Boom town 2.0 - the new generation of tech start-ups

Carmen Busquets virtually invented Net-a-Porter — just without the internet. During the 1990s, she would travel from her native Venezuela to Europe for the big fashion shows, taking grainy Polaroids and making sketches. She would then take these back to her customers in Caracas who would place orders. ‘This was when no one thought you could see fashion through photos,’ Busquets says, in the Library Bar at The Lanesborough hotel, around the corner from her office.

Busquets earned enough money from her boutique to move to California, where she witnessed the start of the dotcom boom and was inspired to get involved. ‘It opened my world. But all these business plans were valued at £80 million. It made me feel so insecure.’ In 1999, Busquets went to London and met Natalie Massenet, a journalist at Tatler, who was launching her own online fashion site. ‘I was like, “Phew, somebody like me. Where have you been? The business makes sense.” But she couldn’t find any money. Because we were the last ones.’

As a result Busquets invested £250,000 of her own money into the fledging site, called Net-a-Porter. The dotcom crash came a year later and other investors fled; two startups Busquets had also backed folded, but she kept on financing Massenet, ‘very conservatively, little by little,’ until Net-a-Porter was the last online fashion company standing. ‘I really lived the change.’ Now, Net-a-Porter is valued at around £350m and Busquets has her own venture, GiftLab, an online version of her company CoutureLab, which sells high fashion and fine jewellery. But she’s also getting back into the technology investment game, along with a number of other veterans of the first dotcom goldrush; sharing war stories, contacts and (call them crazy) cash with a new generation of London-based entrepreneurs. It’s the dotcom boom — or bubble — all over again.

Among the startups Busquets is backing are Moda Operandi, whose users can preorder collections before they’re shown on the runway, and LOOKK, which lets designers upload fashion design for users to vote on. The most successful get made by LOOKK and sent to users. Busquets is picky with her investments. ‘I see a lot of people who say, “I want to be the next Natalie or the next Mark Zuckerberg.” And I say, “Good, find somebody else to invest.” Everyone wants to be a billionaire but not every-one can be a billionaire. These smart people don’t understand how difficult it’s going to be.’

Brent Hoberman does. He floated Lastminute.com, the online travel company he set up with Martha Lane Fox in 1998, in March 2000, earning £300m the very spring the tech bubble burst. It is fair to say Hoberman is the god-father of dotcom London. ‘It was a completely different scene back then,’ he says, sitting in the smart Knightsbridge office of MyDeco.com, an online interior design company that he chairs. ‘Thirteen years ago, the people running internet companies would have filled a small room,’ says Hoberman, 43, but still speaking with the energy of a young entrepreneur.

Lastminute.com wasn’t the sure bet it looks in hindsight: according to the BBC’s technology correspondent at the time, it ‘had the takings of a large London pub, and was on course to make a loss of around £20m’. Hoberman himself was nervous: ‘In March 2000, when we went on a roadshow in America, suddenly we saw Pets.com implode. We said, “Let’s hurry up because there’s money to do this and there may not be next week.” ’ Hoberman stayed at Lastminute.com until 2007; the same year he founded MyDeco.com. But he took the role of chairman instead of CEO: ‘I’d worked non-stop for eight years. I was very mono, I thought I’d be a bit more balanced. I’m slightly ageist about CEOs, too — I think they need to be totally obsessed.’ Hoberman also made about ten angel investments in companies including Viagogo ticket site and WAYN.com, a social travel network, then in July 2009 set up a venture firm, PROFounders capital, with a mission to back the next wave of British internet startups.

One of those was CitySocialising, a networking site for urbanites. Sanchita Saha founded the company in January 2007, after helping to launch BBC Radio 1Xtra. She tracked down Hoberman’s email address and sent him a note. ‘It was just on the off chance. I didn’t expect a response,’ says Saha. Hoberman offered to meet her. ‘It was fantastic, he just talked to me about his experiences and how he would approach the problems I was facing.’ Saha started expanding her business, raising money from investors, and in 2010 went back to Hoberman, this time for money. PROFounders invested £1m. But having a veteran on board is the biggest benefit, according to Saha. ‘Brent’s experience and his contacts spread so far and wide. He’s always sending us articles he’s read, or people he’s met at conferences. He’s been in the game so long he knows everyone. In a 20-minute meeting, he’ll fly off emails to 15 people you otherwise wouldn’t have known. He’s still got the passion, the drive and enthusiasm that I imagine he had in the early days. That hasn’t gone.’

CitySocialising now has 16 employees and offices on Old Street, which it shares with other new startups. The social scene in dotcom 1.0 was fragmented, clustered around a couple of hubs: networking event First Tuesday, co-founded by Nick Denton (who went on to create the wildly successful media and entertainment gossip site Gawker.com in New York), and Home House members’ club on Portman Square. Today most of the action takes place around Old Street and Shoreditch. The area was jokingly dubbed ‘Silicon Roundabout’ by Matt Webb of design consultancy BERG, but it’s a name that’s stuck. Drinks happen at Silicon Drinkabout, a Friday evening event founded by Mind Candy (maker of the popular online children’s game Moshi Monsters), that rotates around Shoreditch bars. This time around it’s pints rather than champagne: ‘There are lot of after-work get-togethers,’ says Saha. ‘They’re social, but it’s not about blowing money. There’s more education support out there now, and there are probably more investors.’

Many of those investors, like Hoberman, have been there, done that, bought the T-shirt: Niklas Zennström co-founded Skype, even-tually selling it for £1.4 billion to eBay; he’s used the money he made from that to set up a London-based venture fund, Atomico, that has, along with Hoberman, invested in MyDeco and the London taxi app company Hailo. Stefan Glaenzer, who co-founded Last.fm, has backed young London web companies such as business intelligence Duedil and female-only social network Luluvise through Passion Capital. Hoberman’s Lastminute.com partner Martha Lane Fox is moving from advising government to startups, recently joining 3D-printed toy company MakieLab as chairman. Michael Birch has backed a number of businesses, including online branding agency Punktilio, which was sold in 2011. But compared to Silicon Valley, ‘there aren’t as many Generation 1.0ers about,’ says Jason Trost, the founder of Smarkets, a social betting company based in East London that Glaenzer has backed. ‘What’s encouraging is that it’s growing and people are getting excited about it.’ A virtuous cycle is being created, according to Saha: ‘The companies that are getting funded can connect their peers with their investors.’

The scene feels a little older and a little wiser than in 2000. No company typified pool party dotcom excess more than Boo.com, which went bust in May 2000 after burning through £125m of investors’ cash, leading to 400 people getting laid off. Its co-founder Ernst Malmsten came to London in 1998 (Silicon Valley would have been ‘too boring’, he says) after building and selling an Amazon-like web business in Sweden. ‘We wanted to build something really different,’ Malmsten, 41, says over the telephone, breaking his sentences with giggles that verge on the maniacal. ‘There were no internet companies in London. But the summer of 1999, that was a really big thing for London. Everyone wanted to own an internet company, get the stock options, make the money and be set for life, basically.’