Is there still a difference between the US & European Startup Ecosystem?

Is there still a difference between the US & European Startup Ecosystem?
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Silicon-Valley

The ongoing question. A complex, if you will. As an American (nay, a Californian) working in the startup ecosystem in Paris, it’s an inevitable discussion: “You know that so many people would rather go from Europe to California, right?” “Did you come to Europe to launch a company?”

And yet, one by one, it seems the very building blocks that differentiated the European tech ecosystem from the US tech ecosystem have vanished.

Access to Capital

“It’s impossible to find funds in Europe” they say, and to them I say that not all startups should raise money, and that if you can’t get Business Angel money or government-backed seed money in Paris, or if you can’t get into accelerators like SeedCamp, who raised a $28 Million fund in order to provide up to $250K in seed money to startups in their program, then maybe you should rethink your startup.

European startups are raising larger Seed Rounds than ever before – Algolia recently raised a ‘second seed round’ topping off at $2.8 Million, and Seed & Series A round ranges are being redefined each minute.

In the hardware space, Crowdfunding campaigns like Giroptic & Hexo+ took in $1.3 Million, while Lima went on to raise $2.5 Million from Partech after their $1.2 Million Kickstarter campaign last year.

In the late stage category, it’s no longer the case that Euruopean startups must go to the US to raise large rounds. Blablacar just broke the ceiling on the European venture capital space, raising $100 Million from traditional VCs, showing that European startups can scale globally from home – Neelie Kroes would be proud.

Don’t mistake my opinion for complacency. There are plenty of ways that the venture scene could be improved, from a regulatory, cultural & monetary perspective; however, the Exodus of startups in search of money, that so many media predicted has been proven to be misguided, if not outright wrong.

A ‘Single Market’ Europe: Myth or Reality?

Recent figures suggest that the population of Europe in 2014 is just under 750 Million people. That’s a little less than double the size of the United States.

Language, Culture & Regulation – in the past many have said that Europe’s biggest weakness has been its fragmentation of epic proportions; however, startups have either found workarounds or built companies in order to remove (read: “disrupt”) these barriers, or they are not relevant to the Internet business.

Companies like Uber & Airbnb have shown that, by and large, people want to have a uniform experience – hotel or taxi – wherever they go, and European startups like Deezer, Spotify, Blablacar & Transferwise have shown that it’s possible to build a European startup.

The Secret to Conquering the US Market from Europe

The US market is just as valuable to Europeans as the European market is to US companies, and Europeans are getting better at attacking the US market in recent years. Criteo, a largely R&D-driven company, has laid the groundwork for a rising model in France, whereby companies keep their engineering team in France, and the business development team moves & grows with market expansion, usually with the CEO in the US for at least a few years.

We’re now seeing PeopleDoc do the same thing, and it looks like Blablacar, while they won’t be going to the US anytime soon, is braced for a similar setup.

Meanwhile, it seems that the vast majority of US startups still have trouble launching in Europe (London excluded). For every Airbnb or Uber, there’s a Lyft, a Postmates, a Sendgrid or a Dyn, who, despite large market presence in the US, hasn’t quite found their market fit in Europe.

The next Silicon Valley is no Silicon Valley

Startups in Europe are hiring, growing, raising money, selling their companies & buying other companies, and, just as one my expect with an ecosystem built on a system of decentralized intelligence (i.e: the Internet), these companies are growing everywhere & anywhere.

In 2010, the race began around the world to convert certain neighborhoods, regions, cities and countries into the next Silicon Valley. That work was not entirely in vain, as the end-result of the low barriers to entry that exist, and the increasing access to capital across Europe and around the world, has enabled almost anyone, anywhere to build the next Instacart, the next Viadeo, the next Afrostream – as long as your government doesn’t actively oppress the creation of new businesses (and even then, there’s always foreign holding companies), the next Silicon Valley will be no Silicon Valley – innovation will cluster together wherever there is a large-enough population of educated people with Internet access.

7 Responses

  1. Avatar
    Marc Brandsma (@Tedesign)

    There is still one major difference you’re missing: unlike the USA, Europe has almost no exit market for tech companies.

  2. Avatar
    capital2blogs

    There’s too much emphasis on “cracking” the US market in my opinion…. if your product is good enough you’ll get there eventually, but more European start ups should concentrate on “cracking” the European market first…. as the article says, it has double the population, the VC and funding structure is there (albeit less glamorous than in the US). As for the Exit market, again, build something great! That way you’ll create your own exit whether that being by a sale or IPO… as a founder of a start-up if you hang around moaning about how there is no chance for European entrepreneurs to get rich then you’re wasting everyone’s time.

    • Avatar
      Marc Brandsma (@Tedesign)

      you can build whatever great product you want, fact is that buyers are US based and if you want to be in their radar, you must be there
      don’t misinterpret me, this is not a pessimistic view, it’s just reality, might hurt but live with it

    • Avatar
      John

      Marc is right. Morever, the US market is ready to pay a % of the ROI you bring to them with your solution. I am not sure the European wants more than a good deal. The difference is very significant.

  3. Avatar
    Pierre Kennedy

    An excellent article. It might be interesting to note that France has possibly the highest number of start-ups in the world with amongst the very highest percentage of fail-rates too. Is it a question of concept, simple timing and/or financial means allied to the current conjecture? An interesting question, no…? Aie aie aie! Comments please 😉

  4. Avatar
    Philippe

    Finally a positive article about European environment for startups 🙂 Thanks Liam!

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