Friday, March 04, 2011

Geography

At a recent startup event a young tech entrepreneur asked me what the single most important thing they could do to succeed would be.

I told them to move to the Bay area.

The huge problem with startup businesses in Europe is that they have small audiences and little or no exit route. This is why British venture capital investment in technology has resulted in dismal returns over the past decade and why there is little or no VC funding now available to tech companies.

In the US there is a conveyor belt of exits, and often it's facilitated by the companies who created the exit route in the first place.

Try to think of any world class tech companies that have come from the UK since Autonomy...

And then try to think of any UK companies that have been snapped up and achieved any kind of valuation, or which have gone public and then flourished. Ironically, the Baltic states have been more successful with Skype and Spotify (which respectively trounced two US competitors Vonage and Pandora).

During my career I've been lucky enough to work on both sides of the 'pond' and the basic fact is that the US market is so large that a very bad company can be made to look good and will be bought by virtue of its 'reach' - YouTube is a classic example of a dreadful company with awful technology that somehow got traffic and therefore got bought.

In the UK the market is so tiny that a company has to be very special indeed to reach the radar of the likes of the acquisitive US company, let alone be on a position to be bought out. The market is small, the traffic usually tiny, so there are no metrics that count. And even the best technology does not compensate for that..

News that Clicker has been bought by CBS is therefore not surprising, whilst Clearleap is powering ahead in the OTT market. Better companies like Locate.tv (OK, part of NDS) and Vidiactive are being left in the wake of the American juggernaut.