London ranks seventh in new analysis of the world’s top technology start-up ecosystems, backed by Telefónica Digital.
The Startup Ecosystem Report 2012 ranks cities on a number of indices, including measures of the start-up activity, the availability of funding and talent, and the adoption of new technologies.
The UK capital was the highest ranked European city, but seventh overall behind Silicon Valley, Tel Aviv, Los Angeles, Seattle, New York and Boston, in that order.
"London has burst onto the scene and has become the most successful Startup Ecosystem in Europe, producing the largest output of startups in the European Union by far," the report says. "But its output is still 63% lower than Silicon Valley. London looks to be well positioned for continued growth as the leading Startup Ecosystem in Europe, and first choice for fast growing US startups to establish their European headquarters."
The report identified a ‘funding gap’ in London, with start-ups in the city raising 81% less capital before launch than those in Silicon Valley. "This is probably caused by a lack of super angels and micro VCs which are designed to target the deal sizes of 500,000 to 2.5 million," it says.
It quotes Rajeed Dey, CEO of internship placements website Enterships.com, as saying: "A lot more needs to be done [in London] to improve access to early stage financing. Generally investors are more risk averse, require far more validation and are less generous with valuations compared to those in the Valley.”