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As technology upends industries and lifestyles at breakneck pace, the Old Continent is not producing any of the online giants like Google, eBay or Facebook. Its best and brightest prefer to emigrate to Silicon Valley, or sell their ideas on to U.S. firms before they have a chance to establish themselves.
The European Union's top executives in Brussels are trying to rectify that with a long-term plan of reforms and incentives but face an uphill battle. The 28-nation bloc is, above all, lacking in the risk-taking culture and financial networks needed to grow Internet startups into globally dominant companies.
Europe's relatively cautious attitude to investment stands out as one of the biggest hurdles—and among the most difficult to change. Investors in Europe want to see that a young company can generate revenue from the start. Europe's many high-technology companies are focused on manufactured goods that can be sold right away to generate revenue—industrial equipment, energy turbines, high-speed trains, medical devices, and nuclear energy.
By contrast, Internet companies often have little to no revenue at the beginning. Twitter and Facebook, for example, first focused on building up their user numbers. Only once they were established as global forces did they put more attention to making money, through advertising and other strategies.
This difference in mentality stands out as one of the key reasons that Europe has fewer venture capital firms and less investment in startups than the U.S. or Asia.Over the past five years, U.S. venture capitalists spent $167 billion on new business ideas compared with some $20 billion by their European counterparts, according to the National Venture Capital Association.
http://phys.org/news/2015-09-europe-isnt-googles-facebooks.html
(Score: 3, Interesting) by TheRaven on Wednesday September 23 2015, @08:35AM
The big problem (according to the founder of a successful startup in the UK who gave a talk to us a year or so ago), is the second round of funding. There are lots of startups in the UK that grow to being worth a few tens of millions. At that point, a silicon valley startup goes for the next round, has a load of VCs lining up to fund it, and then can grow to something worth a few billion - but it only gets there with a couple of hundred million of investment. The other path is to sell the company to a bigger company, which is what almost all UK startups end up doing.
In contrast, the first round funding is increasingly a problem for VCs in the valley. Most VC funds now have so much money that they can't afford to hand it out in chunks less than about $30m. That's far more than most startups can usefully spend, which causes crazy bubbles.
The other problem, which we've known about since the '80s, is that the US is a much more homogeneous market and much more likely to buy from US companies. The EU has a larger population (and GDP), but if you want to sell to everyone in the EU then you need to spend a lot on localisation. If you want to sell to the entire US market, then you need one version.
sudo mod me up
(Score: 2) by M. Baranczak on Wednesday September 23 2015, @04:30PM
The big problem (according to the founder of a successful startup in the UK who gave a talk to us a year or so ago), is the second round of funding. There are lots of startups in the UK that grow to being worth a few tens of millions. At that point, a silicon valley startup goes for the next round, has a load of VCs lining up to fund it, and then can grow to something worth a few billion - but it only gets there with a couple of hundred million of investment. The other path is to sell the company to a bigger company, which is what almost all UK startups end up doing.
Why can't your UK startup go to the Silicon Valley investors and ask for money? This is the 21st century - it's not like the investors would have to put the money in wooden boxes and send it by ship around Cape Horn. I thought transferring capital internationally is supposed to be easy now.
(Score: 1) by PocketSizeSUn on Wednesday September 23 2015, @09:32PM
They can. And they do. But most of the VCs in the valley think:
- The valley is magical and any 'computer/internet/mobile' company will fail if it not located there.
- They don't want to have an investment that is too far to drive their Tesla by and show off to their friends.
No, I don't think much of SV or it's VCs.