VCs: Look at UK tech scene for 'the next Skype'

Investors who are looking to put money into innovative tech start-ups should pay more attention to young companies in Europe rather than in the US, according to one of the stars of the BBC's Dragon's Den.

Speaking at the UK Technology Innovation & Growth Forum in London, Doug Richard claimed "right now, there are more opportunities for investment in the UK than in the US, and they're better priced as well".

Richard, who is also chairman of Library House, said that UK companies do face more regulation and more restrictive employment law than their US counterparts but make up for this in other ways.

He said: "There are many advantages to being based here - it's a more mobile market, and there is access to lower development costs through outsourcing."

Richard cited the success of Skype as evidence that technology start-ups don't need to be based in the US to be successful. "Skype was the first example of a company that was founded by a Swede, based in Lichtenstein, with its development in Estonia and its headquarters in London," said Richard. "I really like Skype because they represent the fact it can happen, and I really like them because eBay paid $2.6bn for them."

As a participant on Dragon's Den, Richard was part of a team of venture capitalists who are pitched with investment opportunities. He explained that during the show he saw evidence that many entrepreneurs persevere with bad ideas because their family and friends don't tell them the truth. He compared this to "ugly baby syndrome": the fact that someone meets a new mother with an ugly baby, they are very unlikely to be honest with them about it.

Richard said: "Of course you don't [tell her the baby's ugly], because she sees the most beautiful baby in the world. It's the same with entrepreneurs. They believe their idea is great, and if they fail they'll claim that it's because 'the customers got it wrong' by not buying their product."

The UK Technology Innovation & Growth Forum is taking place in London on 20 and 21 February. It is run by the European Technology Forum, a sister company to silicon.com.

Graeme Wearden writes for ZDNet UK