I just heard two old English ladies talking about tweeting in a Shoreditch coffee shop. Earlier this morning, I ran into a venture capitalist from New York City on the street corner of Chance and Boundary. And last night, I witnessed an Android app developer hitting on a posh British chick. I believe the apt term is “punching above his weight.”

“I’ve been here 6 years and the tech scene has never been as vibrant as it is now. There are some established startups like Spotify, SoundCloud and Moshi Monsters that have revenue, lots of employees and are backed by a few rounds of funding. In the last few weeks, I’ve seen about 2-3 great companies every single week. As a VC who has to pick what to invest in, it’s getting harder and harder because there are so many great companies to choose from…and that’s a really good sign.”

-Sitar Teli, a Senior Associate at Doughty Hanson Technology Ventures

Last week, I wrote about London’s Silicon Roundabout from a New York state of mind introducing our readers to the first startups I encountered such as social network Floxx, fashion startup Not Just a Label, the “Economist of Culture” Crane.TV and gaming company Mind Candy. It’s clear that London has innovated in industries such as fashion, the arts and games, and is perhaps most proud of its emerging digital music industry. Digging just a bit deeper, let’s take a look a few more brilliant startups, meet the rockstars of London’s music startup scene and find out what the VCs are saying.

We R Interactive

“There’s a buzz in London at the moment, and that energy and optimism is only going to grow over the coming months as we build up to the Olympics. One of the UK’s strongest industries is its creative sector – and it’s the coming together of content creators with people from a more tech based background that’s one of the most exciting movements going on in London right now.”

-Oli Madgett, co-founder of We R Interactive

In terms of social gaming specifically, it’s still relatively embryonic in London (aside from Playfish), but it’s growing as talent from more traditional gaming companies look to create new opportunities.

We R Interactive is an online games publisher that fuses the best of film storytelling and high-end gaming to deliver the next generation of interactive and social games across multiple platforms. Their first game, I AM PLAYR, lets users play the life of a professional soccer player. Check it out here.

The company was founded in March 2010 by entrepreneurs with varied backgrounds in the worlds of film, interactive TV and computer gaming and is currently backed by angel investors with similar industry experience. We R makes money through brand integrations and by selling virtual goods like Nike boots to users of I AM PLAYR.

Flirtomatic

Screen shot 2011 06 17 at 11.24.04 AM Cheers to Londons Tech SceneWe first wrote about Flirtomatic in 2008, and since then the London-based mobile social network has blossomed into a full-blown, cross platform flirting site. According to a local investor in the company, social activity on the platform is second only to Facebook in the UK. The app boasts a serious revenue model, making 70-80% of its cash from selling virtual goods. And I’m not talking about virtual kisses and hugs but unabashed personal advertising. Users can can pay to delete a bad rating, or to have more photos of themselves on the site and pay to be placed higher up in the sea of faces. According to the investor, 60% of the people using the app have met for a date. And in a city that has been described as “not having a dating scene,” that’s impressive.

Newspaper Club

Moo, the awesome business card design site isn’t the only London based startup that has harnessed the power of the web for paper goods. The London based Newspaper Club is a new online service that’s breathing fresh life back into the lost days of printed media, by allowing anyone to design and print their own newspaper. Users simply upload photos and create a layout online. Then, the newspapers, in runs ranging from five to 5,000, are printed once a week on Tuesdays and Thursdays and delivered up to five days later.

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Sponsume

Screen shot 2011 06 17 at 11.35.00 AM Cheers to Londons Tech SceneSponsume is a crowd-funding platform for artistic and entrepreneurial projects, which looks like a complete copycat of NYC’s Kickstarter. The site, launched in August 2010 by Gregory Vincent, a young French philanthropist, is the first generalist crowdfunding platform in the UK and Europe. Prior to creating Sponsume,Vincent, a “passionate advocate of microfinance” worked as an assistant tutor at Oxford University and as a financial analyst in London.

AMEE

Screen shot 2011 06 17 at 11.34.47 AM Cheers to Londons Tech SceneWe wrote about AMEE in April, which stands for the “Avoiding Mass Extinctions Engine” and is an aggregation platform capable of coordinating the world’s entire carbon consumption data. Gavin Starks is the Founder and CEO of AMEE has been in the big data business for the last 12 years. Prior to AMEE, he developed Internet-based research tools in 1993, joining Branson’s Virgin Net (now Virgin Media) as employee number 5 in 1995. He also founded Tornado and was the Managing Director of UK digital music services company Consolidated Independent, which aggregated digital music from multiple platforms and delivered it to retailers like Amazon and iTunes.

Screen shot 2011 06 17 at 6.52.47 PM Cheers to Londons Tech SceneLyst

Lyst lets you follow your favorite designers, stores and stylists in a very similar way to Boston-based Svpply. The site keeps users in the loop with fashion and sale updates, lets them share items on social networks and provides “buy here” links on the site. Lyst, which has offices in New York as well, ships internationally but will only show products and prices available in your country.

Magnolia Box

Screen shot 2011 06 17 at 11.51.38 AM 220x57 Cheers to Londons Tech SceneThe online art industry was worth in excess of $1 billion last year and, as with most online industries, it continues to grow rapidly. In the same family as New York’s fine art startups like Art.sy, TurningArt and Artsicle, but with a different angle, the London based Magnolia Box offers an affordable solution for artists, photographers, galleries, museums, publishers, and picture library’s to sell art and image based products via their own dedicated e-commerce shop. In a sense, it’s like Etsy for art but with more technical oomph. The Magnolia Box offers its software platform called Magnolia Soft that comes with all of the features and functionality an artist needs to compete.

Artfinder

Screen shot 2011 06 17 at 11.56.41 AM Cheers to Londons Tech SceneAccording to Google statistics, there are well over 215 million individual searches for some form of art each month, which is excellent news for Spencer Hyman, the CEO and co-founder of Artfinder, a company that wants to build the world’s smartest art service to help people consume and enjoy art online. Hyman was previously the COO at the Last.fm and plans to apply a similar technical strategy to Artfinder.

In a recent interview with GigaOM, Hyman said: “If you want to build one of these great businesses like Last.fm, or IMDB or LinkedIn, you need to get four bits of a virtuous circle working. The first is the catalogue. Once you’ve got the catalogue, you can move on to the next bit, social profiles — curating stuff, building their own collections, meeting people with similar tastes, sharing stuff. If you think about that, it’s never happened to art. If wanted to show me your 10 favorite pictures in the National Gallery, how would you do it? If you wanted to tell me about this great new street artist called Inky, how would you do it?”

Artfinder is discovery, the search and the recommendation. It then provides the final piece of online consumption, “an alternative to the postcard,” writes GigaOM’s Bobbie Johnson.

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Right, enough with the games, the social networks and the art. It’s time for bass check. It was an exciting week for the online music industry. In light of Pandora’s recent IPO and $3 billion dollar valuation, SoundCloud’s funding from Ashton Kutcher and Spotify’s $1 billion dollar valuation, the digital music space is a very attractive place to be. We recently wrote about the collaboration between digital music companies in London, which includes digital music rockstars like Last.fmMixCloud and Songkick.

This week, I met with an editor of Wired UK and asked him what his favorite London based tech companies are. He answered: Last.fm, Songkick, MixCloud, Musicmetric and Tastebuds.fm. To be fair, my editor friend loves music more than most but after asking several other hooked in Londoners, it was clear that London’s startup scene is very proud of its music biz.

And it should be. London has an amazing music scene. There are more live events on average per night in London than any other city in the world. Songkick, the concert app that combs your playlists and notifies you when one of your favorite artist has a concert in town, tried to solve this one problem: that fans often don’t know about a concert until it’s passed. After working to solve it in London, the team has now moved on to try and solve it around the world.

In London, how Last.fm paved the way

At Seedcamp NYC recently, Dennis Crowley from Foursquare said that his venture was “not 2 years of success but 10 years of my failures.” Much like Foursquare is a seasoned startup, and thus an inspiration to younger startups in New York City, in London, companies like Moo and TweetDeck have marked trails for budding entrepreneurs. But considering this town’s thriving music industry, it’s Last.fm that is London’s poster child for digital success.

The company started in 2002 and was bought by CBS Radio in 2007 for £140 million. Last.fm currently has 65 employees and they’re hiring more. But for such a large company in terms of audience and reach, they’re still pretty lean and try to act like a start-up in terms of how they work, explains Matthew Hawn, Last.fm’s VP of Product. Despite all the hype and the new government money being thrown around, Hawn was drawn to East London to work at Last.fm because he felt that, “We’re in a pretty unique place in time and that the culture here is still fluid and forming. That means there is possibility and passion which are crucial if we’re going to build a community that lasts. I believe what I’m doing here matters a lot and I think most of the small companies here believe that too.”

Last.fm has evolved through a number of phases and not all of their evolutions were wild successes. But they’re still here because they have a great culture and history to drawn on. As Last.fm approaches a decade in the business , I asked Hawn how he thinks Last.fm’s exit has inspired other music startups?

While I’m reluctant to admit how many grey hairs there are in my beard, I do stand by the notion that it is important for there to be some seasoned veterans in the Silicon Roundabout scene. Veterans wear their scars proudly and the good ones learn from their mistakes. Thats just how innovation works.”

-Matthew Hawn

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If you love Last.fm (the team pictured above) as much as we do, then check out 10 Great Last.fm Apps, Hacks and Mashups by our European editor and digital music expert Martin Bryant.

Meet RjDj

Walking into the RjDj offices called ‘The Mission,’ is a little bit like walking into the lab of a mad scientist DJ. “Put these headphones on!” They said excitedly, “Now speak, move, jump around.” As the sounds around the room blended with new bass lines and reverberations in my eardrums, the guys awaited my reaction. “That pretty much sounded like I was on an acid trip,” I said. “But, hey! No side effects!”

“Well, no side effects that we know of yet,” joked RjDj CEO and founder Michael Breidenbrücker.

Breidenbrücker, also a co-founder of Last.fm and his CTO Martin Roth are the creators of “Reactive Music,” a philosophy that powers the supremely innovative and downright clever RjDj, Rj Voyager and Inception apps. But the gents behind Reactive Music say they “don’t do apps” but “craft sonic experiences.” Essentially, the RjDj app allows you to create music and interact with your environment by pulling in outside sounds and mixing that sound with beats and rhythms in the app. To see a brief introduction to people using the app, click here.

Currently music is all about recordings and reactive music is the next stage of the musical evolution. It’s similar in concept to the Washington D.C. based band, Bluebrain that dropped the world’s first location aware musical album iPhone app this spring. “This is where it’s all happening,” says Breidenbrücker as he pulls out his iPhone. “It’s much more clever than the Walkmen but as users we’re still treating it like that. Our reactive music apps are giving musicians, producers and creators access to this technology in a creative way. We are pioneering a new frontier.”

When asked about digital rights issues, Breidenbrücker says, “I’m so sick of that issue that I don’t want to say much about it at all. I don’t want to touch it or deal with it. We’ve dealt with it in the past, and it’s always been bad. In an ideal world, the music industry would be one big API.

Watch our interview with Breidenbrücker and Roth here:

RjDj’s Inception app was the first time they broke into a mainstream audience. The app has had over 3.5 million downloads and has topped most downloaded charts in multiple countries. What’s nearly insane, is that the average time a user spends in the app is an unheard of 40 minutes. “We had people going to sleep with it, trying to induce Inception-like dreams and using it for parallel activities,” says Roth.

One college student suffering from ADD wrote to the creators that it was the best app because it jumbled all the sounds around him, allowing him to finally be able to concentrate on studying. Rapper Pharrell Williams even said, “It’s amazing, it’s like legal digital drugs!”

For one more amazing London based company making apps, check out our article on Lightbox’s connected camera, that might be the best Android app yet.

So, how does one get involved? And how are startups finding funding?

Get Involved

“Get involved” is my 2nd favorite British phrase. Your mate is likely to use it when a big plate of fish pie is set on the table and you’re hesitant to dig in. “Get involved,” he’ll say, meaning, “Dig in” but with a more democratic undertone.

This week, I caught up with London’s Shawn Ghosh, a self-described geek who started programming Casio PB100s back in the day before falling in love with ‘C’ and ‘C++’ and “his bible” K&R. After 20 years working with organisations and CIOs across the globe, he decided to return to his love of startups and founded London’s Silicon Roundabout Meetup in Dec 2010. Just 7 months later and the Meetup has nearly 1,000 members. Schools are getting involved by running their ‘Junior Techmeetups’ Program and Universities are taking up the ‘Uni Techmeetups’ program.

Last month, Ghosh promoted The Silicon Milk Roundabout, which attracted 45 startups looking to prevent banks and consultancies from hiring the best UK engineering and computer science talent. Ghosh now provides feedback to the PMO on London’s Tech City initiative. He’s working with Hackney council to start holding events at schools to get the next generation of startups involved early and with Hackney Community College, which is becoming a Technical University next year, to develop programs and events that would help their students get closer to startups.

Screen shot 2011 06 18 at 3.13.24 PM Cheers to Londons Tech SceneZuzanna Pasierbinska-Wilson, the VP of Marketing for Huddle, a London based B2B startup we’ve written about, set up Silicon Stilettos in September 2008 to encourage more women in startups, tech and social media to participate in the networking events, share ideas, gain knowledge from each other in a relaxed, cocktail-fuelled, atmosphere. The response was overly positive with more than 400 members registered and around 50-80 members attending each time.

“The number of meetups in London is immense and is continuously growing…I believe that the growth will occur naturally. I’m more concerned with the saturation and quality of meetups going down,” says Pasierbinska-Wilson.

Consider next week quality controlled: Next Wednesday, techPitch 4.5, an organization that aims to bridge the gap between young startups and the traditional industries is hosting a music specific conference called Music 4.5. The event promises to be a big debate on the way forward for licensing and the impact of the Hargreaves Report on music-tech startups, artists, entrepreneurs, rights holders and the collecting societies. Purchase tickets here. Also happening next week, on Friday, is the MiniBar Monthly Meetup, which has 4,000 tech savvy members and boasts Stella and Intel as its sponsors.

Office space in London: From abandoned trains to accelerators in Cambridge

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At first, the image above shows abandoned train cars, but if you take a closer look you’ll see people plugging away at their desks. Outside the offices of RjDj, you can rent office space in one of three abandoned railway cars. The converted spaces were created over 2 years ago by 31-year-old furniture designer Auro Foxcroft as part of a project called The Village Underground to create an eco-friendly office space that offers people a low-cost alternative in the high-rent Shoreditch area.

TechHub

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If the idea of baking in a metal box all summer and shivering all winter doesn’t float your boat, but you’re still strapped for cash, check out TechHub, a new coworking space smack in the middle of the Old Street Roundabout. The brightly colored office is filled with entrepreneurs from around the globe and includes drop in rates of £25 per day and two levels of membership starting at £275 per month. More details can be found here and for TechHub events, visit their calendar here.

The Cube

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While I unfortunately couldn’t swing by Shoreditch’s The Cube this week, it looks like it might be one of the most aesthetically innovative workspaces in the city. Companies housed in The Cube include Arctic Kiwi, a company that offers a full suite of design, consulting, development, hosting and support, and Black Tea Events, a free venue finding and events management service. Rates start at £15 per day up to £195 per month for Perma Membership. You can also book a room here through Loosecubes. [Learn more about that awesome NYC based startup here.]

Innovation Warehouse

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While it may look a bit like a church meeting room, Innovation Warehouse (IW), located on 1 East Poultry Avenue, is the City of London’s latest startup initiative. Startups can book meeting rooms, attend events and use hot-desks for £40 per month. For £295 and up, startups and “soft-landers,” those companies from outside the U.K. who are looking to expand, can purchase a Hive membership, which gives you your own desk at IW plus all the benefits of membership.

But the London “hive” isn’t just a coworking space. IW provides entrepreneurs with access to mentors who also happen to manage a micro-lending fund set up for the incubator. Each startup is linked up with a mentor who has started a business in the same market or who has a lot of experience working with the specific customer base. The mentor also tends to be one of the company’s seed investors. Luisa Morales, the Community Developer for IW says, “This supports risk-mitigation through knowledge and experience, and creates a well-founded relationship between entrepreneurs and mentors.”

SpringBoard

Screen shot 2011 06 17 at 4.44.57 PM 220x51 Cheers to Londons Tech SceneFounded by Jon Bradford, SpringBoard is a venture accelerator modeled on Paul Graham’s Y Combinator and David Cohen’s Tech Stars based in Cambridge, UK. Springboard offers an intensive 13 week program based at the inspirational ideaSpace, part of Cambridge University’s state-of-the-art Hauser Forum. In exchange for 6% in the company, SpringBoard provides its startups with 5,000 pounds per founder, up to 3 founders and 15,000 pounds, as well as access to over 100 mentors. Out of 230 applications, 10 startups were picked for the current session. While most are early stage startups, we caught up with New Yorker turned Kiwi, Kaila Colbin who runs a children’s online gaming company called MiniMonos, which is the only company in the current class that already has 250,000 registered users.

“Coming from New Zealand, a country with no capital and no market, it’s been an amazing opportunity to make connections with mentors, some of whom are VCs, entrepreneurs, representatives in big companies, potential partners and potential exits,” she says, “These days, If I’m talking, I’m pitching.”

Cheers

Cheers is my first favorite British phrase, and it’s one I picked up long ago. It’s warm, comforting and celebratory, and indicative of the kind of respect young entrepreneurs have for each other in East London.

I think the best part about London’s tech scene is its potential for global collaboration. Many of the startups I met with weren’t founded by British citizens. In fact, RjDj’s Breidenbrücker commutes home every weekend to his family in Austria. London’s proximity coupled with the availability of an EU passport, adds a better sense of diversity to its creative industries. Young entrepreneurs in Sweden could just wake up one morning and decide they want to move that night to Berlin. It’s exactly what the German based company SoundCloud did, which now has about 50 employees, of which only a handful are actually German.

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“Startup speed is faster than light speed, you don’t ask questions you make decisions.”

-RjDj

While London’s entrepreneurs are pushing full throttle, actively pursuing available engineering talent, it’s investment community is still watching the traffic lights. In the past 6 months, London’s Silicon Roundabout Meetup‘s Shawn Gosh has witnessed VCs moving across town to base themselves closer to the action in East London. But he says, VCs are still very conservative and are slowly beginning to make earlier and smaller sized investments. As the ecosystem develops, investments should get more fluid. Angels also have an important role to play especially for early stage and seed investments, he says. And there’s a tax efficient scheme for angel investors in the UK called EIS, which the government is pushing to help stimulate the growth of start-ups in areas such as social gaming.

But is a conservative investment community necessarily a negative? “Maybe London startups don’t have the potential to be the next Facebook or Google or that kind of thing. I think a lot of money is being thrown around right now in New York and California and I don’t know how far away we are from repercussions. But London is filled with great investments in the kind of businesses that you can build over time. I like investing in Europe for that reason. It might not be the super home run but it will be a strong investment,” said one New York City based VC who I serendipitously ran into on the street in Shoreditch.

One of our readers, a British entrepreneur who spent time working in Austin, TX, said, “The get rich or die trying mentality of the states is something that I believe has become engrained in the people through their history and their more capitalistic minded governments. I have a startup business and have explained the concept to some of my American friends and some of my British friends. The usual American response is, “that’s great, let me know how I can help you out” and the British response has usually been these exact words: ‘but what if you fail?!'”

But as startups in this decade pop up like rock bands in the 80s, “what if you fail” is a valid point when you have questionable IPOs and the Twitter-happy Grandma’s mutual fund to think about. London’s technology ecosystem may be behind New York and Silicon Valley’s but it’s looking quite healthy in comparison (minus the 12% pints at 5PM). So, while Europe might not produce the next Facebook or Twitter, its latest crop of brilliantly innovative companies and collaborative workspaces deserve a proper cheers from the rest of the world.