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Company startups running ahead of venture capital in the UK

Screen Shot 2013-11-27 at 11.25.48The chart above shows that the ratio of businesses started per head in the UK to the US is maybe 3.8:7.6 – i.e. about 0.5 – whilst the ratio of VC investment as a percentage of GDP is 0.04:0.17 – i.e. 0.2. That tells me that the UK venture industry needs to grow 2.5x to match the US in size relative the economy and population.

I’ve been saying for a while now that the UK startup ecosystem is underfunded. It’s nice to put some numbers around it.

I pulled this chart from Saul Klein’s excellent presentation to Dublin Web Summit earlier this year.

 

  • http://marcingrodzicki.com Marcin

    I’m afraid we would also need to factor in the percentages of VC fundable entrepreneurs (vs freelancers, taxi drivers and shopkeepers) to draw that conclusion. Not that the lack of funding is not evident.

  • http://www.theequitykicker.com brisbourne

    Yes. You’re right. But assuming that percentage is constant across geographies doesn’t sound unreasonable.

  • Ilya Venger

    Good point. Arguably, however, the UK start up scene is still relatively young, and does not require the same amount of chunkier investments (yet)

  • http://www.theequitykicker.com brisbourne

    Definitely some truth in that

  • http://blog.kwiqly.com/ James Ferguson @kWIQly

    @brisbourne I would have to disagree – That “Britain is a Nation of Shopkeepers” is more than rhetoric.
    Go to a US town and you will see the vast homogeneity of employment. Even on the highstreet (or Mall) the franchises are well-known Coffee, Books, Icecreams, Supermarkets.

    It is rare to seen the SME retailer in the US, they are almost all scaled.

    The reason is simple – population density. In the US you are either near a commercial hub or you are not – so communities define themselves that way. In the UK you can be “way out in the sticks” and still be an hour from the East End of London. So where you live in the UK does not significantly define availability of capital.

    Heck I am in Switzerland and talking to potential UK investors.

    In the US even agriculture is big per head (so would each pocket handkerchief sized farm in Europe distort the stats – answer yes!)

    Bottom-line @Marcin makes a very valid point that explains far more of the variance than availability of funds