The European startup ecosystem arrived – but Paul Carr wasn't paying attention

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Editor’s note: This is a guest post by David Langer, co-founder of GroupSpaces. It was originally published as part of The Telegraph’s Tech Start-Up 100 debate series in response to TechCrunch writer Paul Carr’s views on European clones.

Having observed first-hand the transformation of the European start-up ecosystem over the past few years, I am frequently surprised by the cynicism still displayed by some journalists and entrepreneurs about the prospects for European start-ups. Since 2004, 8 out of the 30-or-so technology companies that went public or were acquired for at least $1billion were European, including Skype, Betfair and TomTom. In addition to these exits, there are literally hundreds founded since 2000 that now have over $10million in annual revenue.

Back in November 2006, I remember sitting in a lecture at Oxford University’s Saïd Business School being delivered by Matt Cohler (employee number five at Facebook and founding team member at LinkedIn) entitled: “What is Silicon Valley?”. Cohler explained the geography, physical components and mindset of Silicon Valley, and I’ve had the good fortune to travel there a number of times since then to see these characteristics for myself.

In the lecture, I remember contrasting the Valley with what I knew of Europe – in particular, London. We were lagging behind. There were start-ups dotted around, but not clustered in large numbers. There were one or two start-up networking events each month. Venture capitalists wanted six figures of revenue before investing. Angel investors generally didn’t understand the internet. Times were tough.

Jump ahead two years, to November 2008: the overall economy may have been in turmoil, but significant leaps were being made in entrepreneurship, most notably by Saul Klein, founder of Video Island (now LOVEFiLM) and Partner at Index Ventures, who had just observed that Europe had all the necessary ingredients to build the next generation of world-beating businesses. All that was required now was that they be brought together.

Based on these observations, Klein began what would turn out to be two key catalysts. Firstly, OpenCoffee, a weekly networking event for entrepreneurs and investors that served as the first port of call for many start-up founders, from which they could start navigating the ecosystem. Having started in London in 2007, it has since grown to over 130 locations worldwide, of which over half are in Europe. Secondly, Seedcamp, the early stage investment program.

In addition to Klein’s efforts, Alastair Mitchell and Andy McLoughlin, founders of London-based start-up Huddle, started DrinkTank in May 2008, an elite invitation-only event for founders, chief executives and investors in technology start-ups.

If we fast-forward again, to January 2011, almost four years after Klein made his observation, all the ingredients have indeed now come together. London is the capital, and Europe has everything necessary to be called a legitimate, healthy entrepreneurial ecosystem that produces world-class companies.

Silicon Valley has been around a lot longer than London and is more mature, but London now has the same ingredients – and, crucially, they are now gelling together.

While the Valley has a dense population of technology start-ups in and around San Francisco, we have over a hundred in and around Shoreditch; while they have Starbucks on University Avenue, we have Benugo by Old Street roundabout; while they have venture capital firms scattered all over Menlo Park, we do throughout Mayfair; while they have Y Combinator, we have Seedcamp; while they have Plug and Play, we have TechHub; while they have so many start-up networking events that you could go to one every night of the week, we do too; while they have Stanford, Harvard and MIT producing wave after wave of super-smart, hungry entrepreneurs, we have Cambridge, Oxford and Imperial College; while they have gifted engineers moving to Silicon Valley in droves from states all over the US; we have gifted engineers moving to London in droves from all over the EU. You get the idea.

I founded my start-up, GroupSpaces, in October 2007 with fellow Oxford graduate Andy Young. Our first proper hire was an Imperial College engineer who moved to Oxford to join us in June 2008. In 2010, we raised $1.3million from European venture capital firm Index Ventures, who also backed Skype, Betfair and, along with a consortium of angel investors based in both London and Silicon Valley. We moved the company to east London in order to be at the heart of what was happening in Europe, and, since then, we’ve hired four more engineers, two of whom moved from Hungary to join us in London.

If you speak with the founders of Songkick, Playfire, Conversocial, Brainient, Spoonfed, Smarkets or any of the other fast-growing London-based start-ups, you will hear similar stories of a maturing European ecosystem satisfying their needs.

There are also a couple of fantastic events that now take place each year for the founders of Europe’s top start-ups. Brent Hoberman, founder of, started the Founders Forum in 2007, which takes place in June each year for 100 to 150 European founders, investors and select other guests. In 2010, Irish entrepreneur Paddy Cosgrave started the “F.ounders” event that hosted over 120 (mostly European) technology company founders in Dublin, including the people behind Twitter, YouTube and Skype.

So when you see people write “Spotify? Mendeley? Huddle? Mind Candy? Moo? Skimlinks? Yeah, I’ll give you those – but only those. If you can name 94 other promising young tech companies…” it makes you wonder whether they’ve been listening at all. Or is it that the invitations have dried up since they moved away?

As well as the physical ingredients coming together, attitudes are also changing. Huddle founder Alastair Mitchell has said: “Historically in the UK, people built a business over 20 years, sold it and f***ed off to the Cotswolds to have a family. Whereas in Silicon Valley, people built a business over 8 years, sold it and started investing in the next generation of entrepreneurs.” These patterns have led to a virtuous circle in Silicon Valley of more and more successful entrepreneurs, whereas in Europe, there’s been a vicious, repetitive cycle in which hardly any entrepreneurs mentor the next generation.

But a growing number of successful entrepreneurs in Europe are bucking that trend, and starting venture capital firms soon after their big exits. For example, Hoberman, who sold to Travelocity for $1.01 billion, and Michael Birch, who founded Bebo and sold it to AOL for $850million, together started PROfounders Capital in 2009. Jos and Ben White, who together started MessageLabs and sold it to Symantec for $695million in 2008, started Notion Capital later in 2008. And Niklas Zennström and Janus Friis, who together founded Skype and sold it to eBay for $2.6 billion, started Atomico Ventures in 2006.

The attitude change isn’t just at the classic VC level either. In addition to a growing number of entrepreneurs-turned-angel investors doing seed-stage investments, such as Sherry Coutu, Robin Klein, Alex Hoye and William Reeve, the VCs are stepping down: Index Ventures launched a $10million seed fund last year and many others, such as Eden Ventures, Accel Partners and Atomico Ventures, are doing an increasing number of seed deals.

Further evidence of the promising European start-ups emerging is that more and more Silicon Valley angel investors are travelling over to Europe multiple times each year to do deals. Leading the charge is another Start-Up 100 guest columnist, Dave McClure, who has invested in four UK-based start-ups in the past year, including my own, through his new fund, 500 Startups.

Skype founder Niklas Zennström recently commented on the changes: “Now is the healthiest [the European start-up market] has ever been. When we were seeking funding for Skype in 2002 to 2003, we went to twenty-six different VCs, asking for €1.5million in exchange for up to a third of the company, but no one in Europe wanted to invest and we had to bootstrap it ourselves.

“We said we had a great idea, great technology, we wanted to go out and change the telecommunications industry – but they saw something they hadn’t seen before, and they didn’t want to bet on that. Today, the whole culture in Europe – from talent to funding – is so much healthier: you have people who take risks, more entrepreneurs, and more investors who know what it takes to bet on people rather than on companies with cash flow. An ecosystem is being built.”

So, if you’re shouting from the sidelines that the European technology industry is no more than a collection of tribute bands, you’re clearly not paying attention. (Incidentally, how would you describe the latest wave of mobile photo-sharing start-ups in Silicon Valley?)

And if you’re an entrepreneur complaining about Europe not being a good place to build a company, I have some simple advice for you: come to London, stop whinging and get on with it – because everything you need to build a billion dollar company is right here on your doorstep.

TechCrunch Europe is partnering with The Telegraph on the Start-Up 100. Editor Mike Butcher chairs the judging panel.

  • James Pipe

    Great article! Particularly a fan of this little gem: “Historically in the UK, people built a business over 20 years, sold it and f***ed off to the Cotswolds to have a family….” When did Alastair say that?

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  • massifcentral

    Although extremely well argued, and I think Paul Carr really has been beating that drum for WAY TOO long. The only people that actually care about these comparisons are Europeans. In SV no one seems to even gauge why it matters.

    • Fbdeveloper

      Europeans read techcrunch as well, so there.

  • stefanobernardi

    BTW, that’s the UK scene, not the European.

    • Fbdeveloper

      True , i would really like to read the swedish or the finnish or the german perspective for once … just because this is an english blog, doesnt mean we ‘re gonna have to put up with paul carr all the time

      • Fred Oliveira

        Except this wasn’t written by Paul Carr.

      • Fbdeveloper

        did i say it was?

    • Guest

      Well, David does write that “we have gifted engineers moving to London in droves from all over the EU”. That’s very comparable to engineers moving to California’s Sillicon Valle.

      • Fbdeveloper

        Good point, but some numbers would help. Many of the companies mentioned in the article did not “flock to london” to grow. Maybe because they didn’t have to?

      • Fbdeveloper

        Good point, but some numbers would help. Many of the companies mentioned in the article did not “flock to london” to grow. Maybe because they didn’t have to?

    • Guest


    • alain94040

      Yes, this article is UK-centric but through my experience with launching the Founder Institute in Paris, I can tell you that all the cities we operate in (Berlin, Paris, Brussels and Amsterdam) have the critical mass of entrepreneurs, with great ideas. Their weakness, if any, is the lack of ambition. And their main challenge is that the ecosystem has very few angels who understand startups (as opposed to doctors and dentists who put money in).

      It will take 3 to 5 years, but I expect some major success stories from Europe.

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  • Anonymous

    Agree with @stefanobernardi and i would also add a few more points…

    * The quantity (even in London) of seed funds and angel investors is just not enough to create a sustainable startup ecosystem. More over, at later stages of funding (3mil+) there are no more than 10 VCs than can back that up…

    * You can’t find the required quantities of highly qualified engineers at the short period of times that are needed for startups

    * There simply are not so many experienced mentors out there. Maybe there are a few for the very early stages, who at the most part are invisible, but for after-launch mentoring the people capable are numbered.

    I recently wrote a blog post on this issue, you can check it out at:

  • Nick78

    What has this post got to do with Europe?

    David Langer may be trying to show that London is the SV of Europe, but he provides no real evidence of that and he does not even seem to know much about the European tech scene outside the UK.

    TechCrunch Europe, please try to live up to your name, or rename this blog TC UK.

  • Donslim_1116

    Problem is the best graduates all run to the City of London. How can a start-up afford those graduates who will want £40k to live comfortably in London? The VC community in London isn’t exactly great either with very few deals done and many demanding a solid amount of revenue (not easy to do in this climate). Factor in the risk-averse culture in the UK and the obscene amount of money it does cost to even sustain yourself its not the best place to start up. SV is still the place to start-up.

  • AlexSF

    Is the UK still paying rock star engineers only ~$65k per year? Until the UK bucks its ideas up I’ll stay here with the cream of the crop in Silicon Valley where $140 is the base rate.

    • AlexSF

      And couple that with the fact that everything in the US is 1/2 the price it costs in the UK. Dining, cars, appliances, houses… That’s 3-4x the standard of life, not to mention the weather, beaches, mountains, and lack of crime. London? No thanks!

  • DreamA

    Interesting to take a close look HOW TO BE SILICON VALLEY from someone who knows
    Paul Graham

    I have a dream that one day DREAMICON VALLEY in the heart of Europe will be the spot on the map where talented entrepreneurs with spirit and passion from all over the world will work and play together to find new solutions for our society. Dreams instead of silicium.
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    […] start-up ecosystem grows up. At least that’s what a piece by David Langer, co-founder of GroupSpaces, in TechCrunch contends. He says while journalists and […]

  • IAmNotBuyingThis

    If you’re trying to stop the constant contrasting (& negative criticisms) Europe gets vs. US, how is this article helpful? It’s not, just fuels the fire.

  • Fabrizio Gianneschi

    Although London isn’t Europe, it’s still 1-2 flight hours far from quite every european country.
    So under the same conditions (assuming that the author is correct) as an european I’d prefer to go to UK instead of SV

  • Ben Brown

    My company VouChaCha has managed to bootstrap, build a product and gain funding in London. We received receiving amazing support from mentors and initiatives like Geek n’ Rolla, Launch48 and Seedcamp that simply did not exist when I graduated from Uni way too many years ago. It is still early days and we have much to do but are growing fast. From my perspective a big part of the Valley is mindset and optimism which is shifting in the UK fast, there has never been a better time to start up in London.

    • Camelback

      I agree, the time was between 9:30am and about 12 noon, just before lunch. LOL!

  • Robert Latchford

    Start Ups aren’t a location they are a mindset!

  • Nick Hawtin

    Silicon Valley is Silicon Valley just like Hollywood is Hollywood – and everywhere else is not.
    Finito. End of story.

    It is, however, nice to hear London is more entrepreneur friendly that it was. Good luck.

  • Anonymous

    Let’s see whether we could create a similar environment in Manchester, as an alternative to London.

  • J.T.

    People in europe keep saying the climate is changing, the climate is changing. How long have they been saying this? Since the US-led “new economy” started in the mid-1990s? How can europeans catch up to the US if they don’t even understand the concept of free markets and investment capital? The problem is cultural. The US is comprised of pioneers and immigrants. Europe is comprised of pensioners and aristocrats who already inherited their wealth generations ago. The european ruling classes have no need for “bourgeois” wealth creation.

  • Camelback

    According to an EU study, 75% of Europe’s PhDs eventually move to the United States, and less than 20% will ever return.
    In addition to the US technology that is decades ahead of Europe and the state-of-the-art research facilities in virtually each state, US-based PhDs earn more than twice as much as they do in Europe.

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