The London Startup Scene - once more unto the breach?

As 20 UK & Irish startups fly to Silicon Valley, hopefully Being Good, Sarah Lacy has written another post on her impressions of the UK scene over on BusinessWeek. As always, the issue is "does London have/ will it get a Tech startup scene"?. Sez Sarah:

The fact is, you can start a breakout Web-based company anywhere. But there are few pockets where this happens with any regularity. It's an open question whether the MySQL, Skype, Bebo, and Last.fm acquisitions were coincidental or there is genuinely some Internet scene and momentum building in London. It's also unclear whether any big standalone public companies will emerge from the pack.....

.......There's hope for London yet. While the number of bets placed by U.S.-based firms is declining, the average deal size is on the rise. In 2007, the number of investments by U.S.-based firms in Europe declined for a sixth straight year, to 897, even as the tally soared elsewhere, according to VentureOne, a Dow Jones company. Meantime, the total invested has been rising steadily since 2003, increasing to $4.6 billion in 2007. In other words, there are fewer bets, but the bets are substantial.

That looks to me like the healthy emergence of a market—and not sheer momentum investing that will disappear as soon as a slump hits.

I hope that London does increase its scene, and some people think we have everything we need and going to the US is fruitless...though a market that is declining in number of bets and increasing the value per bet, and where major gorilla 3i is bailing, looks like its a return to the safety first VC world of the post dotcom crash to me.

To be fair though, its not the VC's per se that are the issue - its that "equity gap" between where Friends & Fools fall away, and VC's come in - that c £150 - 750k area where Angels are fearing to tread - that is the UK's own Achilles heel in my view.

If we can solve that in London, we have a viable entrepreneurial scene - if we don't...well, we won't.