London ranked best startup ecosystem in Europe

26 Nov, 2012

A new report out from the Startup Genome and Telefonica Digital ranks London as the seventh best startup ecosystem in the world. As you can see from the table above Silicon Valley comes out top and Tel Aviv is the only city outside the US that comes ahead of London.

There are always questions over methodology with reports like this, but the research takes data from 50,000 startups and seems pretty robust, although it would be good to know how the different components were weighted to produce the overall ranking (apologies if I've missed this, I did look). The 'Startup output index' is weighted for population size and maturity of startups in the region which I guess explains why some small cities rank highly on the list.

If you take out the smaller startup ecosystems then London would rank third behind Silicon Valley and New York, but my main interest is in what we need to do to improve. This research tells us that performance, talent, and staying up to date with trends are the areas to focus on. This rings true to me – better results from startups and their investors will bring more money into the ecosystem and help us raise the game generally, talent is the big enabler of performance and leading the world by setting trends is the raison d'etre for startups.

The good news is that I think we are improving in at least two of these key areas. Performance stats will look a whole lot better if/when companies like Mind Candy and Wonga go public, the quality and experience of the entrepreneurs we see increases all the time.

Diving into the detail of the report surfaces two other issues. We have a funding gap in London relative to the Valley and our entrepreneurs are less ambitious as evidenced by the size of their goals and the extent to which they consult on the side rather than commit fully to their startups. I think these are two sides of the same coin – if more cash was available for investment entrepreneurs would aim for bigger outcomes and wouldn't have the same need to supplement their income.

For further reading check out this article on CityAM.

(Nic Brisbourne is partner at DFJ Esprit, one of Europe's leading venture capital firms.  The post has been reproduced with the author's permission from his blog, The Equity Kicker.)

To become a guest contributor with VCCircle, write to shrija@vccircle.com.