In Britain, calling someone "ambitious" has never been much of a compliment. Entrepreneurs were thought unseemly and, well, just a bit too rough around the edges. "NQOC" -- Not Quite Our Class -- was the tag often used.
The Internet was supposed to change all that -- and for a few months, it did. Highfliers such as Martha Lane-Fox and Brent Hoberman, cofounders of supercool travel site LastMinute.com, became media darlings. Lane-Fox even saw her portrait hung at the distinguished National Portrait Gallery in London.
But the dot-com meltdown quickly turned this pair and others from celebrities into pariahs. As their wealth dwindled and businesses came crashing down, so did public opinion of the young entrepreneurs. But contrary to what you might expect, the dot-coms' disgrace has not sparked a resurgence of the traditional British disdain for entrepreneurialism.
While startups are temporarily out of fashion, entrepreneurs and investors don't doubt for a minute that the climate for British small businesspeople has improved. The rapid rise of the dot-coms helped put education and financial infrastructure in place for budding businesses, and, most important, the media frenzy gave young upstarts a crash course in all things entrepreneurial.
WHOLE NEW CRICKET MATCH. Those lessons will not be forgotten. "I don't think you can put the genie back in the bottle," says Jeffrey Nuechterlein, managing director of NGC investments and an expert on European venture capital. One sign of change is the lexicon of business terms that have entered the British vernacular. In 1997, phrases such as "seed funding" were largely unknown to young college graduates.
Today, the idea of capital, along with the notion of a business plan, are familiar concepts to everyone from dot-commers to London cabbies. "There are a huge number of people outside Oxford and Cambridge who now have a macro idea of how to start a business -- and that has to eventually erode traditional British culture," says Clay Shirky, a partner at Accelerator Group, a consulting company that has helped several British businesses plan their digital strategies. "
The popularity of dot-coms also established the essential infrastructure needed to educate and fund entrepreneurs. Just ask Steve Bowbrick. A veteran entrepreneur by British standards, Bowbrick, 37, has run two Internet businesses since 1994. The first, a Web-design shop, failed. The second, Another.com, a free e-mail service that lets users choose their own domain name, has raised about $10.5 million in two rounds of funding. "When we started in the mid-'90s, we didn't even try to get funding. There was no venture-capital scene -- or there was, but it didn't apply in our area. You knew instinctively that you didn't call those guys," remembers Bowbrick.
The evidence isn't just anecdotal, either. Britain now rates high on the scale of entrepreneurial activity, a measure developed by a group of researchers at Babson College and the London Business School. Their 2000 survey of 21 countries found that Britain has one of the highest rates of entrepreneurial activity in Europe, topped only by Norway and Italy. One in 25 people, or 4% of the population, is trying to start a business in Britain. That's up from just more than 3% a year earlier. While that number still lags far behind the U.S., where 1 in 10 are involved in an entrepreneurial effort, it is double the rate in Finland and Sweden, and quadruple that of Ireland, Europe's Celtic Tiger.
TRY AND TRY AGAIN. Venture capital in Britain also is booming. Investors poured $29.6 billion into British companies in 2000, up 31% from 1998, according to Initiative Europe, a venture-capital research group. While much of that money still goes to acquisitions and buyouts, an increasing amount is now headed for startups and early-stage ventures. In 2000, 183 startups got funding totaling $1.17 billion. Compare that to just 51 startups in 1998, with a total of about $291 million.
The shifting numbers underscore a sea change in Britain's business culture. Failure, once viewed as an embarrassment, is no longer always considered a black mark. Paul Lavin, an American expatriate who has lived in Britain for 20 years and is now CEO of startup broadband provider Enformatica, says after the recession in the early 1990s, the British learned that failure isn't always personal -- sometimes it's just business.
"The entrepreneurial culture is a witches' brew of society-taught responses to opportunity," he says. "Yes, there is a sterner schoolmaster to what kind of entrepreneurship is rewarded here than in America. But that is changing." The venture-capital community apparently agrees. True, VCs have stopped racing to find the next investment, but there has been no retrenchment from their investments in early-stage ventures. "Funds are more cautiously deployed, [but] I certainly don't see a withdrawal," says Anne Glover, partner at the prestigious Amadeus Capital Fund.
LINGERING ATTITUDES. To be sure, there are those who insist that nothing has changed -- that it's as difficult as ever to earn respect as an entrepreneur. "In the U.S., you have it ingrained in your culture that someone can start from nothing and end up with millions," says one entrepreneur, who asked not to be named for fear of financial reprisal. "The U.K. is a lot more cynical, and many have a snobbish distrust of anyone who appears to have made their money 'too easily'."
And there's no doubt that a veritable London fog has set in over many startups' dreams of success. Another.com's Bowbrick has this advice for budding entrepreneurs: "If you're touting a plan right now, don't bother. Hide in the cellar. Go on holiday. No matter how good your idea is, it's going to stay in the in-tray."
How long will it take for the fog to lift? Says NGC's Nuechterlein: "We are in for a ride. But things are in place for Britain to become more entrepreneurial than it has been before." Two steps forward, one step back. By Jane Black in New York