Posted on 24th March, 2016

by James Codling
Co-Founder & MD

Failure doesn’t matter in San Francisco

Earlier this month, I was fortunate enough to meet with some of the most influential organisations on the West Coast of America, to tell them more about the burgeoning FinTech market here in the UK and learn more about their ecosystem, as part of a UKTI mission to showcase the ‘Best of British’ FinTech in San Francisco.

I was surprised to find that the vast majority of those I met thought that the UK was a nation of followers and not leaders. This is contrary to what I see every day – businesses that are breaking the mould to create innovative and disruptive products and services that are changing the shape of industry. However, once I spoke to them about some of the businesses that we have helped raise capital for, their perception changed. To continue competing globally, the UK needs to champion the talent we are producing in order to show the world what we’re capable of. So what makes San Francisco so sure of itself as a leader?

A recent report from EY for HM Treasury highlighted that although the UK and Californian FinTech markets are a similar size, California attracted £3.6bn of investment in 2015, compared to just £542m in the UK. The general culture in the Valley is that if an investor believes in an idea, they will provide all the resources needed to get it off the ground. Not only are there significantly more VCs operating on the West Coast than here in London, startups and high growth businesses are supported by banks and other institutions specifically geared to their needs. The ecosystem, including VCs, Silicon Valley Bank, Angels and entrepreneurs, are all interconnected with a strong sharing culture that works brilliantly. The UK, in comparison, has a highly fragmented funding culture and we could learn a lot from the West Coast in this regard.

Even with this very supportive culture, failures do still happen. However, in the Valley, this is seen as just one of those things – the experience gained during the process is what matters. I was again surprised to find that actually many of the successful entrepreneurs had, had a few wobbles in their earlier careers. To be taken seriously, often the entrepreneurs were on on their fourth or fifth startup, which was becoming a success due to the steep learning curve they’d had from previous ventures. This ‘fail fast, fail often’ mantra is constantly reinforced by tales of tech founders who were down to their last dollar, working 18 hour days and living out of their car, before striking rich. It is all part of the much loved rags to riches stories and the American dream.

Once an entrepreneur has been successful in Silicon Valley, they don’t forget their roots. A lot of the large investors backing this new wave of innovation are successful entrepreneurs who not only invest capital, but also give businesses their time and expertise. I was amazed by the opportunities offered to some of the companies in the incubator programmes and some of the skill sets and expertise within the VC community.

However, I think we may begin to see a slight shift in the investment culture in San Francisco. I wouldn’t say that the bubble is about to burst in the startup funding scene, but some of the heat has certainly come out of the market, causing it to deflate a little, and valuations are on a downward trajectory.  VCs are still investing, but seem to be more cautious with their spending. This will likely impact the London market, albeit on a smaller scale, as we've never hit the dizzying heights of US tech valuations.

There are many things Silicon Valley does well to support entrepreneurs, but it is the overall attitude and the belief that good businesses should have everything they need that really drives the market forwards. The UK is making steps towards such a culture, but we still have a long way to go before we can rival the very unique ecosystem nurturing startups in San Francisco.


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