seem to have a greater passion for their business than their product or service.
Why is that most of the great technologists in the UK are so poor at speaking to commercial managers who might actually be able to get a business up and running?
The reason that I continue in my job is that I do still believe that there are a limited number of really good businesses out there and eventually their success will lead to more and more similar companies.
One last thought – at least the UK is better at this than Germany or Japan.

Interestingly nobody has mentioned the huge UK success stories like:-
The BBC micro project helping to grow Acorn Computer – directly leading to the sucess of ARM (their chips in something like 80% of mobile phones and the IPOD)
The success of Cambridge Consultants in spawning the
worlds leading industrial ink jet printers (Domino) and now also the leading bluetooth manufactor (CSR). To say nothing about the leading edge plastic screens been developed by Cambridge Display Technology.
Now all I have to do is to get some of the above guys to our blogging conference at which Tom is speaking.

I think the attitude of most VC’s in the UK is the “Invest now and cash in now” mentality, where just enough cash injected into a company especially in the U.K Biotech industry to give it an early IPO flotation. They then off load this company with a lot of talent to an American buyer because they are under pressure to recoup their investment and not take on any long term risks.

Suw – Explain your business and how it would make money in 30 words or less. Start-ups don’t have a God given right to funding. Particulary if they cannot construct a decent business plan.

According to Thomson Financial (VentureXpert) 38 UK technology companies have received seed or early stage funding from VCs so far in 2005. The equivalent number of US companies is just over 300. To my mind that’s not completely disproportionate.
This statistic will be far lower than the real number for both countries, due to the fact that VC is private money (I know my firm, a technology merchant bank, has made 3 investments so far this year that don’t show up in the numbers)
We are aware of a lot of angel investments being made at the moment, but as has been said these tend to be in lower profile businesses with more obvious cash generation capabilities and more likely eventual exit routes combined with decent management teams (as do our investments).
I totally agree with the points JH makes above – some of the ‘business plans’ we see are desperately amateur and completely unfundable – don’t try to raise VC funding without taking the time to understand what VCs are looking for. As someone else said above VC money comes at a high price – the cheapest form of finance is revenue, and if you don’t have any revenues forecast in your business plan then maybe you should rethink it.
For the younger entrepreneurs who don’t need a huge investment I would recommend the Prince’s Trust ( you can get up to £5k and an experienced mentor.

Translating great ideas/engineering/technology into a business is difficult. I remember a fascinating dinner with a former Xerox executive in Ann Arbor Michigan a few years ago who told me the wonderful, horrible story of Xerox PARC from the insidie. He told me all about the Alto, which many credit as the inspiration behind the Mac. They couldn’t bring it to market for less than $10,000. (Sorta like the Lisa or the Apple III)
They actually couldn’t bring much of anything to market for prices that the market would bear. That’s why so many great technologies came out of PARC but rarely if ever had a Xerox badge on them. The GUI, ethernet, etc.
IBM probably has one of the richest pure research shops in the world, but they also marry that to a very deliberate process to commercialise research. I had a friend who worked with Russian scientists after the fall of the Soviet Union to translate their research and excellent technical expertise into marketable products. It’s a critical step in the process.
IMHO, and I’m no expert in business or management or tech for that matter, the thing that the Valley VC shops do is to bring this marriage of technical expertise and market sensibility.
I’ve been working on a new media strategy for my company, and the techical staff love me because I can speak their language and also the language of management. Finding some technically-minded business partners is really important.
At any rate, great post. Excellent discussion.

It may be the people, it may be the climate, it may be the banks … all fine.
But isn’t one of the main reasons the difference in bankruptcy laws? The UK (and much of Europe) has creditor friendly laws. They favour the banks and whoever stumps up the cash. In the US they are much more debtor friendly, as with Chapter 11 (which basically gives a troubled start-up a bit of breathing space and lets the management stay in charge while negotiating with creditors).

I’ve been meaning to comment on this for ages, and Paul Graham’s latest essay finally compelled me to do so. In summary: there aren’t more startups in the U.K. (or in Europe, for that matter) because the incentives for creating them have been artificially distorted in an effort to reduce inequality of wealth.
More detailed commentary on my blog.

Hmm, I don’t really agree with the idea of class holding us back, I think it is more to do with people’s risk aversion and the general ethos that anything entrepreneurial is too risky and “we should work sensibly and safely for someone else”. Not me – I worked for 5 years in several AI start-ups and for the last 18 months I’ve run my own AI consultancy.
Outside of my consultancy a friend and I are developing an innovative product for the web – a collaborative advice sharing/trading system. It is still in the early stages, thankfully we have the support of the staff at the Sussex Innovation Centre here at Sussex University.
We’re just finishing the DTI’s Grant for Investigating an Innovative Idea – I recommend the grant to anyone who has a novel idea but doesn’t know how to go about analysing the marketplace, product plans and the like, especially if you’re dabbling in a market that you’ve little experience of.
I’ll echo Suw’s comments earlier about having a partner on-board – my business partner is smart, sensible and doesn’t take much guff so we end up supporting and pushing each other.
I don’t think I’d have come this far if I’d have been working purely on my own ‚Äì we’ve been working on the idea for nigh on 10 months now. Further commentary at my blog.
I’ll also echo support for the general idea of entrepreneurial meetings, especially down here in Brighton…

Lots of interesting comments here. I was in the Valley at a startup during the 1998-2000 boom bust years. What an experience! I was then enticed to come to Scotland to work for a government body which was supposedly trying to stimulate innovation and startups. WHAT an experience and WHAT a difference. You think England is conservative – Scottish politicians, Universities (do I hear 25% non-dilutable minimum gurantee), the risk averse financial sector and the local (limited number of) VCs do not have a clue and are just plain affraid to make a mistake. There will never be a large startup community established in the UK. Never. They just do not get it.
Its simple, if you want the true taste of what you are seeking and you are any good go to San Francisco – do not waste your time here.
Me, I’m out of here.

I have got round to commenting on this post on my shiny new blog. I think that what is needed is a supportive culture for bootstrapping new ventures – to do this we need to build some social capital, and if this means meeting up and drinking then so be it 😉
Personally having spent the boom years working for yankee software companies and experienced the hangover and migration of talent towards ‘defeatist’ pursuits like contracting (well, that’s what I did) I am now trying to convince myself into the riskier business of trying something new. There are plenty of talented people in the UK but we have to accept that ideas will not achieve escape velocity using traditional means of starting businesses. I think that with the maturing of the web we are seeing plenty of real opportunity for building decent services for niche markets. The poster-child web apps like Flickr, Blinksale (etc,etc,etc) show that the building blocks are there – smaller and more focussed solutions can be built by bootstrapping without the need for VC voodoo.

Check out this piece, where I point out that Britain has been exporting its foolsh dreamer types for centuries to places like the US and Canada. John Gartner’s recent ChangeThis manifesto, The Hypomanic American, reveals this tidbit: “When asked, ‚ÄúDo you think that starting a new business is a respected occupation in your community?‚Äù 91 percent of Americans said yes, as compared to 28 percent of British and 8 percent of Japanese respondents.”

Number 1: the difficulty and cost of getting a merchant account. I’d have a go at a couple of small-scale projects I have if only I could get one. Being 21 and still in university doesn’t help (only one bank out of 5 will give me a credit card, and I have no debt!)
Suw’s point about being crap at marketing is a key issue. I (and I imagine other British people) look at the hype generated by certain web startups and go ‘uugh’. It turns me off, it’s too cringe-worthy – I want facts, not hot air (note: same cynical attitude as we have to politics). We understate ourselves. It’s in the culture. I believe it’s why we’re great at research and development, shame about making money out of any of our ideas.
The point about social software (like theyworkforyou) is well made. I often feel bad about taking money from people for work unless I know it’s outstanding, and a lot of the geniuses I know are the same. I’d like to say it’s the culture again, but that’s not true – look at any property management company or estate agent for the complete opposite (Never deal with Lindesays in Southampton!)

Can’t say I’ve read all the posts but I don’t think anyone has mentioned the cost that most people are saddled with living in the UK (particularly London). I am convinced most people working in an industry that lends itself to startups and are at that age where they have the time and energy to devote to starting something up are caught up in a debt spiral so the last thing they think of doing is leaving a job that’s only just keeping there noses above water. Not sure how this compares with the rest of the world but London is the most expensive city in the world certainly in many respects and possibly what makes people more risk averse (because when you get hit with an extra ordinary expense here it hurts Р250 squid (US$440) the other night when my car was towed at 10pm for being in the wrong place for 30 mins.

There’s no real history of software entrepreneurs here. It began and ended with the games industry prior to the PSX.
In the US there’s a good solid record of people making the leap and building software businesses.
My university days (90-95) as a comp-sci student were solidly focused at getting a degree and then joining IBM, BT, ICL, etc. People do need to be told that it’s possible to not work for a corporate. I suspect that this point is now moot with the current uni crowd, thanks to the interweb. An entrepreneurial track and supporting events would be no bad thing for a lot of degrees though.
If it wasn’t for Mr Hume I wouldn’t have made the leap and been persuaded to leave my job and start Future Platforms. Since then I’ve been through the VC grind with Press Red. It took us a solid 8 or 9 months to raise just shy of ¬£500k. And that was after the founders had spent the prior year and a half looking.
Part of the problem with funding in the UK is the lack of small funds. If you’re looking for multi-millions then there are a number of routes you can take, but sub ¬£1 million the options are few and far between.
I’d be interested to know what route Zopa took; but then there a big Egg connection, so perhaps the banks were more than willing to listen.
Tom Hume does make a good point – I suspect that there are lots of small scale efforts, self-funded, growing slowly for the moment. Bootstrapping without external funding is surely the most sensible way of getting going, but I recognise that for some ideas and some business, a big cash injection is what’s really needed…

Had quite a chuckle reading all of the above. We started up a financial software company about five years ago – great, reliable software, with some good clients. However, unless we are prepared to pay a fortune to have our software accredited (why, for goodness sake – it’s in use, does what is says, reasonable cost), or are prepared to pay a fortune for a stand, its almost impossible to get noticed. In this country, it seems that there is a herd mentality, particularly in finance. Unless its some huge software producer (guess who!!), they twitch about it – never mind that its been working for years with our customers. Tend to feel that people in this country are not prepared to be open enough to see new players – and are quite happy to pay double because they know the name.

The Brits talk about doing things while others get on with doing things. This attitude is unfortunately combined with a lazy and amateur approach where there is rarely any sense of urgency felt. Historically, a very large proportion of the worlds inventions have their origins in the UK – the IPR however rarely stays in the UK. We talk about getting a product to market while others are busy getting it to market. People need to get off their arses, put some real work in and take a chance.

I am in the process of possibly changing an exsiting agreement I have with a smaller service company that supports some of my efforts in moving our telecommunications software products in the UK. It is possible that I may just hire some of these individuals directly, and I am trying to find a source for what would be considered fair and reasonable pay in the UK for an individual that is capable of providing first line tech support and sales support of our products.
Any ideas?

Wordy arn’t we. I was reading and decided to go down to the bottom of the page and decided, what the heck, do I need to read all this. You need to get to the point.

I found a lot of the comments listed quite interesting, and in most cases they’re completely right. It is very difficult to get VC support these days, especially after the dot com crash, and in the UK there arent that many *known* successful .com startups.
That said I have been trying to get together a group of like minded people for start-ups for months and just cant find the talent or visions to match my own – if anyone is interested in getting together for a brain-storm on a start-up drop me an email 😉

As a UK web startup (born valentines day 2006), we don’t need VC capital just yet as everything is there for free on the web. Code, coders, testers, ideas and so on; so infact as a beta we are almost testing the market and the ideas. As critical mass is reached, we will move to the next stage of the business cycle whatever that maybe.
But yes, the UK is full of innovative people but what we lack is an attentive and informed media and VCs who are visionary. We also lack the penetration that US companies have – so many potential users and customers. In someways you have to appeal to the US market first.

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I’d like to help a European software company succeed in North America.
To Whom It May Concern:
I have known Don Beall for several years. I have worked with Don in
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I tried to startup my own business. The software was damn good – I know as I now use a cut down version in my day jobs, but after 9 months of burning out my life savings getting it written I found that because I didn’t have any ‘handicaps to getting going’ e.g. single parent, ethnic background, poor education etc… I received ZERO help from government.. I wonder how many more people there are in the UK who just can’t get going because there’s no help available. I was eventually told (by a representative of the jobcentre) to claim jobseekers allowance, and LIE every other week to claim it… He felt sure that the ¬£200 a month I was NOT entitled to would help feed me, and pay my ¬£400 a month share of my rent – hmmmmm.
I’m now still paying off the debts I racked up in that year, and thanks to the governments tightening of the laws on bankruptcy, I am stuck at 31 years of age with ¬£20k of debts, no life savings, a pension fund thats worthless, rented accomodation and No chance of getting a mortgage for another 6 years – And you wonder why People aren’t starting up their own businesses??

I am from the UK, but worked in the US.
My reflection is that its all about attitudes to adventure. Any new start up gets tired at some point. Whilst in the US, just at that point someone will appear and inject some energy to keep things alive, in the UK, there is a “told you so” sort of attitude and it will be killed off.

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If you are so bothered – get off your arse and do something about it!
That’s what the rest of us are trying to do.
You can’t order people to be inspired, nor can you order people to ‘manufacture’ products that aren’t economically viable.
There are businessmen trying to get off the ground and do something. Our market is – as you astutely point out – dominated by big players.
It is therefore difficult to establish business – because due to simple economies of scale, it is tough to find a competitive edge on price.
That’s why most new / young businesses that look exciting initially, ultimately sell up to a large investor – usually a multi national/PLC.
Fortunately/Unfortunately – that’s free market economics.
The only way to reduce these kinds of acquisitions would be to somehow hit Big Business with a form of taxation to give them less muscle to be able to prey on smaller ones.
I for one believe in a higher rate of Corporation Tax for Large Companies in the UK. This could be offset with a reduction in Corporation Tax on smaller companies, and perhaps an increase in the VAT threshold to protect the smaller more vulnerable businesses that are trying establish themselves.
I believe that Corporation tax should be set at a higher rate for Big Business across the board in the European Union.
Competitiveness could be maintained by a reduction in VAT rates, and a reduction in personal taxation for the poorest members fo the community. This would give them more incentive to take risks and build new businesses.

Great theme. Check out http;// and what we are doing now via Many entrepreneurial and innovative SMEs share your frustration at the lack of opportunities within the public sector. This represents around 40% of the potential market for the application of digital technology. Surely there is an opportunity there?

It seems I am quite late to find this thread, but couldn’t agree more with the original blogger. I am a Brit in US and am struck by the number of startups around the US. Plus they do not just exist in the SF Bay Area and NYC! Chicago has seen a lot of interesting startups making new. A little further down state (still in Illinois) a college town I have lived for a while, Champaign-Urbana, has startups a plenty. Champaign-Urbana is a small college town with approximately 90,000 population (that’s tiny in UK standards) and it is not an exception for college towns to be abundant in startups. I should also mention that Champaign-Urbana is surrounded by corn and soy bean fields for miles and miles. Not the most likely place to find entrepreneurs abundantly.
I hope to return to UK some time soon, but I dread coming back to big bidness. As a consultant in US I have been working mostly with startups or at least innovative larger firms in the financial/hedge fund and entertainment industries.
Don’t get me wrong there are plenty of things I dislike about the US way of life (mostly political and cultural), but somehow the US has cultivated a great attitude toward people starting businesses that can grow and make a difference. Of course, Silicon Valley/Bay Area sees a LOT of failures because it pushes the the attitude to an extreme, but it is not the worst problem to have considering the options.

I’m also a late comer to this thread, but I can’t agree more!
I’m an electronics engineer from the UK with over 16 years of experience, including start-ups and contracting.
Guess what? I’m also in the Bay area where there is so much more opportunity than the UK. I was very happy to leave the UK. I have no idea where it will be in ten years. There is virtually no VC money about. What is seems to go to the most pretentious suits. I have worked with the largest and smallest tech companies on three continents and the UK is simply a joke in attitude and opportunity.
Personally, even if the situation changed, the tax situation would always prevent me from returning!

Thankfully, there are many more Innovation Centres opening up throughout the country. Many say the Govt pays lipservice to innovation but it does seem there is investment there as we are hitting over 300 innovation centres in the UK now. These are home to entrepreneurs (in the case of the Sussex Innovation Centre – mostly high tech). Tax is an issue as is the risk averse business culture here but there is support if you look. We put a commercial team around the entrepreneur and introduce them to investors/customers lending them credibility. It’s very frustrating but I think true that this model succeeds because ‘it’s not what you know, it’s who you know’. Being Australian and having grown up there, it is a different story down under to some degree and risk is more common. We have to work with reality rather than change it so here’s to the upsurge in innovation centres.

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