By Jonathan Weinberg
February 25, 2014

FORTUNE — In the shadow of London’s 87-story Shard tower, on the south side of the Thames, a new kind of “brain drain” is underway. The term once referred to talent moving across borders; here, it represents a new phenomenon. Britain’s best technical graduates are shunning traditional jobs in banks or large corporations to create their own startups instead.

The Entrepreneur First program is partly responsible. A Silicon Valley-style accelerator for aspiring technology company founders, the program was developed in 2011 by two McKinsey consultants, Matt Clifford and Alice Bentinck, to harness the best of Britain’s university talent. (In classic startup fashion, the pair met on their first day with the firm and departed two years later to pursue the idea full time.) By the end of the program’s first year, 30 graduates had launched 11 companies worth $50 million.

“We realized the U.K. is producing great engineers of the same quality as those in the U.S. — at, say, Stanford or M.I.T. — but their career aspirations are just very different to previous generations,” Entrepreneur First co-founder Alice Bentinck, 27, says. “But there was no logical way for them to create their own startup without being labeled as ‘unemployed’ by their parents and peers.

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“They also couldn’t find anybody who was as good as them, as committed as them, or who had complimentary skills and they weren’t very good at identifying the kind of idea they had should be working on. These problems became the cornerstone of EF.”

The intensive seven-month program is supported by a number of companies that include Experian, Microsoft (MSFT), KPMG, Rackspace and McKinsey. Word of its success has spread so widely that spots for its third cohort were oversubscribed by 14 to one. Recruits are usually computer scientists and engineers, as well as self-taught programmers with arts degrees, Bentinck says. They come from the likes of Cambridge University, Imperial College, Edinburgh University, and St Andrews.

“If you look at who recruits Cambridge computer scientists, it is typically [the British semiconductor company] ARM and the banks,” Bentinck says. “Now we are making a big dent in that. This year, one in three eligible Cambridge computer scientists applied to EF.”

She added: “The only real competitor seems to be Google (GOOG). They still have various roles that are very desirable.”

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Applicants don’t need to have a preconceived idea to be admitted to the program. Once they’re in, they are encouraged to build small teams and spend up to three months identifying a problem they want to solve before creating a product to solve it.

Leo Anthias, 23, is one member of EF’s inaugural class. His startup Kivo, which allows business workers to collaborate on Microsoft Office documents, raised an estimated $97,000 from the prestigious Silicon Valley-based Y Combinator accelerator. “EF changed my thinking and showed me just how awesome creating a startup was vs. working for a big company,” Anthias says.

Entrepreneur First’s rigorous application process is one major factor in its success. Candidates who make the initial 50% cut must then engage in a 10-minute Skype interview, where they must discuss the rationale behind the things they have previously built. Candidates who pass that test are then asked for an in-person interview with Bentinck and Clifford as well as with members of current cohorts. They are also asked to take a technical test.

For the first time this year, candidates who passed all of those stages — 60 people in all — were invited to a hackathon where they had 24 hours to either create a new piece of tech or develop one they already had in mind.

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Ollie Birch, 22, is one of 50 people accepted for the third cohort. “Having worked at a larger company during my gap year and then for two summers, I was pretty convinced that I did not want to go into the corporate world which I found overly dull and repetitive,” Birch said. “EF provides a much-needed alternative. If you were to look at the Cambridge Careers service, for instance, you could be mistaken for thinking the only jobs in the world are in consulting and banking. I think that is a little bit sad. If I am to spend 10 hours a day solving a problem, I’d prefer it to be my problem rather than someone else’s.”

Joe Root, 24, has licensed the personalized publishing service he co-founded for use by a major U.K. newspaper. The service helps publishers understand readers’ interests to surface content they will find engaging.

“Starting a company throws any such constraints out of the window and forces you to draw upon any and every skill you possess,” Root says. “As technical co-founders, we found EF to be one of the few places to actively understand and encourage innovation.”

Participants in the program gain access to big business mentors. “In one day, we had a former senior VP of Apple in the office and a guy who sold his company to Google for hundreds of millions of dollars,” Clifford, 28, says. “This would be inaccessible to most 22-year-olds.” Bentinck and Clifford have also arranged for the cohort to visit Downing Street and Buckingham Palace.

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The not-for-profit organization takes an option for 8% equity — for £17,500, or slightly more than $29,000 — in startups born from the program. Of that 8%, participating investors have access to up to 6%; EF’s founders take 2% between them.

“We think corporates should be willing to look way beyond traditional recruitment models,” Clifford says. “Often partnerships with startups and indeed acquisitions are going to be more effective than straightforward hiring for big companies. This is one of the major reasons that our corporate partners sponsor EF.”

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