Business Management

Q&A: Why Eurotech shouldn't be in the shadow of the Valley

Facebook. Google. Twitter. Microsoft. It’s almost impossible to talk about tech without referring to US-based companies. Sometimes it’s like the European tech scene doesn’t exist in the media. But Ivo Spigel, founder of Perpetuum Mobile and tech journalist for the likes of Forbes Croatia and Tech.eu, wants to change that.

Through the years he’s talked to the likes of Huddle’s Andy McLoughlin, Soundcloud’s Alexander Ljung, and Michael Acton Smith of Mind Candy (creator of Moshi Monsters), and now he’s turned these interviews into a new book, The European Startup Revolution, celebrating, he says, Europe's amazing entrepreneurs, and showing people that great things are happening not only in Silicon Valley, but also in Helsinki, Zagreb, Paris, Barcelona and beyond.

Due to be released in May, it features interviews with 30 of the continent’s leading entrepreneurs, looking at their journeys, from how they started to how they got to where they are today, with all the successes and failures in between. IDG Connect caught up with Spigel to talk about his book and how the European tech scene compares to its American rivals.

What would you like main message readers take away from your book?

The tough spirit that carried our ancestors around the globe in the Age of Exploration is still very much alive in Europe. If you have a great idea and the energy to pull it off, go ahead and build your company!

What’s the most important piece of advice you would give to a new European startup?

Just do it. Take the best lessons and learning points from European as well as global success stories. Remember however that there are no set "rules". You don't have to move to Silicon Valley to succeed (although of course you can). You don't have to take on VC funding – it's possible (but really, really hard) to bootstrap.

On your Indiegogo page, you say that European startups are often “often overlooked by the media in favour of American founders and CEO's.” Why do you think this is?

General business media as well as tech tends to over-focus (in my opinion) on the mega-mega tech companies and these have admittedly been American ones – especially for consumer-oriented apps and platforms such as Instagram, Facebook, and Twitter etc. Mass media usually follows a ‘celebrity’ process – once an entrepreneur ‘emerges’ as a ‘tech’ or ‘business’ celebrity, everyone (or almost everyone) feels the need to say or report something about them. To some degree this is also due to the European entrepreneurs themselves, some of whom avoid the press and media.

Which of the startups covered in your books do you think have the most promise or potential to rival the likes of Google, Facebook or Microsoft for size?

Supercell has been valued at $3 billion at its latest funding (Softbank invested $1.5 billion for 51%). Tradeshift, Soundcloud and Huddle all have a shot at going beyond billion-dollar valuations. Will they grow to become the size of Google and Microsoft, which are by now giant corporations with tens or hundreds of thousands of staff? No, they won't. But going beyond that billion-dollar valuation is a great success by any measure.

Should the European startup scene be looked at as one homogenous block or 30-60 odd smaller markets?

It's a complex ecosystem built around a network of ‘hubs’ – basically, cities. There is no real ‘UK’, ‘French’ or ‘German’ startup ecosystem, there is London, Berlin, Munich, Paris, Barcelona, Madrid, Helsinki, Tallinn etc. The same actually holds for the US – there is Silicon Valley and then there are other hubs such as Seattle, Boston, New York etc.

Which European markets do you think are thriving but would surprise people?

There are actually very, very interesting things going on in many places in Europe. Stockholm, Copenhagen, Lisbon, Ljubljana, Sofia... Obviously the maturity differs and with it the level of funding available, and that is an important factor in how these develop. Also, the word ‘markets’ is a bit misplaced since practically all successful, high growth startups and companies are going global, none of them is selling dominantly into its own ‘home market’.

Will the European scene ever rival Silicon Valley [or US tech in general], in terms of money or press coverage?

That’s actually very, very hard to say. I think most will agree that Europe is catching up and slowly closing the gap with the US. The difference is still huge though – we have to keep in mind that Silicon Valley has a history of 60 – 70 years. That means multiple generations of companies being built, wealth being accumulated and redirected back towards new generations of entrepreneurs. Again, it’s important to understand that even in the US the Valley is a special place, an outlier unlike any other US ecosystem, with Boston and New York being quite strong but still far behind in terms of capital invested and billion-dollar companies.

By some important measures, however, Europe already rivals the US. Between 2003 and 2013, Europe produced 30 “unicorns” (billion-dollar companies by valuation) and the US 39. Another report shows that most “unicorns” between 2004 and 2014 came from outside the Valley. Another important way to look at these developments is by sector. In particular, music, financial technology and gaming are areas where Europe is very, very strong. 

If you were to compare the strengths and weaknesses of the European tech scene and Silicon Valley/US tech, how would they differ?

The US, especially the Valley, has some well-known advantages over Europe: a very, very large domestic market, large amounts of capital and a strong and long history and heritage of building successful companies.

A key difference that is perhaps not as obvious is the entrepreneurial culture. The biggest European companies tend to be "old school" – oil, pharma, telecoms, banking. The biggest US companies (by market cap) include Apple, Google, Microsoft, Facebook and Oracle. Related to this, the wealthiest Europeans are often secretive and not at all inclined to invest in and mentor new generations of entrepreneurs. This, of course, is changing over time, as successful tech founders come onto the scene as angel investors and mentors.

Culture, however, changes very, very slowly and I think most would agree that, overall, the European culture of entrepreneurship is less supportive and less dynamic than the US one. But again – we are seeing changes. The ecosystems in the cities I mentioned before are dramatically different – in each of the cities – than they were 10 or even five years ago.

The sale of Nokia saw one of the biggest and most well known European tech companies bought out by a bigger US company; what’s to stop this happening in the future, and won’t it stifle the European scene if it keeps happening?

Mergers and acquisitions happen all the time, in Europe and in the US and everywhere else. Nokia fell from dominance in mobile way before the Microsoft acquisition, and the way that played out is not really representative of startups exiting to larger companies.

While it's great to see a European company become globally successful and maybe go for an IPO, a strong exit can also contribute very much to the way the ecosystem develops, depending of course on what the founders do with their money. In tech, however, it's often the case that they become investors and mentor new generations of startups.

Although Skype was eventually sold, the impact of the team on the European tech and startup ecosystem was enormous. So there’s no need to “stop” M&A by any artificial measures or regulations. Europe needs to push and support its entrepreneurs and, over time, more and more of them will become large and successful and remain independent via an IPO.


The European Startup Revolution is published in May 2015.


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Dan Swinhoe

Dan is a journalist at CSO Online. Previously he was Senior Staff Writer at IDG Connect.

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