Right now I’m flying back to London from San Francisco after a week-long trip with the LDN2SFO group, a collection of entrepreneurs and VCs from London. We toured places like Sequoia Capital, Singluarity University, YCombinator and Pivotal Labs with the purpose of building relationships and strengthening the ties between the London and San Francisco tech startup ecosystems.
I thought it valuable to document my experiences and observations while they’re fresh in my mind. I make no value judgements, simply objective and personal perceptions.
The first two observations are nothing new and will likely just reinforce what London entrepreneurs already know:
1) London has far less investment activity than San Francisco
Many people make seemingly plausible explanations for why this is, such as the fact that London hasn’t had any runaway successes or IPOs that mint hundreds of millionaires overnight thereby fueling the angel investor community. In addition and for whatever reason, the UK seems to be more risk averse than the US.
Some people have speculated that this risk aversion partly comes from the fact that the UK still attaches a bit of a stigma to a founder that fails, but if this is the case, I haven’t noticed it.
Lastly, the investment process requirements are starkly different. I spoke with several entrepreneurs this week who said they raised up to $150,000 without even showing a pitch deck. One guy said that he raised $1.5 million with 10 slides. The attitude seems as if providing five-year financial projections are laughable and could actually prove detrimental.[1. I’m definitely not advocating for this type of investment behavior as it seems just as noxious as requiring a 100 page business plan. There is a middle ground.]
All of this being said, I do know that the advent of crowd-funded equity solutions such as Seedrs in London are making the process significantly easier. I spoke with one UK-resident who raised a nice pre-seed round in the matter of a couple of weeks by using the Seedrs platform and said the process was painless.
2) London has fewer acquisitions
This is connected with the first point but does play a critical role in the investment market dynamics between the two locations. When we spoke with organizations that work with startups in both London and San Francisco, they mentioned the increase in the number of London-based startups that are placing small teams (usually marketing and/or sales) in San Francisco not merely for the access to the larger market the US provides, but because it increases their visibility to potential acquiring companies.
These two points don’t illuminate anything new as they are already highly discussed among London entrepreneurs.
While those things were expected, the following subtle points were new to me:
1) Extreme Optimism
By definition, an entrepreneur needs to be optimistic. They need to be able to see what doesn’t already exist and believe that the future can become a reality.
Silicon Valley entrepreneurs however, really take this to the extreme. When presented with a problem, they tried to reason possible solutions as to how they could overcome it. They actively searched for ways that things could be done, regardless of the obstacle.
It’s fair to say that extreme blind optimism is just as bad as extreme pessimism, but it makes for a very different community dynamic. It’s a small difference, but seems to have a cumulative and exponential impact on the ability of that ecosystem to think big.
2) Pay it Forward
This was mentioned by nearly everyone I talked to who had experienced both the Silicon Valley and London startup ecosystems.
Silicon Valley entrepreneurs really want to help those around them. At each event we attended, I noticed that people weren’t just networking with the end-intent of gaining something specific for themselves out of it, but were legitemately interested in helping those around them.
Chris McCann (Startup Digest) put it to me best by saying that a Silicon Valley entrepreneur’s reputation was truly the most important currency available, so it fosters a system of really wanting to help those around you. Once a system like this is put in place, it’s self-perpetuating.
While I’m not saying that there aren’t those individuals in the London startup scene who actively look for ways to help (Here’s looking at you Matthew Stafford), that mindset doesn’t seem to be as prevalent.
Because I think that these two discoveries could potentially prove valuable, I’ve decided to run an experiment. I’ve set up a Meetup group called Startup Karma and I’m going to hold an event later this month with the underlying premise of “Think Big” and “Pay it Forward.” I’m requesting that each individual who attends, shows up with the intent of helping at least one other person. It could be something as simple as providing 20 minutes of specialty-role consulting or making a key introduction.
It’s obviously unenforceable, but I’m hoping that the underlying premise proves beneficial for people and eventually, the ecosystem as a whole.
You can sign up for the group at http://www.meetup.com/StartupKarma/ and I hope to see you there.