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  Why London has all the ingredients for a successful startup ecosystem

  LONDON — Just a few years ago, startups seemed like the purview of a niche circle of hipsters, probably living somewhere trendy like Shoreditch or Dalston.

  But as I write this at a Starbucks in a leafy and residential suburb of West London, a group of lads sitting behind me are chatting animatedly about their startup’s “value proposition.”

  Indeed, two things became apparent during my week in London. The startup vernacular (meaning overused buzzwords like “big data” and “minimum viable product”) is hitting the mainstream business culture, and tech companies are emerging at an unprecedented rate.

  Recent estimates suggest that the Internet economy accounts for about 8 percent of the country’s GDP, a higher percentage than the United States. Not too long ago, the British economy was described in the press as “sluggish,” even “moribund,” but the tech sector is cause for optimism and is generating a steady stream of jobs.

  From ‘Silicon Roundabout’ to ‘Tech City’

  How did England’s capital city establish a thriving tech hub in a matter of years?

  Eileen Burbidge, a local tech investor, said she’s been struck by the rapid emergence of startups, investors, mentorship, and support networks in the city.

  Jut two or three years ago, she explained, London’s startups were held back by a lack of seed funding, and the scene was in early-stages of development. A decade prior, when she moved from Silicon Valley, the tech scene was embryonic. In 2013, Burbidge can barely keep up with the number of investment opportunities, and her firm, Passion Capital, funded 34 startups across a diverse range of sectors.


  Startups working at White Bear Yard.

  To meet the rising demand for funding, Burbidge has also established a $60 million fund and office space known as White Bear Yard, which she says could invest in up to 50 companies over the next five years in Europe.

  According to Burbidge (who insists on publishing extensive data about the firm’s portfolio companies), Passion Capital’s three partners invested in 21 early-stage startups in 2011 and 2012, and only two have “wound down.” The rest have raised follow-on rounds, were acquired, or have continued to grow without needing further financing.

  “We have got to the point where we have a healthy, self-sustaining ecosystem” she said.

  Eze Vidra, Google London’s campus chief, agrees that the tech sector has come into its own. He points to a combination of factors, including government support and the growth of equity crowdfunding.

  The government is a booster of the tech scene, and it keeps track of the local startups. Just last week, Prime Minster David Cameron made a showing at the G8 Innovation conference, touting “open data” initiatives and and announcing a £1 million ($1.5 million) prize for entrepreneurs who could solve the world’s biggest problem.

  In December, a few months after the Olympics, Cameron announced a £50 million ($76 million) investment in London’s Tech City, which was spent on coworking spaces, classrooms and workshops for startups in “Silicon Roundabout.”

  Tim Ferguson /

  Prime Minister David Cameron believes East London will rival Silicon Valley.

  The term “Silicon Roundabout” is often bandied about, but Vidra believes it’s a bit limiting. Entrepreneurs living nearby the Old Street roundabout in East London use the moniker, and that area boasts a large concentration of startups. But clusters of tech companies also operate in South Kensington, a stone’s throw from science- and technology-focused university Imperial College, and suburbs like Essex, which offer a cheaper cost of living.

  “With the Olympics a few years back, the government wanted to communicate that the U.K. is the best place for tech startups,” Vidra explained. “So they came up with the [more expansive] term Tech City.”

  ‘It’s become easy to raise money’

  London entrepreneurs on the hunt for funding are inundated with options.

  High-net-worth types, who may have invested in real estate or the stock market just a decade ago, are on the hunt for the next Spotify or Instagram. Likewise, entrepreneurs who made their money in the dotcom boom, are forming venture firms. In the past few years, at least a dozen seed funds have emerged in the city, including #1Seed, Connect Ventures, Passion Capital, and Playfair Capital.

  If you’re keen to avoid the traditional venture route, it’s easy to meet angel investors at startup pitch events in the city. Likewise, Crowdcube and a host of others help startups and other businesses raise money online. Consumers can back small businesses for as little as £10 ($15). One U.K. startup, Escape the City, recently raised almost $1 million through Crowdcube.

  “If you have a strong team and product, the money will find you,” said Vidra. “It’s become easy to raise money.” As a result, Vidra points out that about 1,000 registered tech startups are operating in London. Just a few years ago, this was just 300.