The heady days of 1999 are back. Once again it’s fashionable to work for an internet start-up, even more so if you’re a part of the so-called ‘Web 2.0’ bonanza. (For those who may worry that they’ve missed some kind of software update, Web 2.0 refers to second-generation internet developments based around user-generated content and social networks, such as YouTube and Wikipedia.) Hopeful entrepreneurs are chasing venture capital money with the dream of becoming the next Skype or Google. There are differences, however. Europe — and specifically London — seems to have a more pronounced buzz than in the first boom, yet there’s also a definite recognition that another bubble may be in the making. I’ve spent the past week immersing myself in the internet’s second coming.

Supreme networker Oli Barrett invites me to tea with London’s internet mafia — all extremely bright and ambitious. Conversation turns to comparing London with Silicon Valley as a place to start a dotcom business. Experience is mixed. Michael Acton Smith launched Firebox — a site where you can buy boys’ toys and technophile gadgets and games — in the heat of the last boom, and was able to raise finance relatively easily. He has also secured venture capital funding for his second company Mind Candy, which produces alternative reality games. But others have found London a much harder place to pull the pieces together. After casting around for months for funding for his passwordless log-in technology, Peter Nixey flew to San Francisco. Within a month he’d found a partner, secured seed funding and landed a place in a prestigious Silicon Valley business incubator. ‘It’s just easier to join the entrepreneurial dots in the US,’ he says. ‘85 per cent of start-ups fail on both sides of the Atlantic, but the assumption in London is that 99 per cent will. It’s much harder to build the kind of extraordinary team you need to succeed in an air of pessimism.’

The ‘London vs the Valley’ debate continues at an internet networking extravaganza called Second Chance Tuesday where I talk to two venture capitalists who operate on both sides of the pond. Benchmark Capital’s George Coelho points out that UK labour and tax laws favour small businesses, as does the ease of setting up stock option plans which encourage employee ownership. And the crackdown on immigration in the US after 9/11 has made it more difficult for companies there to import foreign engineers — not so in the UK. As for entrepreneurial spirit, Simon Levene of Accel Partners, who spent his twenties mostly in Silicon Valley, thinks the UK has grown ‘by leaps and bounds’. ‘London is becoming a cluster for European technology start-ups. Having said that, it’s probably still only where the Valley was 20 to 25 years ago. That’s precisely the opportunity. There is enough talent in Europe, it’s just a matter of ambition and time.’

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The chat moves to comparing today to seven years ago. The differences are substantial: people now actually use the web to shop, communicate and gather information in volumes they simply weren’t doing in 2000. Companies don’t have to make enormous assumptions about how consumers’ behaviour will change. Fred Destin of Atlas Partners says, ‘Now you’re managing a business against measurable metrics, not wild assumptions about market growth.’ Fred also offers a note of caution: he thinks that valuations and the speed of deal-making indicate we’re already seeing a measure of overheating.

This sense of another internet bubble in the making increases at a cocktail reception for London’s ‘creative entrepreneurial community’ in a sensational flat overlooking Soho. The lift opens to a bathtub filled with champagne bottles and a staircase leading to a roof terrace with a hot tub, which gets cooking later in the evening. Maybe San Francisco doesn’t have so much on London after all. Channel 4 News is filming and the majority of people I meet have new-ish web-based businesses, including some which sound like re-runs of 1999. I meet some hardened survivors of the first wave, including Ben Way. He started his first business at 15, made £18 million from developing business-to-business search technology, then lost it all. Now he’s back running a ‘venture creation’ company called Rainmakers. ‘When I’m investing in companies I’m always more comfortable if entrepreneurs admit they’ve made mistakes in the past and learned from them. The thing that frustrates me most is meeting people who went through Web 1.0, have not learned the lessons and are still talking the same old rubbish five years later.’

I end my tour of London 2.0 by having a drink with technology investor Max Bleyleben of Kennet Partners. He also sees striking similarities with the last boom. ‘Companies are concerned with getting eyeballs on sites and worrying later about how they’ll monetise them. Everyone loves Netvibes [a site which uses Web 2.0 technology to create a highly personalised homepage with no advertising or subscription fee] but there are 30 other companies doing exactly the same thing. The top one or two may get bought, and the rest will be out of luck.’ He also observes that Web 2.0 technologies are already being incorporated into products by Microsoft, IBM and other giants — which may leave start-ups hoping to sell out to them high and dry. From him and other venture capitalists, I’m left with the distinct impression that — while everyone is live to the possibility of another technology crash — there’s still a lot of money seeking a home and adding fuel to the fire.

The biggest excitement of the week is the arrival of my new business cards from whizz web printshop Moo.com. After receiving natty bite-sized business cards all week from web entrepreneurs featuring their own digital pictures, I meet Moo’s founder Richard Moross at the champagne soirée. He convinces me that creating them couldn’t be simpler. I’m sucked in, pay my £12.98 for 100 cards, and start making my own picture selection. The problem is that the cards can only reflect the life you capture on your digital camera. So rather than pictures of me with rich and important friends in exotic locations like the ones I’ve been given by trendy internet types, my cards feature a variety of scenes of my kids in Richmond Park and my backyard. Still, at least my four-year-old is impressed.

This article first appeared in the print edition of The Spectator magazine, dated