Sometimes you have to follow the action—and for a lot of tech start-ups, that means a move to California's Silicon Valley. But what can you get there that you can't get in the UK? David Woodward speaks to some of the entrepreneurs heading for the sunshine

Peter Nixey took a couple of years to fine-tune his idea. When he was convinced it would fly, he swapped London for Silicon Valley. "If you want to succeed in an industry, you need to go to the place where the industry is," he says matter-of-factly. It has not been a particularly smooth ride.

Nixey has only just found a new name for his venture after discovering the old one had enjoyed a former life as a porn site; plus, there's the task of acquiring an H1B work visa—the US immigration service is notoriously difficult to rush. But he says being at the "epicentre" of the tech industry will give his company the boost it needs. Put simply: "Everybody's here."
Nixey's business, Clickpass, which allows users to access their favourite websites without needing to remember their passwords, is one of several promising young companies on the books of San Francisco technology incubator Y Combinator. Partner Paul Graham is seeing more young entrepreneurs crossing the Atlantic: two of the 20 start-ups in the current pool are from Britain and one from Ireland. He says Silicon Valley is becoming increasingly cosmopolitan. "It's really cities that are competing, not countries," he adds. "And once you realise you can move, it makes sense to move to the best city you can."

Of course, with or without help from the US government's immigration service, the Valley has always relied on migrant skills. Indian, Pakistani and Chinese engineers have been essential to northern California's tech boom ever since Silicon Valley was better known for its silicon chips. But these days the originators themselves are just as likely to come from out of town. "There are more companies started here by foreign-born entrepreneurs than US-born entrepreneurs," says British software developer Aaref Hilaly.

"It's amazing how many Brits are out here," adds Pete Flint, who, two years ago, founded Sequoia Capital-backed Trulia.com, a real-estate search engine, after moving to California to do an MBA at Stanford University. Flint meets up regularly with fellow British expats for start-up gossip and premiership football. "It's such an international place," he says.

The question, of course, is what these emigrants are getting in the Valley that they couldn't get at home. Not much, if you study the bald statistics. A September 2007 report by Ernst & Young showed that a Valley address is no longer an automatic magnet to capital. Europe is catching up fast—and the UK is at the sharp end of the assault, recording a record seven Web 2.0 deals in the first half of 2007, accounting for a total of $22m (around £10.8m) invested. The San Francisco Bay Area managed 25 deals in the first six months of the year—at a total investment value of $91m (£44.6m)—but in terms of the number of deals worldwide, the Valley appears to be losing its mojo. From 2002 to 2006, Silicon Valley accounted for at least 40 per cent of all Web 2.0 deals. In 2007 that proportion is down to 20 per cent.

That hasn't stopped the influx of hopefuls. Hilaly feels very welcome in his adopted home. Little wonder. He's now CEO of email analytics firm Clearwell Systems, after selling his start-up, a software administration company called CenterRun, to Sun Microsystems for $66m (£32.4m). "The Valley is a young place that relies on outsiders to drive its economy," he says.

Hilaly describes Clearwell as something of an anomaly: it's an enterprise software start-up in a field dominated by so-called "clean-tech" (green technology) and Web 2.0 companies—two of technology's fastest-growing industries.

Hilaly insists the Valley is buzzing again—and according to the MoneyTree report (collaborative research between PricewaterhouseCoopers and the US National Venture Capital Association), there is life in the old dog yet. So far this year, US venture capitalists (VCs) have backed the largest number of US tech deals since the bottom fell out of the market in 2001, the majority completed in the Bay Area. In the Web 2.0 sector, the research shows the number of deals to be rising, but proportionately less money is being pumped in—a reasonable indication that second time around, more and more start-ups are generating cash straight off the bat. The VCs of Sand Hill Road and beyond have rediscovered their appetite for risk, but each gamble now costs them significantly less.

How quickly a fledgling company can stop burning borrowed cash has always been a major consideration for exit-conscious investors. As a founding employee of London-based Lastminute.com, Flint says entrepreneurs who start up in Silicon Valley can enjoy a simpler expansion route. "We rolled out Lastminute.com all across Europe, and that was hard work," he recalls. "Scaling businesses across the US is 10 times easier. There are no language, culture or currency issues. It's very easy to get a business off the ground."

Part of that is down to the networking grid. Whether ad hoc or organised, the bars and cafés of San Jose and Palo Alto buzz with entrepreneurs, software engineers, designers, lawyers, VCs, angels and PR folk. Michael Birch, CEO and co-founder of Bebo, and arguably the UK's most bankable export to the Valley, says the area's main attraction is its experienced pool of talent. "There's a thriving internet start-up community in the UK but not yet the pool of developers who can go from concept to product quickly," he says. "Most people here have experience working at start-ups, so they share that mentality and pace." Which is: "Work lean and mean, fast and efficient."

Bebo, which Birch founded alongside his American wife, is a social networking site in the Facebook/Myspace mould. It has 11 million users in the UK, 36 million worldwide, and recently signed a deal with Microsoft to launch an instant-messaging tool.

Valley journalist Scott Harris, a reporter at the San Jose Mercury News, says the company represents a growing band of start-ups seeking Californian addresses. "Bebo is a striking example. You'd think that the UK's top social networking site might have been born in London. But it was formed in San Francisco—and is still headquartered here. Would the [Microsoft partnership] have happened if it was based in London?"

Harris isn't sure, but Saul Klein, former vice-president of marketing at Skype, believes it's perfectly possible to recreate the Valley aura on this side of the pond. If anything, he says, Europe will lead the next tech boom, rather than ape it. "If you look at where the US ranks in terms of number of broadband homes per head of population, or speed of broadband to the home, it's in a terrible state, not even in the top 10 markets in the world," he points out. "Mobile innovation is happening outside the US. Massive multi-player online gaming is happening in Korea and China and then going to the US. Linux happened in Europe, WiFi, GSM—the Web was created in Europe. We've got an inferiority complex that we've got to get over."

Klein's answer is Seedcamp, which promises not only valuable seed capital, but also the ability to link young companies with "a Rolodex of mentors that would elsewhere take them five years to build". He believes the Valley model of moving your headquarters as close to Sand Hill Road as possible is outdated. "Our attitude is to back local teams with global ambitions—and those local teams are just as likely to be in Estonia nowadays as they are in Palo Alto." The international make-up of Seedcamp's first six start-ups, which include businesses from Scotland, Slovenia and Sweden, reflects that approach. "I thought we could give people the confidence to come out of their bedrooms to give it a go," says Klein.

But for Keith Teare, another UK export, attitude to risk has always been a key differentiator between London and Silicon Valley. It's the reason he relocated in the first place. Teare set up Easynet in the UK alongside David Rowe in 1994 (last year BSkyB bought it for £211m) but found it next to impossible to raise capital, moving to the US three years later. "I don't know if it's a national characteristic, but [in the UK] the idea of only doing things that are achievable is in stark contrast to the American view of reaching for the moon."

He accepts that attitudes may have changed in the time he's been away, but asked if he'd ever give the UK another chance, Teare is unequivocal: "No, never. The tolerance for leading-edge innovation is very low. You're more likely to fail because big companies that tend to dominate European business don't have a habit of doing business with start-ups."

Teare's latest business, a classified-ad tool for publishers called Edgeio, was launched with the help of long-time business partner and Silicon Valley guru Michael Arrington, whose daily blog, TechCrunch, is considered such an integral part of Valley life that it now turns over $10m (£4.9m) a year. TechCrunch has become so popular that Arrington has hired a CEO. In the Valley, even the bloggers have boardrooms.

Eager to avoid London landlords charging "something like £400-£500 per desk per month", Oxford graduate Kulveer Taggar chose to base his start-up, Auctomatic, in Silicon Valley, where you're more likely to pay the same price in dollars. Auctomatic, which Taggar runs alongside his brother Harjeet, is a website offering tools that enable professional eBay sellers to trade more efficiently. Taggar is still awaiting news on his visa application, but he's confident of a positive result. In the meantime, his days are spent sharpening his networking skills.

"In England, when we were starting up last summer, we were the only people starting companies in our peer group," he recalls. "We went to San Francisco and were surrounded by other people doing the same thing. That makes a big difference. In Stanford the best graduates say: 'Which start-up can I join?' In the UK, they say: 'How can I get a job at Goldmans?'"

But a growing cluster of successes is beginning to provide UK graduates with an alternative. Zopa, Garlic, Monitise, OnOneMap, Nestoria, Zoomf and Zubka are all original, scalable UK tech firms. Says Klein: "Not only is there access to an amazing ecosystem of talent, but you now have sophisticated venture capital. People are being myopic when they think of Silicon Valley as the only place to build Web businesses."

There's no doubting the Valley's credentials as a first-class innovation hub. But it does seem reasonable to expect that the Bay Area's main strength—a cosmopolitan core of labour and ideas, coupled with easy access to capital—may only serve to advertise its rivals' superior suitability: after all, if you're looking for a combination of diversity and cash, London has both in spades. But for now, the Valley is still king. The well travelled Arrington sums it up thus: "It's like making movies outside of Hollywood: lots of people do, but the culture is different and it's harder. I've never seen anything like Silicon Valley anywhere else in the world. That's why so many entrepreneurs move here, with or without a visa, to make their dreams come true."