Page last updated at 09:20 GMT, Friday, 3 April 2009 10:20 UK

UK web firms go into the valley

By Maggie Shiels
Technology reporter, BBC News, San Francisco

Web 2.0 expo floor
WebMission showcases British talent to big name Valley companies

The recession has replaced Silicon Valley's usual bravura with a sober "back to basics" attitude.

That's the view of some of the 20 starts-ups visiting the area to network and make deals as part of a government-backed WebMission.

This week, the best UK Web 2.0 companies met venture capitalists, bankers and senior Valley executives.

"People are putting on a bullish front, but it's all smoke and mirrors," said ViaPost's Simon Campbell.

"It's obvious deal flow has really slowed down and people are being cautious and everyone is waiting to see what happens."

Mr Campbell said he believed the economic climate was perfect for his product, a hybrid mail service allowing people and businesses to send physical letters over the internet.

With turnover of £4-£5m, the company is due to break even in August, a year after launching.

"We are saving money for people, around 50% of their postage costs. That is a very strong message wherever we go and the conversations we have been having here with Oracle and Microsoft are encouraging," said Mr Campbell.

The 20 firms from the UK and the Irish Republic are part of WebMission, now in its second year and supported by UK Trade and Investment, Enterprise Ireland, Oracle and Sun.

During a visit to the Web 2.0 Expo in San Francisco, organiser Oli Barrett said there had been a real shift of emphasis and this year was all about "bare bones" business.

"What investors are looking for are clear revenue models. A year ago if a company had said we don't know how we are going to monetise this, that would have been par for the course. This year the investors didn't want to hear that kind of talk."

Eye-opener

Throughout the week, household names such as Microsoft, Google and Oracle played host to the WebMission, giving the start-ups a glimpse of how a big Valley company operates.

There have also been closed door sessions with high-level executives and the chance to pitch to venture capitalists and bankers.

Andrew Yates
Andrew Yates says coming to the Valley will accelerate his business

Andrew Yates, head of Artesian Solutions, a company that optimises search and surveillance, told BBC News that WebMission was all about "opportunity".

"We've had airtime with some really top notch execs and we have had access to opportunities we wouldn't have had at any other time, I think.

"The eye-opener was how closed the market is to non-US organisations. So the best piece of advice I have been given is that if you want to be taken seriously here, then you need to have a location here," said Mr Yates.

And it is one he is seriously considering with hopes of setting up in about a year's time.

"Massive change"

But in a changing world and a global economy, is Silicon Valley still as relevant as it once was?

WebMission alumni Alistair Mitchell thinks so. This is the second time his company Huddle has taken part.

Huddle is targeted at the enterprise market and offers collaboration software. It has just secured a distribution deal with professional networking site LinkedIn. He is opening a US office later this year.

"There is a massive change, no doubt. I was with a banker this week who works with venture capitalists and told me there are 650 in the Valley just now but by the end of the summer there will be 350.

"But despite the slowdown the Valley remains hugely important because big name companies like HP, Oracle, and Google are here. You make so many connections and you can make deals happen within a week. That doesn't happen unless you are here," said Mr Mitchell.

Alicia Navarro
Alicia Navarro says she "loves this crisis" but won't be leaving the UK

But Alicia Navarro of Skimbit is not convinced of that. She is also a WebMission alumni and is sticking to her pledge from last year to stay in the UK.

"I come here every four to six weeks for meetings and even though I am Australian, I want to do well in Britain and wave the flag for British companies.

"The meetings I have had this week with eBay and Amazon show how things have changed. A newcomer like me with a solid business plan is being embraced a lot quicker than in the past."

Ms Navarro admitted that the recession had been good for her.

Facing the prospect of going under, Ms Navarro said she changed tack from being a free social decision-making site to launching a product called Skimlinks, to help publishers make money.

"For me, desperation was the most magnificent creator of ideas. We have just closed funding and will be breaking even in a few months all because of the financial crisis.

"I love the energy here and the access to senior people but I don't need to move here to be a success," said Ms Navarro.



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