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The London scene: how it shapes up

London has a ways to go to be Silicon Valley, but it is already miles ahead of the rest of Europe

Financial trends and news by Steven Loeb
October 26, 2013
Short URL: http://vator.tv/n/32d0

If you are a member of our Vator family (and if you aren't, then you really should be!) you probably know that in a little less than two weeks Vator Splash London will be heading to London for the first time ever. 

What you make not know is why we chose London. Here's the answer: because it has one of the hottest emerging tech scenes from around the globe.

report from around a year ago, conducted by research firm Startup Genome, called the Startup Ecosystem Report 2012, ranked the top 20 startup ecosystems. London came in seventh place, behind Silicon Valley, Tel Aviv, Los Angeles, Seattle, New York and Boston.

It was also one of one three European cities to even make the list, beating out both Paris and Berlin.

How does London rank?

To rank each region, the report breaks it down into eight important categories: 

  • Startup output index, which represents the total activity of entrepreneurship in the region
  • Funding index, or how active, and comprehensive, the risk capital is in each ecosystem
  • Company performance index, or the total performance, as well as the potential, for startups in each region
  • Mindset index, or a measurement of how well the population of founders in each ecosystem thinks like a great entrepreneur
  • Trendsetter index, which measures how quickly an ecosystem adopts new technologies and management
  • Support index, or the quality of the startup ecosystem’s support network
  • Talent index, a measurement of the talent of the founders in an ecosystem
  • Differentiation index, or how different a startup ecosystem is to Silicon Valley. 

It shouldn't be a surprise that Silicon Valley came in first place in every category. London, on the other hand, showing a lot of strength in some areas, and weakness in others. 

For example, out of 20 cities, London came in 14th as a trendsetter, and 17th in how different it is from Silicon Valley. But it was fifth in funding, third in mindset and it came in second place for its support network.

The average age of an entrepreneur in London is older than their Silicon Valley counterparts (35.98 to 34.12) but is more educated. For every one college dropout, London has three entrepreneurs with a Masters and a PhD. Silicon Valley's ratio is 1 to 2.5.

On the other hand, New York entrepreneurs do not work as hard, with an average of 9.78 hours a day, compared to 9.95 hours for Silicon Valley. 

The two cities are pretty much equal when it comes to the percentage of female entrepreneurs. 9% of London entrepreneurs are women, while that number is 10% in the Valley.

The two cities are fairly comparable in most ways, except one: Silicon Valley beats London pretty handily when it comes to percentage of serial entrepreneurs, with 56%, compared to London's 42%.

Other findings

Startup Genome found that London, despite coming so high in the funding index, actually has a funding gap. The city has 81% less capital raised by startups before product market fit than startups in Silicon Valley.

"This is probably caused by a lack of super angels and micro VCs which are designed to target the deal sizes of 500k to 2.5M," the report said.

One very important statistic that Startup Genome found: London is lagging behind in the mobile space, which is becoming crucial.

"London has been slow in adopting mobile, with 30% fewer startups than SV and NYC in the mobile space."

But the biggest difference between London and Silicon Valley is the mindset.

London entrepreneurs are 31% more likely to tackle smaller markets, 6% less likely to tackle markets ranging in soze $1billion to $10 billon, and 32% less likely to tackle markets larger than $10 billion.

The report's conclusion: "They are more motivated to build a great product than change the world."

London by the numbers

Obviously London has a ways to go to become the next Silicon Valley, but it seems to be miles ahead of any other city in Europe.

In the first half of 2013, there was $373 million invested in 61 startups in London, according to data provided to VatorNews by Dow Jones VentureSource. If the last six months of this year prove just as active, that will mean the investment activity will just about match 2012 and remain at the highest levels since 2007 when nearly $1 billion went into 159 startups for the full year.

The six-month activity makes greater London the most active over Berlin, Paris, Barcelona, Copenhagen and Dublin, the top European cities for venture capital investing. 

Berlin saw $269 million invested in 45 startups, the most of any European city behind London. Paris, meanwhile, invested $160 million into 37 startups. The other three cities had less than 20 investments, and put in less than $100 million, in the first half of 2013.

Meanwhile, across Europe as a whole for the first six months of this year, $3.1 billion was invested in 659 companies compared to about the same amount - $3.19 billion - invested in the San Francisco bay area alone during just three months (Q3) across a much smaller base of companies - 269. 

London has one of the most up and coming startup ecosystems in the world, and is already the top one in its region. Don't be surprised if we see more and more startups emerging from there in the next few years.

Take a look at our lineup of speakers at Splash London:

We have Jon Bradford (TechStars), Scott Gallacher (Angel Investor), Stefan Glaenzer (Passion Capital), Joseph Hawayek (International Venture Associates), Ben Holmes (Index Ventures), Andrew Humphries (TheBakery Accelerator), Emma Lloyd (BSkyB), Danny Meaney (New Media Partners), Richard Muirhead (Firestartr.co), Nilesh Shah (Blick Rothenberg), Fabio Torlini (Rackspace), Eric Archambeau (Wellington Partners), Simon Walker (Taylor Wessing), Nic Brisbourne (Forward Investment Partners), William Bryant (DFJ), Jeff Burton, (SkyDeck Berkeley), Stephen Chandler (Notion Capital), Laurence Garrett (Highland Capital Europe), Neil Martin (News UK), Bambi Francisco (Founder of Vator), Ezra Roizen (Ackrell Capital), Nina Faulhaber (Index Ventures), Sitar Teli (Connect Ventures), Mike Turner (TaylorWessing), John Webb (Get2Growth) and Daniel Waterhouse (Balderton Capital).

Thanks to Rackspace, Blick Rothenberg, Taylor Wessing, Level39, TheBakery, London & Partners and Tech City for supporting this event!

(Image source: http://josiahjames.com)


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