London: the new Silicon Valley?

This type of question is most relevant to people considering which ecosystem in which to base their company, or part of it.

Having spent 2007-2012 doing a startup in London and the past year doing a startup in Silicon Valley, I've experienced both sides. I also had Silicon Valley investors in the first startup and spent time here every year since 2007.

London is catching up in some areas and you have to break the question down to make it useful. I'd look at the following areas that make Silicon Valley what it is:

Funding

- Not much difference in availability of investors but you'll get roughly double the amount of capital at double the valuation at each stage in Silicon Valley.

- Reason for similar availability is that there is at least an order of magnitude more investors at seed/early stages in Silicon Valley but a similar proportion more startups.

- At seed/early stage, Silicon Valley investors have higher expectations for growth and London investors have higher expectations for business model validation.

- Silicon Valley was much further ahead 5 years ago due to fewer investors in London and fewer startups in Silicon Valley.

- In London the tax incentives for seed investing and VC firms started by successful entrepreneurs (Atomico, Notion, ProFounders etc.) are changing this.

- In Silicon Valley, YC and its copycats are creating more high quality startups.

- At later stages, investors are still almost all American but they are comfortable investing across the pond by then.

Talent

- Proportionally more top people in Silicon Valley than in London across all functions.

- You'll pay 50-70% of the salary for people of an equivalent level in Silicon Valley and the cost of living is similar to London.

- Hiring is an order of magnitude less competitive in London than in Silicon Valley.

Acquirers

- Silicon Valley is dramatically better. London has no talent acquisition market and because all the active large acquirers are in Silicon Valley, they prefer local deals. This feeds all the way down to early-stage valuations which need to be so low in order to tie up with the poor exit market in London.

Ambition and role models

- One of the biggest differences. Mentality of being best in the world is far more ubiquitous in Silicon Valley than London.

- This has serious implications for you as a founder as your ambition levels are heavily influenced by the people you surround yourself with.

Accessibility of a large market

- Most billion dollar addressable markets you can target are mainly composed of the US market.

- For cultural reasons on the consumer side and relationship-building reasons in B2B, it's much easier to win the large markets when starting in Silicon Valley.

Overall London is catching up and one $10B+ success story will accelerate closing of the gap, but there are some structural reasons that mean there's always likely to be gap.

I wrote a guest post discussing the growth of London a couple of years ago, and things have continued in the same direction since: http://techcrunch.com/2011/01/27/the-european-startup-ecosys...