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They pretty clearly state their metric for performance is "unicorns per $1bn" (3.08 vs 1.22). They're suggesting dollars invested in UK startups are more likel

They pretty clearly state their metric for performance is "unicorns per $1bn" (3.08 vs 1.22). They're suggesting dollars invested in UK startups are more likely to create a unicorn than those same dollars put into us startups, hence higher performance.

jimnotgym 11mo ago
Presumably because VCs in the UK are so much more risk averse? They only invest in 'sure things', potentially missing out on other opportunities.
- nailer 11mo ago
  Also if the UK investor says "we'd love to invest, can do the whole round, want you to send us your current cap table, we need to get the deal done before April because we have capital to deploy before end of the current financial year" don't actually expect the funds.
  - inglor_cz 11mo ago
    Could you explain this?
    - cjbgkagh 11mo ago
      I assume too good to be true. I had the misfortune to be pitching to VCs in the UK, the money was so expensive that it’s just not worth it, much better off moving to the US if you can.
    - nailer 11mo ago
      Sure: UK VCs ('Haatch' specifically in this example) will give an enthusiastic 'yes' and then not deliver funds.
      - inglor_cz 11mo ago
        Aren't they afraid of the reputation risk? If they behave so treacherously, future startups may go to the US without even asking them.
- FloorEgg 11mo ago
  I know nothing about UK investment culture, but I have been building startups for 15 years, volunteered for multiple accelerators, made angel investments and rubbed shoulders with many US VCs. My impression of the US VC industry, especially near the end of the zirp era and even more especially during covid, the amount of VC capital being deployed far surpassed the number of competent VCs or startup founders. Many VCs were making decisions based on factors that were NOT correlated with future venture success. Many VCs in fact probably biased companies away from future success, because they didn't understand what they were doing and their instincts from prior industries or investment regimes were directly the opposite of what was needed for an early stage startup. In other words, there is risk aversion, and there is foolishness. I know for a fact there was a lot of foolishness going on in us VC investing (I even participated in some of it, learned from it, and I know better now). I'm not just talking about VCs throwing money at anyone with a pitch deck. I'm talking about VCs having a backwards understanding of what makes startups successful and actively pressuring startups that could have worked into doing the wrong things. There is a core of US VCs that are the world leaders in what they do, exceptionally aware of what makes startups successful and have the track record to prove it - this minority is overwhelming responsible for the industry's ROI. There is also a massive graveyard of fools who tried to replicate that success and failed for a variety of reasons.
conductr 11mo ago
If they are able to scale at that ratio it will be noteworthy. It is quite unlikely though.
- idle_zealot 11mo ago
  Well, yeah. Presumably the way they achieve a good ratio is by being more discerning with their investments. If you try to scale that you get the US's numbers as you throw money at anyone with a pitch deck.
  - conductr 11mo ago
    The thing is, the US model is still better in aggregate as it basically results in every single unicorn being birthed (in theory, there’s simply no lack of funding for plausibly good ideas). Focusing on a conversion metric is a vanity exercise when absolute value creation is available. We would all rather own a huge low margin business than a tiny high margin business. Eg, 5% margin on $1B of sales is better than 80% margin on $10M sales.
wakawaka28 11mo ago
That might be a case of selection bias. The only reason to put up with UK regulations and other issues is if you have a compelling reason to do so (compared to similar opportunities).
cjbgkagh 11mo ago
Quite typically the highest return investments are picked first; as such there is a diseconomy of scale, it should be of no surprise that the ROI decreases as investment scales. Perhaps instead of thinking of it as a sign of efficiency it should be thought of as an underdeveloped market with the UK foolishly leaving money on the table.
- hshdhdhehd 11mo ago
  Also it is not measuring average returns per $ but returns split by company then a vector operation of ceiling (1bn) divided by my 1bn then aggregated.
aiauthoritydev 11mo ago
Thats a dumb metric. It is like saying conditioned on a doctor saw you, how many people were saved. You gotta count folks who died because they did not see the doctor too. Some of the unicorns could be simply rent seekers making money by colluding with government people. Investors saw them sure shot and hence invested. That model is neither scalable not healthy.
dv_dt 11mo ago
I wonder if the study adjusted for purchasing power in SV vs well, everywhere else - maybe London is on par

jimnotgym 11mo ago

Presumably because VCs in the UK are so much more risk averse? They only invest in 'sure things', potentially missing out on other opportunities.

nailer 11mo ago
Also if the UK investor says "we'd love to invest, can do the whole round, want you to send us your current cap table, we need to get the deal done before April because we have capital to deploy before end of the current financial year" don't actually expect the funds.
- inglor_cz 11mo ago
  Could you explain this?
  - cjbgkagh 11mo ago
    I assume too good to be true. I had the misfortune to be pitching to VCs in the UK, the money was so expensive that it’s just not worth it, much better off moving to the US if you can.
  - nailer 11mo ago
    Sure: UK VCs ('Haatch' specifically in this example) will give an enthusiastic 'yes' and then not deliver funds.
    - inglor_cz 11mo ago
      Aren't they afraid of the reputation risk? If they behave so treacherously, future startups may go to the US without even asking them.
FloorEgg 11mo ago
I know nothing about UK investment culture, but I have been building startups for 15 years, volunteered for multiple accelerators, made angel investments and rubbed shoulders with many US VCs. My impression of the US VC industry, especially near the end of the zirp era and even more especially during covid, the amount of VC capital being deployed far surpassed the number of competent VCs or startup founders. Many VCs were making decisions based on factors that were NOT correlated with future venture success. Many VCs in fact probably biased companies away from future success, because they didn't understand what they were doing and their instincts from prior industries or investment regimes were directly the opposite of what was needed for an early stage startup. In other words, there is risk aversion, and there is foolishness. I know for a fact there was a lot of foolishness going on in us VC investing (I even participated in some of it, learned from it, and I know better now). I'm not just talking about VCs throwing money at anyone with a pitch deck. I'm talking about VCs having a backwards understanding of what makes startups successful and actively pressuring startups that could have worked into doing the wrong things. There is a core of US VCs that are the world leaders in what they do, exceptionally aware of what makes startups successful and have the track record to prove it - this minority is overwhelming responsible for the industry's ROI. There is also a massive graveyard of fools who tried to replicate that success and failed for a variety of reasons.

conductr 11mo ago

If they are able to scale at that ratio it will be noteworthy. It is quite unlikely though.

idle_zealot 11mo ago
Well, yeah. Presumably the way they achieve a good ratio is by being more discerning with their investments. If you try to scale that you get the US's numbers as you throw money at anyone with a pitch deck.
- conductr 11mo ago
  The thing is, the US model is still better in aggregate as it basically results in every single unicorn being birthed (in theory, there’s simply no lack of funding for plausibly good ideas). Focusing on a conversion metric is a vanity exercise when absolute value creation is available. We would all rather own a huge low margin business than a tiny high margin business. Eg, 5% margin on $1B of sales is better than 80% margin on $10M sales.

wakawaka28 11mo ago

That might be a case of selection bias. The only reason to put up with UK regulations and other issues is if you have a compelling reason to do so (compared to similar opportunities).

cjbgkagh 11mo ago

Quite typically the highest return investments are picked first; as such there is a diseconomy of scale, it should be of no surprise that the ROI decreases as investment scales. Perhaps instead of thinking of it as a sign of efficiency it should be thought of as an underdeveloped market with the UK foolishly leaving money on the table.

hshdhdhehd 11mo ago
Also it is not measuring average returns per $ but returns split by company then a vector operation of ceiling (1bn) divided by my 1bn then aggregated.

aiauthoritydev 11mo ago

Thats a dumb metric. It is like saying conditioned on a doctor saw you, how many people were saved. You gotta count folks who died because they did not see the doctor too. Some of the unicorns could be simply rent seekers making money by colluding with government people. Investors saw them sure shot and hence invested. That model is neither scalable not healthy.

dv_dt 11mo ago

I wonder if the study adjusted for purchasing power in SV vs well, everywhere else - maybe London is on par