UK Startups Look For Funding And Escape From Echo Chamber
By Tom Foremski - July 7, 2009
I've been meeting a lot of UK entrepreneurs as part of the Traveling Geeks trip and I'm hearing a lot of the same things US startups tell me. They are looking for funding and also fed up with seeing the same people at their meetups.
Funding is a big problem in the UK because there are very few European VC funds actively investing. And very few angels. Many startups are looking to the US for funding but they tell me that most US VC firms have closed their UK offices.
One entrepreneur told me: "We're thinking of relocating some of our team to San Francisco so that we can be closer to the VC firms. Several VC firms have told us that they love our product but we are not over there. And so they wouldn't consider investing."
That was a common theme: that US VCs won't invest in startups unless they are in Silicon Valley.
I didn't have the heart to tell people that even if you are in Silicon Valley funding is really tough right now.
I ran into Don Thorson from Silicon Valley based Ribbit yesterday. Ribbit had a very nice exit about a year ago when BT bought the company for $105 million.
Mr Thornson was in town for a board meeting at BT. We began talking about startup funding and he was complaining that the Silicon Valley VCs aren't doing any investing. He says there are some very good startups around but many have just a few months of runway left.
This is a serious situation. If we can't have sustained funding we won't have a crop of next generation companies to harvest when exits open up.
It's one thing to have no exits but it's another to have no companies to exit. That means no new money to reinvest in Silicon Valley.
The UK entrepreneurs regularly get together at various events but many are getting fed up seeing the same faces and hearing the same stories. I can relate.
- One entrepreneur told me: "I've started going to fewer events because I wasn't getting much value from them. And everyone's business ideas started sounding very similar. I'd rather spend some time developing some original ideas."
The UK entrepreneurs are heavily into social media and Twitter. Some hope to be acquired by larger startups that have the potential to go public once financial markets open up. But when that happens is anyones guess because the UK economy continues to splutter.
Right now, it seems that a few seed investments would go far in the UK. A few angel investors could make some smart bets at good valuations.
I'll mention some of the startups I've been meeting in a later post.
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Posted to Startups | Traveling Geeks
July 7, 2009 | Permalink | Comment | Subscribe to SVW
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Comments (8)
This has been on the cards for awhile and starting 2 sink in now as part of the overall economic slide.
SV VC's always wanted their 'siblings' within a 30min car ride anyway :)
Posted: July 8, 2009 9:07 AM
I just posted on this:
http://danielnenni.com/2009/07/08/fourth-of-july-and-silicon-valley-independence/
There are big changes coming to Silicon Valley in regards funding and innovation. The VC void will be filled by internal development and Open Source initiatives:
http://danielnenni.com/2009/06/12/electronic-design-innovation/
The revolution is coming!
D.A.N.
Posted: July 9, 2009 6:44 AM
I don't get this echo-chamber angle. Surely people in the Valley see "the same people" all the time at events?
Posted: July 16, 2009 2:45 AM
Mike: Yes, they do see the same people and are fed up with it too.
Posted: July 16, 2009 2:53 AM
There are many reasons why I'm not in the UK at the moment, but it has nothing to do with the parties. ;)
Tom, I believe I bumped in to you outside the boxee party in SF recently ;)
Posted: July 16, 2009 3:01 AM
I have been to many meetups in the UK. I have spoken to many people, but it seems that there's about 3 ways to get funding in the UK:
1) live in London and get to be friends with NESTA (or similar)
2) get to be friends with one of the very well known investors (and hope)
3) get VERY lucky
Seriously, there are very few startups in the UK that are funded because they have potential. UK investors appear to be much more risk averse unfortunately.
There are very few good startups in the UK anyway. Silicon Valley has numerous startups to choose to invest further in. UK has much less of an idea how to be entrepreneurial.
Posted: July 16, 2009 3:16 AM
Attending events initially is not always about money for start ups. We at odbody have been to 6 events in the past year in the UK but have not gone to seek funding (yet!) because we're gaining knowledge and know how which is more beneficial to us as a start up at this stage. Each time we've walked away with something extremely positive and valuable. It is a slow process but surely that's got to benefit VC's in the long run?!
Posted: July 16, 2009 4:09 AM
Europe is in a worse state than you think. The Friends of TC "Europas" were (rigged) full of Index/Tag/Klein investments which do not represent the best of Europe IMHO.
Where was mention of MaxRoam, JoliCloud, and Qik? Come to think of it where were:
ProcessOne - France
OpenCalais - UK
Zemanta - UK - Klein/Index
Layar - Holland
OpenX - UK -Klein/Index
Xing - Germany
NetLog - Holland - Klein/Index
Qype - Germany
Talis - UK
Zend - Israel - Klein/Index
The winner Spotify (amazingly not Klein/Index investment) is backed by the big 4 music labels but at an event in London last night, everyone said they used it but no one would pay for it. Who is going to buy the next Last.fm and who is going to pay for it?
Huddle is a fantastic team with a product most people do not understand but when Google GWave arrives with its collaborative platform who will use/pay for Huddle. I hope MSFT buy them first.
Skimlinks another darling of UK scene is about to have its affiliate model killed by Twitter itself who is going to copy their model. Tweetdeck is nice but memory hungry and buggy.
Many others including SpinVox, Rummble, TrustedPlaces, Qype are either running out of runway, time and new ideas.
Oddly the best one is Zemanta (Klein/Index) and they are moving stateside like Qik. Even Tweetdeck raised most of its funding in the US.
London is tired and unoriginal. The biggest recent investment (Klein/Index) was for a take-away aggregator called Just-Eat.co.uk - oh please!!!
Not all is lost I do think these two companies are worth watching:
AMEE, Alertme - more Klein/Index investments.
I guess after writing this comment I have realised that in Europe unless Saul or Robin Klein invest in you, I guess you are either unique or not going to make it.
Posted: July 16, 2009 8:53 AM