Why are British entrepreneurs still flocking to Silicon Valley?
Silicon Valley is home to 100,000 Brits, many of them in tech
Many of Britain’s best technology entrepreneurs have shunned the UK tech scene and flocked to Silicon Valley in the last few years on the quest for success. But what is it that makes Silicon Valley such a desirable place to build a tech start-up?
Today there are over 100,000 Brits living in Silicon Valley and given that techology is the region's largest sector, it's fairly safe to say that a considerable number of them will be working in tech.
Huddle’s Alastair Mitchell and Stripe brothers John Collison and Patrick Collison are all prime examples of young entrepreneurs that made the leap to the west coast of America and went on to make millions of dollars, hiring many locals and pouring money back into the local economy in the process.
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But what does Silicon Valley have that the UK doesn’t? A potentially important question if the UK wants to cling on to some of its finest tech talent and grow its own economy in the same way that Silicon Valley has.
A sunny disposition
The first thing, and one that no government scheme or initiative can address, is sunshine. Many Brits in Silicon Valley truly believe that this is a key factor to the region’s status as the tech capital of the world.
“I have a theory that the weather is what makes Silicon Valley so successful,” says British entrepreneur and Huddle CEO Alastair Mitchell from his office in San Francisco’s SoMa (South of Market Street) district.
“Honestly that’s what I put it down to,” he continues. “If you think about it, the UK has got Cambridge, the equivalent of Stanford, and London is a bigger financial power house than San Francisco. But the weather here breeds a certain level of optimism and focus.”
John Collison, a 23-year-old Irishman who set up an online payments business in San Francisco’s Mission District with his older brother Patrick, agrees that the weather in Silicon Valley has something to do with the success of companies in the area. “People are really smug here about the weather,” says the co-founder, who left the UK to study maths at Harvard before starting his fintech business.
There are, of course, a number of other factors that make Silicon Valley the tech capital of the world.
Entrepreneurs looking beyond the prospect of a golden suntan make the move in order to tap into the vast pools of capital available to tech firms in Silicon Valley.
The funds, which dwarf those available in the UK, run into the tens of billions, according to Mitchell, who has raised $40 million (£23 million) for his enterprise file sharing and collaboration company since setting up an office in San Francisco.
“There is more money in one building on Sand Hill Road [in Palo Alto] than there is in the whole of the European venture capital ecosystem,” he claims. “There are 20 or 30 buildings down this road and in one building there’ll normally be $1 billion - $2 billion (£600 million - £1.2 billion) under management. At least. Sometimes it’s way more than that.”
Collison, who has watched Stripe raise $130 million (£77 million), acknowledges the fact that there are vast tech funds waiting to be tapped in the Valley. However, the main pull for him was not ludicrous sums of money, but the access to a skilled workforce and the fact that many of Stripe’s target customers are also headquartered in the area.
Several other factors make Silicon Valley and San Francisco a great place to be a tech entrepreneur.
Entrepreneurs are the norm
Mitchell, who lives in Sausalito, across the iconic Golden Gate Bridge on the other side of San Francisco Bay, takes the ferry to work. “[It] beats the Northern Line,” he said. “It’s a nice 20-minute commute...you see seals, maybe even a whale.”
Gerald Brady, head of relationship banking at Silicon Valley Bank UK, adds: “The Valley really is the most optimistic place on earth because every day you meet entrepreneurs who say I’m going to change the world.
"The biggest difference [between Silicon Valley and London] isn’t about lawyers, capital, universities or the ecosystem. It’s cultural attitude to risk.
"Also, no one thinks you’re unusual to be an entrepreneur in the Valley. You’re surrounded by Apple and Google and Genetic and all these companies. There are buses everywhere. Apple stores everywhere. Every kid sees iPhones. Half of your children’s class have mums or dads who work in tech or life sciences or they’re doing a start-up. So for them there’s nothing unusual about it and there’s not the perceived risk that they have here.”
However, the influx of entrepreneurs from Britain and beyond has led to drastically rising rents, resulting in tensions between those that work in tech and those that don't, or the "haves" and the "have nots".
Despite the tensions, which could well be unique to this corner of the world, the UK government is keen to shine a light on its own tech scene.
David Cameron put his stamp on the cluster of successful start-ups spinning up around London's Old Street roundabout three years ago, when he labelled it Tech City, and Boris Johnson has also jumped on the bandwagon this year, hailing London as the tech capital of the world. Part of this is about convincing British tech entrepreneurs that London and other tech clusters in the UK can compete with Silicon Valley.
To support the UK tech scene, a number of tax relief initiatives and visa schemes have also been introduced by government, while the London Stock Exchange and Tech City UK have introduced several initiatives to make London a more desirable place to float a technology company, including the new High Growth Segment and the Future Fifty programme.
Whether these actions will dissuade the UK's talented entrepreneurs from "Dreaming of Californication" remains to be seen, but they're certainly a step in the right direction.