Business Week’s Sarah Lacy pens an interesting piece on Europe’s startup climate following her visit to Le Web 3 in Paris a couple of weeks ago. Although relatively fair-minded, it has the faint whiff of disdain. I can imagine her saying “Europe? Pah? Who’d want start there when you can do it all in Silicon Valley?!” And if her fawning interview with Kevin rose at Le Web 3 was anything to go by (a typical question was “Aren’t you like a rock star?”), one wouldn’t expect much more.
Indeed, the article makes the usual mistakes of journalists parachuted into a territory they know little about, and who end up making odd claims unrecognisable to the locals. One of these is the view that Europe’s startup culture differs from Silicon Valley because there is a lack of ‘trickle-down’ economics. The piece claims that “stock options don’t have the same allure in Europe as they do elsewhere” because “employees don’t care as much for them, and entrepreneurs and investors won’t part with them.” This is a claim I’m afraid I don’t recognise at all at the moment. Lacy quotes the figure that “Silicon Valley companies typically set aside 20% of the stock pool for employees, compared with about 5% in Europe,” but gives no source for this information. Therefore, she argues, “successful founders amass a fortune, but little wealth trickles down.”
This is something of an over-simplification. One of the biggest issues is that – unlike Silicon Valley – Europe does not have a 50-year old startup culture. I would put most glib statements about Europe being a slower startup culture not to a lack of trickle-down economic but to something much simpler: a shorter history in the tech business. And yes, there is less of a share-ownership society in Europe, but then there is a greater emphasis on wider society generally. It’s a different mind-set. One must also be wary of viewing Europe through the prism of one centre. Paris is not “Europe” any more than Kiev or London. Each are different.
However, Lacy is correct in saying there are “signs of cultural change” pointing to an improved business climate, Internet penetration, the strength of the euro, the European common market, and the same startup economics as the US (such as small staff and low costs).
She name-checks a few people of note: Janus Friis, co-founder of Kazaa, Skype and Joost, with Niklas Zennstrom. Also Danny and Neil Rimer of Index Ventures who have “led Index to become some of the most successful investors in the emerging Web, backing hot European deals that a few years back even the Silicon Valley elite wouldn’t touch” like Skype, MySQL, Last FM, and others. Tariq Krim, of the “hot” London and Paris-based startup Netvibes is mentioned. As is Yoav Andrew Leitersdorf, co-founder of YL Ventures which has a history of nurturing European startups to successful exit via a sale, often to US firms.
As Leitersdorf explains, “it’s necessary if Europe’s startup culture is going to truly emerge. More mature startup markets take these smallish exits for granted. It’s the backup plan to becoming the next huge public company.” That doesn’t sound like nothing is happening in Europe to me.
Thankfully the article eventually finds a more balanced tone:
“A firm like YL Ventures is also helping to create that class of people who know they don’t have to re-create Skype to get a financial reward for quitting their jobs and following their dream — a whole collection of young, optimistic serial Web entrepreneurs. That’s all Europe has ever really lacked. The money is there, and the U.S. has no lock on smart, educated people.”