Lecture
The publication Business Insider UK published a material in which they speculated about why Europe does not have its own large technology companies like Google or Facebook. According to the author, the matter is mainly in the European mentality and fragmentation of the market, as well as in the active activities of American and Asian organizations that buy promising European projects at an early stage.
The VentureBeat publication supports the point of view of colleagues, but Square designer Thomas Peterson does not agree with it - he believes that one of the main reasons for Europe’s lag is the actions of European politicians who are trying to unify the market.
Founder and CEO of Open Garden (developer of a FireChat messenger that works without an internet connection) Mick Benolil, the editor of Business Insider, was born and raised in France - and launched his first startup there. The entrepreneur who studied in San Francisco, however, understood that if he wants to change the world, the best place to work on his project is Silicon Valley.
In 2011, when Benolil had the idea of creating FireChat, he moved back to California. “I knew this was the only way,” he says.
“The Old World does not produce as many IT giants as the USA - in Europe there is no Google, Facebook or Apple. The brightest talents of Europe prefer to move to Silicon Valley and do business there - or sell their products to American companies, ”writes the author of the material on Business Insider.
One of the main problems, according to Business Insider, is the unwillingness of European investors to take risks. “In California, crazy ideas are welcome. The more unusual, the better. European investors treat every investment with the utmost caution - this hinders the development of the start-up sphere in the region. This is the biggest obstacle for European entrepreneurs, and at the same time it’s the most difficult to fight. ”
Investors in Europe, the author writes, want to make sure that the company is able to generate profits - and almost from the very beginning of its activity. Many high-tech European companies are focused on the production of industrial goods that can immediately make a profit - for example, high-speed trains, medical devices and so on.
Meanwhile, Internet projects rarely start making money right away. “The same Twitter and Facebook were originally focused on gaining a large user base. Only after this was done did they begin to think about monetization and building a profitable business. ”
Over the past five years, American Business Venture capitalists have invested more than $ 167 billion in startups, while in Europe this figure was only $ 20 billion. In 2014, investors from America invested $ 50 billion in companies, and investors from Europe - $ 4 billion. According to this indicator, Asian venture capitalists also overtook Europe - in 2014 they invested about $ 22.5 billion in young technology projects (in 2015 this figure would increase - by August 2015 it exceeded $ 32 billion).
Anand Sanwal, CEO of CB Insights, a New York-based company, notes that getting an investment at an early stage can be crucial for a startup. He explains that funding helps the project bring its product to the market as early as possible, and those teams that are slow to launch are usually initially doomed to failure.
In addition to caution, believes Square entrepreneur and designer Thomas Peterson, Europeans have another mentality trait that prevents them from creating their Silicon Valley - namely, politeness. Most of the high-profile US projects - Airbnb, Uber, Kickstarter - preferred to “not ask, but apologize.” They have changed the industry, and now they are conducting endless legal proceedings with those who are unhappy with it. “This style of Europeans seems unacceptable. They create a predictable business within the law. ”
Another problem faced by European startups is the lack of large start-up hubs (such as Silicon Valley) and a strict government policy on business. Founders of companies from Europe need much more time, money and official permits to do business. In addition, strict social protection mechanisms do not allow to quickly dismiss an employee - and, fearing to take unnecessary risks, start-ups do not expand their staff.
To build a technological project in Europe is difficult for another reason - because of the "fragmentation" of the continent. Scaling up business is not the same as in the US: when launching your service in a new country, you need to take into account the peculiarities of its legislation, adapt the project for local residents (language localization, and so on). Starting in America, with a population of about 320 million people, the company enters a huge English-speaking market.
Designer and entrepreneur Thomas Peterson believes that all of the above reasons alone can not create a situation similar to that observed in Europe. “Yes, the market is indeed fragmented, but why did it not previously prevent the companies of the Old World from becoming leaders? The list of 500 richest companies in the world includes 160 European companies and only 132 American ones, ”Peterson says.
The designer agrees that one of the main European problems is the absence of a large technological hub, such as Valley or New York. At the same time, he writes, it is important not to forget about the political situation on the continent.
“In order for the EU to unite in a single market, member states must agree on laws that are fair on a national scale. In fact, the need of European politicians to constantly introduce new laws to unify the domestic market creates an unfavorable environment for innovative business, ”the entrepreneur notes.
Peterson believes that changes made by politicians are often of no benefit to startups. He believes that the edits should go "from the bottom" - from the companies themselves and entrepreneurs or their representatives. But the European government does not trust the private sector and prefers to solve problems on its own - not always in a way that is beneficial for startups.
As the author of the material notes, some European companies have managed to enter the global market, but none of them can be compared in scale with Google or Facebook. Successful European projects include Skype video calling service, Spotify streaming project, Angry Birds mobile games from Rovio and Clash of Clans from Supercell, which have become popular all over the world.
The fate of these companies is as follows: two years after launch, Skype bought eBay for $ 2.6 billion, and in 2011 Microsoft acquired video service for $ 8.5 billion. Rovio is in decline - interest in Angry Birds has fallen markedly in recent years, the company's operating profit also decreased, Rovio had to spend reductions several times. Supercell is not an independent gaming studio - 51% of the company is owned by Asian investment firms SoftBank and GungHo.
According to the editors of the publication VentureBeat, the majority of successful companies from Europe are still being devoured by large organizations from the USA at an early stage. There are many examples of this: absorption of Skype, the purchase of Semetric, the sale of the creator of Minecraft - the studio Mojang - and so on.
“There are no doubts that there are talented developers in Europe capable of launching world-famous companies. But since all young firms simply buy up at the first hints of project success, hardly any of these developers will have a chance to realize their potential. ”
One of the co-founders of Skype, and now the head of the London-based investment company Atomico, Niklas Zennstrom believes that the situation in Europe is gradually improving. At one of the conferences, he noted that since 2002, when Skype was launched, the start-up environment in Europe has noticeably changed for the better. Duncan Lamb, a former developer at Nokia, now holding the position of design director at Transferwise, believes that people are the only ones - and if there are enthusiasts in Europe who want to solve human problems and build their own projects, the startup sector will develop.
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