Why doesn’t Europe have that many great startup companies? That was the topic at a discussion I joined at Deutsche Telekom’s Innovation Day earlier this week. Fortunately, the discussion did not center around the lack of seed and early stage capital which was usually the case in other discussions I joined on this topic (and for which reason I am not going to cover that here). A lot of other reasons were brought forward but instead of just citing them, I decided to comment and add my very own perspective on this issue. I would like to stress that my view might be very much centered on Germany, hence I do not claim these aspects to be applicable for the rest of Europe (particularly the UK).
Risk Aversion & Reward
I believe mindset to be a major issue in this context. Yes, we are all risk averse to some degree. And it is a well-known fact that most startups fail. Some people asserted that this high probability of failure is scaring off too many bright engineers who might go with a more secure (and well-paid) job instead. But as long as failure bears the opportunity to learn, I don’t see why failure should be all bad. Some people learn best from their mistakes. Others learn a lot going through this process. From my own perspective, I found it one of the most valuable experiences in my life. But be aware: there is a thin line between foolishness and embracing risk.
World Changers & Business
I don’t think those two aspects are exclusive. However, I see a lot of researchers who want to have their inventions brought to full swing while, at the same time, they want to pursue what they love most: research. Nevertheless, I don’t see a reason why these two aspects could not be combined. It requires a bit more structure and planning (and finding the right people to run the business after all), but there are many examples where this worked.
This was one question that was most seriously discussed and one that we did not reach consensus on. The question is: if you start in Germany, is that hindering you from becoming a global success story? Generally, I am sure that it doesn’t matter where you start your company as long as the basic needs are met (e.g. cheap rent, availability of great engineers). But the question is: should you start building everything in English? If your target group speaks English, why not? But as Julie Meyer from Ariadne Capital put it so bluntly the same day: some think small and need to go big quickly.
The more important question from my perspective is: how do you get in touch with your users? How do you enable your users to give you feedback, become earlyvangelists? Even Facebook’s Net Jacobsson said that it was those local Facebook Developer Garages that enabled Facebook to drive the growth in Applications.
Building for Sale
This was an interesting point: a lot of German startups would have been already sold at a time when startups in Silicon Valley were just closing their second or third round. So, is this a matter of risk aversion on the investor’s side? Maybe. Without further data, I would assume that this might indicate some lack of late stage capital. Later stage investments tend to be much higher and thus ask for syndication or larger funds. However, there are VCs in Germany which have recently closed funds for growth capital and thus help bridge this problem in the future.
Lack of Entrepreneurial Network
Universities built entrepreneurship centers in the last couple of years to provide a harbor for all those aspiring students, foster interaction between different departments and provide help and information. BarCamps are mushrooming everywhere. Twitter, Facebook and others helped finding fellow entrepreneurs and staying in the loop of what’s happening out there. However, after years in which entrepreneurship has suffered from a bad image (esp. after the bubble burst), people are able to find support and others who want to pursue their dreams. All this is great news. But we’re talking about less than 10 years. I guess this needs some more time.
I am sure this list can be extended further and I don’t think that improving either one of these aspects alone would suffice to have a significant and lasting effect. It’s a matter of pulling the strings together.