Why London — and not the valley

I recently returned to the UK following a 10 day LDN2SFO reconnoiter of San Francisco and Silicon Valley. My goal in going was to understand whether and how Reincubate should be out there, and to build my network. Thanks to Jack Gaviganʼs efforts, UKTIʼs informal support, and a bunch of very generous speakers, the trip was an enjoyable success. Today I'm out on the East Coast, in Silicon Alley, but before I turn my thoughts to that I want to write down what I took from the West.

There are clearly some differences in the environment which offer value to entrepreneurs:

• The network is tighter, easier to access, and there is more capital floating around
• The concentration of entrepreneurs, service providers and investors make serendipitous connection more likely
• In general the attitude is less risk-averse and more positive
• As a consequence of the above it is likely easier to raise for and dispose of businesses
• Dismissal of staff is much easier with employment at will, although this cuts both ways

Many of my cohort have written in positive terms about sunny Californiaʼs dotcom mecca. One might digest those pieces and conclude that London entrepreneurs are crazy not to make the move. Praise like this has me looking for the razor in the apple, and my own contrarian reflection has had me concluding Iʼm better off outside the valleyʼs 1,500 square miles for now. I've left aside comment on tech immigration, and itʼs been well covered already and is clearly in need of reform.

At the time we started our trip there were a few small mentions in the tech press of Jody Shermanʼs death down in LA a few days prior. By the middle of the week some commentators were asking whether the industry and press needed to re-examine the way it treats founder mind-sets and mental health. Whilst no one I spoke to directly addressed this, many of them gave colour and context to the debate happening around us in what they said.

As we went about the trip I was impressed by how enthusiastic, focused and compelling many of pitches we heard were. In the UK we can be a less effusive in our pitching, and I felt some of what we heard needed to be taken with a pinch of salt. We got some hints of this: one oblique warning about funds investing late stage to get logos in their portfolio, and an investor warning how they reject the concept of co-working spaces after we toured a couple of well-sold but visibly deserted incubators. Thereʼs a fine line between the “hustle” that investors rave about and something else altogether, and I got the impression that moving over from the UK one would need to reorient oneʼs bullshit filters. This stands more as contrast than criticism; itʼs a natural consequence of a healthy, survivalist “always be pitching” attitude, and as a founder I need to turn it up a bit myself.

Whenever I return to the States I'm struck by how American greetings sound more sincere than the cursory mumbles one might get in a restaurant or chance meeting in the UK. However, it doesn't take long to realise that the West Coast culture isnʼt to give more or less of a shit than elsewhere; rather, itʼs simply to sell it better. In a similar vein, several people we saw speak on the trip referenced the textbook entrepreneurʼs reply of “things are fantastic!” even when theyʼre not going well, which more than likely is most of the time. Alexia Tsotsis refers to this in her recent writeup on TechCrunch. Other asides I heard on the trip drew my attention to there being a much greater gulf between reality and appearance on the West Coast. In particular, one founder talked about how the high cost of living amongst other factors made it “easy to become homeless [as an entrepreneur] in the valley” and gave the opinion that many relationships there lasted only in the context of a successful business. Hyperbole, I thought -- it canʼt really be this stark -- but it got me wondering how to reconcile this and the inescapable SF homeless we saw, with the oft-repeated mantra that “failure is a badge of honour”.

I had my breakfast reading the SF Chronicleʼs reporting on young men sleeping in illegally rented $600/m washrooms, before visiting a cramped hacker house with six or so young men sharing what appeared to be a bedroom and a half between them. We heard about how startups are usually restricted to high cost, high excess medical cover which is rarely comprehensive. I started thinking about the pressure these founders must be under, with or without the responsibility of having taken investment. It must be very hard to build healthy relationships, and particularly ones which give you some emotional balance and grounding outside work. That sort of thing is pretty important when youʼre having one of those “itʼs all extra-broken” periods in the business. I like to think the relationship I have with my team goes beyond just business, and if I transplanted some of the early-20s staff in my team to San Francisco I would feel a lot of extra concern for their wellbeing.

We heard tales of about $150k+ engineers rotating rapidly between the startup du jour and the old euphemism that many there are incredibly motivated by money. I wondered, when you do that pivot, miss those numbers, or when TechCrunch say youʼre more Friendster than Facebook... off might go those prized hackers -- your most important assets -- at the drop of a hat. I picked up the insight that a founderʼs network and roster of investors counts a lot towards their perceived value, but we didn't hear anyone argue against taking investment early. A decision like ours not to ABR early external funding would surely make our lives harder. Whilst much of what I heard was perhaps exaggerated, non-valley founders face enough pressure as it is without exposing themselves further to these dynamics. Is enhanced startup scene literacy a helpful thing for a founder to have in their staff? Do smaller tech communities like those in LA or Las Vegas feel more isolated than SF, or do they club together more? Clearly these dynamics arenʼt limited to the US, or to the valley, but the few people I spoke with gave me the impression that they were more pronounced here.

The conclusion I reached is that both San Francisco and the valley are great places to raise money or to dispose of a business. They are also fantastic places to build networks. I met a bunch of friendly people and saw some things at a rate that was far greater than I could have in London. Some of that was from Jackʼs kindness in sharing his network with us but itʼs clear itʼs also about the place. I intend to spend more time there building my network and getting inspired, and as Reincubate gets closer to enterprise deal-making I can see us possibly building up local sales resource. Balancing that, though, I felt it would be a poor choice of place to base the business in its formative years.

I see a few foreign businesses following this path. Working hard and focusing without distraction at home, getting the fundamentals right, proving their strength by getting US investment around a foreign base (hard to do, but these exceptions break the rule and make them look awesome), and then making the move once they have a sound and saleable business. Perhaps founders should be out there to reap the rewards of their hard work rather than taking the business through delicate early stages.

Thereʼs one last point to make about the valley as a startup scene. The benefits a scene offers an entrepreneur arenʼt only accessible if the business is based there. One can take advantage of some elements by camping out from time to time. I can draw a parallel with London. Steve Blank defines a startup as a business working towards finding a sustainable model. Londonʼs Shoreditch stands for finding models, finding profitability, finding people (by implication some of them moving from other businesses) and finding ideas, whereas Londonʼs City stands for revenue, profitability and knowing what the plan is. I focus on the latter and want to send this message to my team and partners, so we made a bigger investment to base the business in a costly, professional area rather than a subsidised or shared one. Like many CEOs those things in Shoreditch are useful for me, but if Iʼm doing my job properly my team should be focused on City values and not Startup Disney. For now I think the B2C elements of our business can be sold from anywhere in the world with great consumer protection laws, and the UK certainly has those.

Wrapping up, this latest valley trip was a short one, and I met only a small sample of people. I will be back in San Francisco and further south later in the year to learn more, and no doubt my opinions will change. Drop me a note at @afit and help me change them, or just say hi.