Every time I visit Silicon Valley – very regularly since 2005 – I recognize how little of a role Europe plays over there. The discussion order goes like this: First Silicon Valley, then the rest of the USA. Followed by China and rest of Asia. Next level is Brazil. And finally Europe. I do not dare to talk about Germany, England, CEE or Turkey in particular. Europe is in one pool – in the view of Silicon Valley.
I believe that this is a mistake. Europe has a big potential, a big but fragmented market and a lot of well educated people. But the biggest challenges for Europe are a lack of an entrepreneurial ecosystem and a strong investment infrastructure.
Ecosystems are dynamic and need success to grow
The Silicon Valley ecosystem was built over the last 30 and more years. There are more VC’s, more great companies, more great entrepreneurs, more students than anywhere else. This leads to an unique ecosystem. It is like the German soccer ecosystem – it is part of the German culture, the identification of talent and the education is on a superb level and the German teams including the German national team are always among the top 3 favorites of all tournaments. German soccer players are heroes in Germany and elsewhere (read here a beautiful article about the comparison of the German soccer culture and German entrepreneurial culture). So, ecosystem matters. Entrepreneurial ecosystem is one big white spot in Europe – even though there are strong local communities like Berlin or Stockholm. But the European entrepreneurial ecosystem is still small and not visible that much in the society around it.
An ecosystem is so valuable. There is a little village in Ethiopia called Bekoji. This village has produced 16 Olympic medals in 20 years. How is this possible? The GDP is very low, the education level far away from Western standards and there is almost no infrastructure in that village. But it has produced more gold medals than India (1.2 billion population) or Indonesia (247 M population). In my opinion, it all started with successful role models like Abebe Bikila who won the marathon at the Rome 1960 Summer Olympics. He became a hero. Many others followed him. They all tried very hard and some of them won Olympian Gold. Over the years, this village created an ecosystem because there were role models, success and experienced people to give guidance to the next generation.
Money makes the world go around
A few months ago I was sitting with one of the big Venture Capital companies for a lunch in San Francisco. I was talking about Europe and particulary about Turkey and as they are polite people, they were listening. Then all of a sudden, one of the guys around the table mentioned that he has raised a micro fund. I got curious and asked the size of the micro funds (which was raised in two weeks). The answer was 80 M USD. In that moment I changed my topics as I was realizing that the entire Venture Capital early stage capital in Turkey is about 100 M USD. At this lunch, one guy was just sharing that he has raised 80% of the entire Turkish Venture capital in two weeks… It was a lunch talk and it helped me to understand he dimensions between Silicon Valley and Turkey. This is what I meant when I said Europe in general is missing a strong investment infrastructure. Of course, the UK or Germany are much better equipped with financial fire power than Turkey but compared to Silicon Valley, they are also still small.
Not only that US Venture Capital companies are moving to Europe but also VC’s founded from Europeans are coming up and identifying deals which are not visible to Silicon Valley. Atomico, Lakestar or White Star Capital are just some examples and I am sure many others will follow them. The stronger the Venture Capital (institutional) funding in Europe will be, the stronger European tech companies will arise and will join the unicorn club. Maybe we have an own (European) unicorn club with more than 50 members… It is just a fact that US startups receive significantly more funding on every stage than European startups.
However Europe is changing
European entrepreneurs becoming heroes in their home countries and qualify as role models. Many others are following them. Niklas Zennström, the Skype co-founder, is one of them. There are others in Sweden like Spotify, Klarna or Soundcloud. Finland has Rovio and Supercell. Germany has Zalando or Xing and France Vente Privee or Criteo. You can find such successful entrepreneurs in every European country – from Estonia to Spain and from Turkey to Finland. There is a big change coming up as the successes of the entrepreneurs are strengthening the ecosystem in Europe. I strongly believe that this trend will change also Silicon Valley’s view on Europe.
I wish US players would be paying more attention to the world outside, especially Europe. And for Europeans, I wish for more confidence in our capabilities.
I am a big believer on European startups and European entrepreneurs. I believe that we have to create a culture across Europe demonstrating that entrepreneurial activities are good and must be supported. Entrepreneurs are creating jobs, they drive innovation and they change old structures. Whenever Europe will have a stronger entrepreneurial ecosystem and a stronger financial investment infrastructure, it will also reach the next level.
“The best time to plant a tree was 20 years ago. The second best time is now.” Chinese Proverb