I'm on my trip to London and have been witness to the startup scene here which is quite vibrant. While the city has a significant portion of large businesses and banks, the startup ecosystem is just taking off, with rapid growth the just the last few years. Yes, the startups space in London isn't that advanced but is certainly flourishing.
Some of the first tech startups to be based in the city - Dopplr, Last.fm, Tinker.it, TweetDeck, Berg, Fotango, weartical.com, Songkick and more have now grown up, having raised several rounds of funding. Their success has attracted several more startups. There are apparently over 200 tech startups based in the "Tech City" part of London alone! The growth of new startups emerging from this part of the world is amazing, and is something we can learn from.
I think there are two things driving up the startup eco system here in London: First, the concept of shared working spaces or co-working spaces has really taken off here. There are innumerable co-working spaces available in various parts of the city, where small groups of founders work on their startups. The energy in these spaces is amazing. These are not boring, cubicle-style offices, but more open-spaces where everyone is working on their own startup. Coffee shops are everywhere with free Wifi, and it's really easy to get access to resources and mentorship that would otherwise be scarce. Having trouble finding a good designer? Just ask for recommendations from the 5 other guys who are sitting right next to you. Got stuck on a weird Ruby-on-rails problem? There are tons of tech experts right in your co-working space that can help you out! This culture of constructively destroying the silos that startups tend to work in has worked wonders. Secondly, there is a proliferation of startup accelerators that are doing a great job polishing and promoting talent. Accelerators like Seedcamp are providing great support and mentorship to startups that have a great idea, but need that level of polish and refinement before they can attract world-class VCs and investments.
The one thing that has made a big difference is the will of the government to make London as a center of startups and entrepreneurs. UK Trade and Information (UKTI) has done a remarkable job of transforming London over the last few years to make it more friendly for startups and entrepreneurs to set up base here.
A key part of the government's initiatives were setting up a "Tech City" in East London. Broadly, Tech City is a cluster of startups and tech companies in close proximity, designed to encourage the free flow of ideas which are so important to a startup ecosystem. In 2011, Google setup shop in Tech City, and now acts as a facilitator of the ecosystem by organizing hackathons, speaker series, training workshops etc... at its companies. More importantly, it provides a working space for new startups!
The UK government also instituted what's popularly called the "startup visa". It's a special work visa aimed at startup founders that want to set up shop in the UK. This visa makes it really easy for startup founders to expand into UK and Europe from their base in London, without much hassle. The Visa applies to funded startups that would create jobs or further investment in the UK. The policies for Angel investors and startup investments in general are also very favorable (including favorable tax terms for startups that are exiting via buyouts). While there are lots of ways to go, the progress has been quite quick in the last few years.
At a panel discussion organized at the London School of Business, some investors who have worked both in the UK and India drew several parallels between the two ecosystems. The general feeling was that the scene in India is very similar to what was in the UK 5 years ago. There was a large funding gap, the startups were not polished enough to meet international standards, and there was no ecosystem to speak of. But through a concentrated effort, things have progressed in the UK, but there are some familiar problems. There haven't been large IPOs of tech startups, and not a lot of exits for investors. There is still a feeling here that the startups that emerge out of the UK need to do more to match up to the quality of world-class hubs like Israel and Silicon Valley.
Overall, there's a lot here that India can learn from, especially on how the government and the private sector can actually collaborate to promote entrepreneurship and startups, and actively build an ecosystem, instead of just waiting for it to happen!