What’s wrong with tech entrepreneurship in Europe

Photo Credit:  Dave Cynkin

Niklas Zennström, founder of Skype, Kazaa, Joost and now Atomico Ventures spoke at Le Web today about his entrepreneurial experiences. Following that there was a round table panel hosted by Brent Hoberman (co-founder Lastminute.com), discussing why there is a notable lack of billion dollar internet businesses in Europe. The panel included entrepreneurs from the UK, France, Spain and Norway such as the founders of Fon and Opera.

Both Zennström and the panel highlighted some structural issues which are clearly holding back Europe. I was horrified at some of the severe issues which startups have to endure in Spain in particular. It’s no wonder Spain is in deep trouble, with unemployment at a horrific 19%. I feel fortunate the UK does not suffer from anything quite as severe as these issues.

So what is the problem with tech businesses in Europe?

  • VCs have a very low appetite for risk, compared to their silicon valley counterparts
  • European entrepreneurs move to silicon valley to enjoy a more supportive environment, but causing a European brain drain
  • Tax regime is geared towards corporations rather than small startup businesses
  • Restrictions on immigration and visas for high-level people
  • Restrictive hiring and firing legislation which prevents businesses flexibly scaling up or down as required
  • High burden of regulation
  • No critical mass of potential acquirers
  • Large European businesses don’t trust buying from newer small companies
  • More complicated and harder to scale in Europe (due to language and multiple country markets)

Silver lining

Whilst these challenges are undoubtedly hampering Europe’s ability to build significant internet businesses there are some points where we do rather well:

  • It’s easier to build a global business out of Europe, because we’re more used to dealing with different languages and cultures.
  • European managers are better than their American counterparts, partially because of greater international experience.
  • Innovation remains high.

What can be done

  • Reduced regulation
  • Reduced tax burden
  • Better internet infrastructure (e.g. more European cloud operators)
  • More sanguine approach to failure
  • and by far the most important, everyone agreed, a hands off approach from Governments

Finally, it’s worth noting that it’s not all bad, there have been some successful European tech companies, such as Skype, and there will surely be more.

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4 Responses to What’s wrong with tech entrepreneurship in Europe

  1. I’m not sure about UK’s advantage over Spain – it took Codility almost 2 months to set up a company bank account here comparing to max.30 minutes in Poland (with the same documents at hand)…

    Chris

  2. Hi Scott

    I got your blog link from Chris’s tweets.Very interesting artcile . I think govt does play a very major role and they just talk about doing things as a election agenda but never really take any substantial actions. What a shame…. Anyways I have read your blog posts and found them very inspiring and informative. I am based in London and would be very happy to connect/meet if you do come to london.

    Sanjay
    http://blogtrepreneurs.blogspot.com/
    http://uk.linkedin.com/in/sanjaychoudhary1

  3. […] London’s startup ecosystem is not a quick fix, there are some structural issues, many of which will take years to fix, but it’s going to keep getting better and better in the years to come. If you’re a […]

  4. AG says:

    Hi Scott,

    Totally agree. The strict restriction and policies are a big blocker for startup businesses in europe. Sad truth …

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