London’s Silicon Roundabout Lures Tech Investors Seeking Cheaper LinkedIn

Laurel Bowden, a partner at Facebook Inc. investor Greylock Partners, has been working out of London from a rented desk for more than two years.

Fresh from an initial public offering of LinkedIn Corp. that valued its stake at $1.3 billion, the Menlo Park, California-based venture firm last month raised its first fund focusing on Europe and Israel. Greylock and Insight Venture Partners, an early backer of Lovefilm and Flipboard, are among American investors considering opening offices in London to take advantage of a burgeoning number of technology startups.

U.S. venture capitalists, later-stage technology investors and software companies are paying more attention to targets in London, Paris, and Munich, upping investments in and exposure to a region some had all but written off. For them, Europe offers a chance at finding hidden gems in unlikely places — and perhaps billion-dollar success stories such as Skype Technologies SA, Spotify Ltd., and Yandex NV.

“The quality of entrepreneurs in Europe is exponentially higher than a decade ago,” said Jeff Horing, a co-founder of New York-based Insight. “We are over there because we think we’re getting better deals.”

European technology startups are cheap relative to the U.S., where valuations have soared in the wake of Facebook, Twitter, and Zynga Inc. Last year, deal values in Europe stood at a pre-investment average of $5 million, compared with $15 million in the U.S., according to Ernst & Young LLP. In the first quarter, valuations in Europe rose 20 percent to $6 million while the U.S. saw a 40 percent surge to $21 million.

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