US vs UK: How is the UK venture market different from the US market?

Leading investors assess the state of UK venture capital and how it compares to its American counterpart…

With several entrepreneurs flocking to the US for funding, leading British and American investors discuss the state of the UK and US venture markets and whether businesses have to break America to be a global success.

The debate

UK or US – which venture market is better?

Jeff Burton, executive director of SkyDeck Berkeley and co-founder of Electronic Arts:

“There is a great deal of potential in the UK. In terms of sheer numbers, the UK market isn’t there just yet but I think that’s because US venture companies are pursuing high-impact business ideas, apps especially.

“In the US I see a lot of pitches from product and service businesses that also have a social element to help developing countries with many using scientific-engineering to create a world-wide impact. In the US start-ups and entrepreneurs hold the belief that ‘my company is going to change the world’; it’s far different to the attitude of British entrepreneurs.”

William Bryant, venture partner at DFJ:

“Entrepreneurship is a global phenomenon. At DFJ we believe the next big thing can come from anywhere be it UK, US or outside of these parameters.”

Ben Holmes, partner at Index Ventures:

“The game is only half played in the UK.”

Do businesses have to go to the US to be a global success?

Ben Holmes:

“Honestly, the only businesses that should go to the US are enterprise software companies as there is a lot more for them there but that’s the only exception. Businesses in any other sector can be a success and don’t need a US presence. Take UK-based Just Eat for example, that started in 2001 and has now been rolled out in regions across the country and its business model has now been copied in the US – it was a global innovator!

“In the US success centres on certain concepts, there’s often a curse of the “big thing” as opinion quickly changes in the US.”

It is often said that raising money is much more difficult in the UK, is this true?

William Bryant:

“In the US we have four main venture funds and several others but we don’t have late-stage venture funds, say for Series C/Series D, I don’t know about the UK. What I would say is that if you’re a cloud infrastructure or software business that you really do need to be in the US for the best support and investment, and this includes robotics, 3D printing and planet labs.”

Quality of business angels: UK vs US?

Ben Holmes: 

“We have a good business angel community in the UK with investors from major companies such as Skype and a lot of great angels have come out of the gaming industry. There are great angel networks here as well but there are a lot of imposters out there. Stay away from pay to pitch events and do your research. If you are a strong entrepreneur with a good business proposition then you will attract angels.”

How much are angels and VCs guided by a business’ management team when it comes to investment?

Jeff Burton:

“It’s necessary, people in management have to be very, very smart. You have to filter out and be selective about who you hire. Take Google for instance; they are notoriously strict when it comes to recruiting – they expect candidates to present report cards and sheets showing every single one of their grades.”

Ben Holmes:

“The biggest difference in the UK compared to the US is that we don’t have a very business-minded culture. In the US lots of successful founders also work as university and college professors. In the UK professors aren’t entrepreneurs. For me when it comes down to management and assessing the business’s potential I always ask myself ‘how much have they achieved already with the little money that they have?’ If they have already learnt a lot and have a lot to show then this paints a good picture of what they can achieve with venture-backing.”

 

Jeff Burton, William Bryant, and Ben Holmes were speaking at Vator Splash London this month, held at Level39, Europe’s largest Fintech accelerator.

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