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Earlier this week, the Wall Street Journal’s Ben Rooney published an article called “How Entrepreneurial is Europe?<\/a>” The article, a re-cap of a talk he gave at Istanbul’s Webit Congress, looks to quantify how ‘entrepreneurial’ various countries are, as benchmarked against the US & Israel. The study looked at two specific figures – number of deals & total VC funding per capita – and benchmarked European countries against Europe itself, as well as against the US & Israel. The intent was to give context to Turkey’s appeal as a startup ecosystem, but, ultimately, the article feeds into a mindset that has a diminishing return in value.<\/p>\n Rooney does make an effort to point out that the data, provided by VentureSource (another Dow Jones company), may not be complete – it does not include angel rounds, does not mention France, Ireland, Denmark, Luxembourg, or other notable startup locations – and that given the small sample sizes, the data can easily be skewed by outlying deals. The end result, however, is the same: the reader is given the impression that startups have 10x the chance of succeeding in Israel, despite the fact that Rooney published an article just two weeks previous stating that Israel has trouble building global players<\/a>.<\/p>\n France Digitale has been doing a very interesting report each year in cooperation with Ernst & Young, and the data points feel much more relevant – here is the most recent edition<\/a>.<\/p>\n The other issue I take with this article is that it simultaneously measures Europe against its own member states, while comparing Sweden to the United States. While I agree with Rooney’s assertion that Sweden & other smaller markets are forced to think globally from day one<\/a>, he contradicts this process in this very article, pointing out that Estonia’s VC per capita is far lower than other countries, despite the tales of the “Estonia Mafia” and their claim to Skype.<\/p>\nWhy is “per Capita” relevant?<\/h4>\n
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Ultimately, I take issue with two aspects of this article. The first is the idea of ‘number of deals per capita,” as I’m not sure this is a relevant figure to look at. What does it matter that Germany has 85 Million citizens? How are 95% of the population impacting the performance of the 5% or so of the population working in the tech startup ecosystem? If Germany encourages parents to have more children, will they subsequently create proportionately more deals or funding? If you’re going to take a nationalistic view of the issue – my second issue is with this – then why not look at the Startup Cycle conversion funnel. How many newly created companies are raising funding? How many angel-funded companies are raising VC funding? Is there a Series A crunch? A Series B Crunch? No Crunch? Or, if you don’t think funding is a relevant validation of a startup’s path to success: how many companies which launch in Germany launch internationally? How many companies that reach $1 Million in revenue reach $10 Million?<\/p>\nSweden is not competing with the UK? Europe as a Single Market.<\/h4>\n