UK Startups, mini-bubbles and the VC

In today’s Guardian Victor Keegan writes positively about the solid, vibrant start-up boom that is currently percolating through the coffee houses of London and the other web/tech centres of the UK.

He contrasts the frugality of this generation of start-ups like Last.fm with those of the dot.com boom like the infamous Boo.com.  As he says:

… it is 90% cheaper to set one up now [a website] than at the height of the last boom. This time it is not a bubble waiting to burst. These new startups make a virtue out of frugality.

I agree there is no big, over-funded bubble stretching its rather thin skin ever more taut.  What there is, in my opinion, is a shower of little mini-bubbles all ready to burst - hurting little more than the egos of the increasing number of hopefuls setting up specialist social networking sites.

Just look at the number of such sites that Europe’s version of Techcrunch, Vecosys, has documented of late.  Keegan himself highlights a meeting between VCs and two guys from Dublin who’ve put together a social networking site for people who enjoy fancy dress – http://www.welovefancydress.com/.  The last time I attended, albeit I was late, the Second Chance Tuesday events in London, three out of the four entrepreneurs I met had established specialist social network sites.

While I’m not disputing that there is a potential demand and that anyone with a passing knowledge of Drupal can create a site for a few hundred quid, I fear Dunbar’s number may rapidly begin to assert itself.  A mini-network of a few hundred is great news for the members of that network, but not so great news for business.

But VCs must be loving it.  They can bet small and often without any danger of losing their shirt.  Who knows, maybe welovefancydress.com will be the next big thing after all.  Personally I’d bet my money on Ning who’ll be cleverly aggregating and spawning hundreds of these little social sites.

Tags: keegan, vecosys, VC, welovefancydress, drupal, bubbles, dunbar

Alex is the founder and editor of SmallBizPod, the UK's first podcast dedicated to small business, start-ups and entrepreneurship. Alex writes about topical small business issues, entrepreneurs and anything else that catches his eye here on the small business blog. http://www.smallbizpod.co.uk