Very true! These points above are absolutely valid and I’m surprised more people aren’t trying to get in on the UK market first… especially with the unsteady one currently in the US. Great article!

Pros: close proximity to a) one of the largest consumer market in the world and b) also networking events where you get to meet with potential VCs, investors, partners, advertisers etc.

Cons: too competitive, everyone wants to be one up on the other in matters not even relating to building the next great product/service. Too difficult to hire and retain good people, they often get poached to higher paying jobs. High cost of living which means companies have to pay higher too. If it’s a self-funded startup, it’s hard to pay that kind of salary. Why would any employee sacrifice their financial security for a founder’s dream.

They will look at risky new ideas. Would twitter or Youtube etc have ever got (sam) funding in the UK – NO.

The exit returns are much higher in the US. Would Sphere really have got $30m in the UK? – NO

Would Skype, Last.FM or MySQL have ever been bought by a UK company – NO

Sorry like Peter Nixey, Micheal Birch, Keith Teare and many other UK entrepreneurs they have to think like Dick Whittington and move to the Valley. I am sure most of the UK startups on the web mission 08 will find funding easier and a few may even stay behind.

However, I would qualify that by saying that it is a great place IF you are planning to bootstrap and IF you are planning to work with people offshore to keep costs down.

If you need to hire in London or raise money in London, things ain’t so pretty.

London is a very expensive place to hire people. Talented people gravitate to well paid jobs in the finance, media and other sectors, so competing for that talent is very expensive. London does not have the same track record of tech startups creating wealth for early employees, so offering equity or options is not perceived as having the same value as in places like Silicon valley

London remains a very hard place to raise funding at decent valuations. It has improved in the last 24 months, but in 2004 I raised money for a tech startup with a working product, early blue-chip customers and £100k in year one licence revenue. £250K cost 40% of the company. At the end of the day this was just too big a slice of the company for too little capital. At the time it was the only option, but it screwed up the dynamics of the company permanently. I am told that in the US early stage investors understand that they need to leave something on the table for the founders and future rounds. I don’t think that is understood in the UK.

I was at a lunch with John O’Connell who founded and sold Staffware, one of the bigger UK tech success stories. I asked him bluntly whether, if he did it all again, he would have founded Staffware in the UK or the USA. There was no hesitation, he said the USA every time.

Its actually even cheaper if you do it outside of london, people in london tend to forget that the UK is not london. Sorry a minor annoyance of mine.

It would be cheaper for me to move to San fran than it would london and to be honest if I ever get the choice I would.

The problem with the UK is investing establishment don’t have a history of making google sized wins so they tend to look at traditional businesses more. I think a great example is Dragons Den, you have 4 dragons who never invest in web stuff because they just don’t get it.

There are people doing deals but I bet they would get better deals in the US.

Paradigms never shift unless people are pushing, and I believe the reasons given for starting/funding/selling in the US are true now, but can equally be true for the UK in a short amount of time.

Perhaps I am naive, and in a year, you will see me sunbathing in San Francisco with a hefty bank account and scoffing at my juvenile belief that I could have achieved that if I’d stayed in the UK.

- the free market economy dictates the levels of risk/reward in UK versus US … we can’t force it. Hopefully soon the UK/Europe will want some of the action rather than watch all the innovation pounds disappear into dollars.

- advertising revenue models pretty much need the US market. Why wouldn’t a UK startup want a US audience and advertising revenue? The market is huge!

- who wants to live in the US anyway?!

Mashup and NESTA are doing their best to cheer on some UK startups.

What can we all do to help?

David
http://www.mymission2.com