Killer startups in Europe beckon – if we tighten our synapse to the global market

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This is a guest post by Alex Hoye , a London-based entrepreneur and angel investor and in Internet, media, and consumer markets. He is CEO of Latitude Group, a European digital marketing agency, and before that co-founded GoIndustry plc, an online industrial auctions firm. Hoye invested in Seedcamp Seedcamp and is chairman of Skimlinks and BraveNewTalent .

I was in the Bay Area for the weekend and aside from standard harassment from Valley Bubble dwellers – “What are you still doing in London, that macro-challenged market – at least go to Brazil or somethin’?!” – I met a proto-example of the power of execution and came to two similar-but-different conclusions.

Win Speed: I had a coffee Sunday in the Valley with a startup that to me simply typifies execution at win speed.

Three consultants in an NYC bail out, park in the Valley (eschewing Soma to avoid the distractions of drink and Bubble Syndrome), and spend three months 20/7 learning to code using Django. They then build their first SaaS software and roll it out. It works, but after market testing with real clients (who are using it today), they mothball it as a lead option after real market factors suggest that the market size and margins are fine, but not world-changing.

Four weeks later, on 4 December they start a new project. They go to an incubator in Jan, and roll out their first version in mid-Jan, six week after line one of code. They then spend three days selling to clients.

Actively.

First line. They bag clients. Paying clients. Up front paying clients. They then stop bagging clients and spend three weeks implementing the feedback from these clients.

They go back to market three weeks later with three subtly different propositions and real life MVT them. Which worked best out of a hundred trials? They then chose the most effective and, after refining, bag dozens – then hundreds.

They then work with those clients – front line, no customer support team – for a couple of months to figure out touchpoints, real value levers for the clients, what was good in a sales pitch versus what worked in real life. Then, given the small team, they again freeze client acquisition, but are now near cashflow positive. At that point, they hit up the VCs and get nine term sheets four months after targeting their second option.

This is possible anywhere. Incubators can help to keep ramen on the table and focus. In Europe we have Seedcamp, Springboard, etc. And nine term sheets in a week and a half may be hard going with Europe’s VCs. But frankly, if you execute at that kind of rhythm, several with a few extra weeks is very feasible, which wouldn’t kill you.

So, what else, why doesn’t it happen more here?

Would the client base here be less susceptible to a few 25 year-olds selling a new concept? A year ago, perhaps. But I believe that Groupon and Facebook have added to the declining impact of old school media. Companies like these are forcing business marketers and advertisers, for example, to open their minds to new channels here in Europe, as they are elsewhere.

Is it the Valley bubble exposure? In this example, it was 700 paying clients in four months that made the difference, not rocking TechCrunch Disrupt or a base of super-angel names on the initial seed round. Right idea, right execution, paying clients… Fast.

In short, if these three guys had done the same thing off Old Street/Silicon Roundabout, they may have extended that time frame from seven weeks to paying customers to ten, and they may have taken four term sheets in three weeks – but it’s all possible. Admittedly, the business is brilliant and will absolutely rock the planet – filling needs and mobile platforms readily available here in Europe. But they weren’t the first to explore this area – there are plenty in the Valley and probably some here as well.

They just executed.

I believe that companies moving at that kind of speed – with drive and discipline – can make it wherever they are. Currently, that kind of global speed is unevenly distributed. If we’re going to take our game global, we can and must re-distribute more ‘speed’ to our market.

Synapse:

When I was at Disney the film release cycle rolled out in waves. First we hit LA and New York. That created buzz and hype. Then we rolled in the burgs and burbs of America. Once we felt like we knew what worked and what didn’t, we would develop our international marketing strategies, usually hitting the UK, then France & Germany, then the rest of Europe and Japan, then, well, the remaining ROW (Rest of World as we Yanks call non-US turf). Sometimes the lag was a year or more to get to Buenos Aires and Bombay.

Today, filmgoers in Hyderabad and Hangchow see copies of films before they hit Houston if you don’t run a global release strategy. And maybe even if you do – albeit, perhaps, a bit fuzzy and with the occasional moviegoer goint to the loo bobbing in front of the pirated copy. Today, the hype machine is instant and the tastemaking isn’t analogue – it bounces digitally. The synapse response time has gone from months to weeks. Days. With consumer Internet, synapse is now moving closer to real time. And with the consumers, follow the enterprises.

In 2007, when I spoke to US VCs and startups, they simply didn’t care about Rest Of World. The US sandbox was plenty big and, besides, the rest of the world couldn’t keep pace with US speed of execution and capital. Build the US, don’t get distracted, become unbeatable, then think about ROW strategy. Big winners in today’s pantheon followed that strategy effectively. Google came to Europe after it was established and led with sales and account teams. Facebook followed a similar strategy without recourse. Twitter. Zynga, built in America, driving into the continent where gaming for cash is not going to set the FBI after you.

But what if we drive the synapse response time faster? First off, don’t get me wrong – I witnessed the 1.0 world of copycats, most of which failed miserably. That was in no small part because the companies they were modeling were rife with bad ideas destined to fail themselves. I predict that we will see even more clones in Europe now, many of which will be building on ideas which will fail in the US and worldwide. Such is the nature a land rush – and goes to my advice that you make sure that your segment has potential before you dedicate your life an passion to it. Following others with poor logic doesn’t make it ‘validated’.

Further, the companies I’ve been involved in are without exception thought leaders in what they do – Skimlinks built its proposition before its American rivals, BNT before its big US competitor, and the European advertising technology sector often leads the US. But I’m a little tired of the US megafirms being able to take their time at home, and then simply rock into the European market at their leisure.

The fable from Colors comes to mind – a young bull turns to the wise bull on the hill and says, “Hey, whatcha say we run down and f*** us one of them cows?” The sage bull shakes his head with a knowing look and says, “No, son. We walk down there and f*** ‘em all.” Well, it’s time we stake out our herd in Europe and make that more of a challenge. And go poach their herd, for that matter.

Groupon made for an interesting shift in that modus operendi. Or rather, CityDeals did. It was still a sell-out rather than rolling an original European leader into the US as we did with GoIndustry in 2003 and as many of the euro and ICE crew are now driving. But at least that sale feeds the European machine and everyone involved learned how to operate at global speed. Groupon were Samwered. The Samwers’ initial foray in 1998 was an eBay clone subsequently bought by eBay which proved the model from their mutual perspective on both sides of the pond: To Americans, it was worth the lack of distraction to pay a few tens of mil to these guys for breaking the market; To the Samwers, it was cut-n-paste. Highly effective cut-n-paste.

One result is that German start-up land has built a reputation of being predominantly Revenge of the Clones (clearly there are exceptions, but…). And presumably Groupon feels similarly to eBay, having footed a bill in the hundreds of millions for CityDeals. Relentless execution driven by the Samwer machine could have never been done by the Chicago-based firm without distracting it, and what’s a few hundred mil (ok, 10 digits with the earnout and some growth opps in Asia) when you’re building something worth several bil?

But, no doubt they would have been happier to simply walk down and f***ed them all.

So what has Europe been lacking? Consumer adoption?

We’re at or ahead of the States in most instances – the web is mainstream in Europe and online purchases per capita in the UK exceeds the US.

Capitalisation?

Yes, but it is getting better and clear winners will be funded.

Scale?

Yes, there is more friction in Europe – language, culture, press, regulation. That’s hard. I’ve dealt with it and continue to do so. But frankly there is less competition and there are 500 million here to 300 million there.

With blogs and reporting, cheap Virgin and United flights and an increasing bridge of mutual contacts to the coffee shops of Soma and with access to the investors on Sandhill, there is little reason that this synapse cannot, should not be even faster. Real time, or damn close to it. And the closer we are to that synapse being real time, the more likely we are to innovate even more concepts along with and ahead of the US. Visit a bit. Build connections with people there and Skype them. But build here where you can address the US and Europe at once.

I honestly believe that one does not have to live in the Valley to build a big winner. We just need to tighten our synapse time with the global market, which for now is heavily weighted to SF.

Think Globally, Build Here.

Then we can bring our assets to bear – great minds, a new wave of entrepreneurs, a broad pool of talented devs and most importantly … 500 million consumers who are largely wired want more. The synapse response time must go from months to days – to real time – and as often as possible, to reverse in direction.