No wonder there's no UK-born Facebook or Flickr

I attended a presentation by my colleagues from NESTA Investments on Monday, and I have to say I never realised the gravity of the sad state of investment in tech startups in the UK. According to Paul & David, the overall amount of money invested by venture capital in the UK is £10billion. Of this, only £1billion is invested in early-stage companies. Of this pot of early-stage investment, only £160 million goes to tech startups. That's just 1.6% of the total. Sheesh. It's no wonder UK tech startups are struggling. I wonder what the comparative figures are for US venture capital?

Comments

[Silvis Rivers]

Hello Miko

Flickr was not started up with US venture capital at all . It was friends in Canada who started it up (before Yahoo snaffled it into the US) and the key element they got right was creating a hygenic and multi taste model . They were more tolerant than the UK which when it did started something up which showed Arts & photo stuff like Mad For Arts - (A DCMS and Charity idea) created no self moderating compartments (building in conflict) and lacked tolerance for tastes and it was state hobbled from the word go ....

The problem is in the UK too much Top Down state power and funding is still around the idea of innovation and what funding is available is still not localised enough and is too subject to the strategic weavery of Govt policy and circles of connections

Localising funding and de-Londonising the country into some realisable autonomies may just see local growth rather than whose in the know getting the opportunies .. Mad For Arts was funded to the tune of 424k and left its users without an exit strategy and no education into how to use the net and facilities like Flickr ..

How do I know ? .. I helped everyone over to Flickr after Mad For Arts closed - They are still there .....

Okay its one small example, but it had some themes in it that show state cross organisationaly only created career money for well connected circles - Part of the problem was the media being involved in a govt connected charitable way - they did not miss opportunities for connection and some cash though ..

Loads of money was wasted on the Community Channel (that partly ran Mad For Arts) and other ideas that were supposed to be "socially inclusive"

I've paid for my own ideas to be produced albeit on a small scale in a country dominated by Top Down circles ..

Regards

Silvis Rivers .

[Miko Coffey]

Hi Silvis,

Great point re: Flickr starting in Canada - I had no idea. I'd be just as interested to know the proportion of Canadian VC that goes on tech startups as US VC. I've not been able to find such info easily (maybe not looking in the right place).

Overall, I think there are many factors affecting the dearth of tech startups in the UK - most of which seem to be the same ones debated on this thread from 2005:
http://www.plasticbag.org/archives/2005/07/where_are_all_the_uk_startups/

Interesting (or sad?) that 2 years on, nothing much has changed.

[Roland Harwood]

They say that if Bill Gates were born in the UK, he's be running the largest software company in Guildford.

What about Bebo and Last FM though?

[Miko Coffey]

Last FM for sure - and fantastic news in terms of realising their investment (CBS just bought them yesterday: http://news.zdnet.com/2100-9588_22-6187408.html )

Bebo however isn't so straightforward. Although Michael Birch is British, both he and the business are based in San Francisco. Birch stated last year that he was focusing on growing the UK market for the site, which has been the case (they're currently #1 social network in UK and Ireland). This has been supported by staffing up in London, but the home of Bebo is still firmly in the USA.

Overall, I was pointing out the lack of UK VC investment in tech startups. That isn't to say there aren't successful ones that make it through the cracks, it just seems to me that UK tech startups have a bigger hill to climb than US ones. I suspect it's no coincidence that Birch chose to base his operations a stone's throw from Silicon Valley. That's where all the money is.

[Leon Cych]

Ttoally agree about top down and what this does is centralise stuff and create unintended hegemonies of inertia.

[Silvis Rivers]

I'd almost forgotten I'd posted here but I am glad as I was doing some searching to see a response was put down .. I'll build on the theme I have put here because I am involved in a practical way with it ..

From a bottom-up perspective more Mental Health Users Online are using free web resources .. My intense concern about Britain is the hierarchical way it treats its populace and particularly localities..Its stinks like a dinosaur with back door trot that has convinced itself its nasal receptors do not exist.

The big Diplodocii (to extend my cheek) mental health charities and some alliances with them have collared a massive big lottery Grant (18 mil ) NESTA will know about it because I know NESTA's connections - this large grant is inside a context where MH users frankly could have done with more MH specific granting happening to seedbed local developments and the shape of their own groups. Yet the shadow of the quasi back civil services i.e third sectorite MH Charities is a-looming

The problem is the Centre and "top" in the UK are convinced they should lord over the local and are always trying to own the bottom ... Its known as unfelt Clarse conflict - ..This is part of the weave of events ..

WEB 1. mentality (tight control of stand alone resources) and corporatised thinking aint gonna work too well out there in the provinces of MH User-land on the web because what coming out of the web bag is Web 2. inter-activity and others in the world who are way ahead are lay back about this and are using loss leading schemes i.e. (free uploadabilities) onto resources and its works - it helps everyone ..

When you look at NING.com at the moment you see Users being able to form networks of enablement (if they want that) you can see it works . My friends , and one who is real enabler to the core, and I started off a community of Users and its only small but we are showing everyone how to do things like embed video from YouTube and upload stuff and talk about using Windows Movie Maker - linking photos from Flickr.com etc etc ,

This is happening when money is swilling about at top corporate levels with the large MH charites and mainly dulled MH Trusts who are anxiously hanging onto power over Users still.

This is UK tosspot rather than pure tinpot logic... Because the webcat is out of the bag .. This freeing up thematic is true too of Open Office (free downloadable software) which Microsoft have realised people across the world will use so that Microsoft cannot continue dominating via prices and monopoly .. Part of the EC are going over to use Open Office because its cheap and part of the Open Source Software movement ..

Now the chancers reading this if they do are already behind because UK wide there are MH Users who will undermine the corporate and corraling take of those who want pretty big slices of the grants-take out there ..Some of us are gobsmacked by the way the MH Charities are creating old hat web-sitage which collects mosses and makes em look credible ..

The point is though NESTA needs to get to the bottom and start creating the bottom up empowering approach and cut the Top Downers out of the equation ... We know who they are by name and ambition ..

Services Delivery of empowerment can be done but NESTA I doubt will listen and if it does it will favour a managerial class approach rather than locality approaches.....

Watch out for the MH Trusts they are safe playing tossers and the world is re-orientating into the age of the freed individual and the de-pyramised media even MH Users are aware of this ..

[Silvis Rivers]

Hell I just thought .. I should put down our little blog here .. We advise and help MH Users get stuff onto the web and we accept their slow pace but we live with the idea that people will grow . And they do a bit faster when the corporate-mind clears out of the way and they watch innovators directly who are not trying to latch them into other cash schemes..

http://nbca.blogspot.com/

See you on NING.com

Silvis

[Miko Coffey]

Hi Silvis,

Sorry for the delay in responding but I've just managed to catch up with lots of August holiday backlog.

I'm not 100% sure how we ended up on a mental health discussion starting from a post about tech startup investment, but I'm happy to continue the dialogue as you are clearly very passionate about this area... and I hope I can add something to the conversation, even though I'm no expert in this particular area :-).

Unfortunately, I think the 'top down' approach is not unique to mental health, or the UK, but is widespread across many industries and cultures, and it will take time to break this down. However, I do think folks like Eric von Hippel are showing big business that there is another way (ie. learn from your customers!), and movements like the open source movement and the huge growth in web app development will force a sea-change at some point. I think self-organising and using the social web for social good can only be a good thing. It's great that mental health users are adopting free web resources like ning.com and other social networking tools for sharing ideas and building a sense of community. They are also self-organising in SecondLife - just this morning I noticed at least 5 mental-health related support groups in there. I'm a big believer in organically growing communities, and making use of cheap/free tools like del.icio.us, Basecamp or Diigo (in fact we use a lot of these at NESTA - something I'll post about separately). Which tools are you using, out of curiosity?

Overall, I think this will be a big area to watch as users of all kinds start to recognise (or get trained by folks like you) that they can galvanise groups around issues & build momentum in ways never before possible using these kinds of tools. A lot of it is already happening out there, under the radar so to speak. (Slightly off the mental health topic, but it's worth having a look at how some of the socio-political activists are using these tools, too.) The difficulty I think is that while amazing localised efforts do exist out there, the problem is making them known and convincing descision-makers further up the food chain or in different localities to acknowledge their impact or even give them a try (when appropriate). I think citizen journalism helps, but until people with power start taking the social web seriously and understanding what's *really* going on in Web 2.0, a lot of it will continue to happen under their radar. But in time I think this will (inevitably) change, provided we can do a good job of educating and desmonstrating value to these people. And we mustn't forget that the underlying culture must change in order to support it, too - that's the really hard part.

I have to say I'm a little disappointed that you are so sceptical about NESTA not listening to the users and expect us to favour a 'managerial class approach'. This is exactly what we have tried to avoid in things like our Innovations in Mental Health call for proposals. There, we specifically targeted users and front line workers, as we wanted to bring some of their hidden ideas to the surface, and put our money where our mouth is by supporting them financially - in fact we contacted some mental health bloggers & forum moderators to invite them and their readers to submit their ideas. As we don't profess to be experts on mental health issues ourselves, we decided to partner with expert organisations in this area, so we could benefit both from their experience and access to front line workers and service users. We felt this was the right approach, as we certainly didn't want to storm into such a complex and unknown (to NESTA) area like a bull in a china shop.

I hope that we demonstrate our openness to user-led innovation in other areas of our work, as well. I'd encourage you to have a look at some of the articles, reports and podcasts on our site (for example, the 'hidden innovation' research on the rehabilitation of prisoners, or some of the themes Ron Burt touches upon). We're just starting to explore a lot of the nuances of the innovation landscape, but I hope that in time we'll be able to help create a positive environment in the UK in which innovation of all types can thrive, in all sectors.

[Jim Plamondon]

Miko --

Along with the University of Queensland's Dr. Peter Thomond (formerly of Cranfield), I did some research into this question when I was trying to start up a company in Australia. There, things are even worse than in the UK (or Canada).

I eventually gave up trying to educate Australia about disruptive innovation and moved back to the USA, where my innovations have been much more warmly received (www.thummer.com/reviews.asp).

Pete's contact info can be found at
www.bgsb.qut.edu.au/about/staffdirecto/thomond.jsp

If Pete proves unresponsive, I would be happy to send you our research results.

Thanks! :-)

Jim Plamondon
CEO, Thumtronics Inc
The New Shape of Music(tm)
www.thummer.com
Austin, Texas

[Idamann]

A UK born facebook or flickr wouldn't have fit the IP minded culture of British startup - this country is far behind in understanding that web 2.0 is more about the elegant execution of simple, great ideas than how much IP you have.

The UK wouldn't have the risk tolerance that goes with the fact that both businesses had very little in the way of revenue when they received their first funding.

I wonder if NESTA has recognised the need to shift away from the IP dominated era when it comes to web 2.0 startups?