Does Europe have a startup problem?

Is startup culture hampered in Europe? Our list of finalists suggests a vibrant scene right across the country, but are these just the exceptions that prove the rule?

It seems ironic that the very same day we publish the finalists for the NEXT Berlin startup competition, The Verge suggests that Europe has no successful startup culture:

Europe, the grand old lady of the civilized world, is starting to look a little tired lately. Its single currency model is under threat, economic growth is but a fond memory, and worse, nobody seems to have any great ideas for reviving the region’s flagging fortunes. In contrast, the world’s technological sector continues to thrive, with web-centric startups going from zero to multimillion-dollar heroes in the space of mere months. An obvious solution to Europe’s present malaise, then, is to encourage more of these startups to take root within its realm and to thereby capture some of the exponential growth that the web is driving. After all, there’s no reason why companies like Airbnb, Netflix, and Instagram should sprout up and succeed in the USA and not in Europe, is there?

No, there isn’t and we’d like to suggest that our list of finalists – and winners past – suggest that we already have a vibrant startup culture in Europe.

The problem with The Verge article is that the comparison isn’t really very fair. This isn’t like with like. For example, the US isn’t one mass of startup success. There are a few significant hubs where the majority of the startups live, most notably San Francisco and New York. Europe, too, has its hubs: London and Berlin both spring to mind. To be fair, this is eventually acknowledged, but a looooong way down the article:

In concluding her Leaders Club presentation, Neelie Kroes remarks that “the fairy tale is that it’s all happening in Silicon Valley.” She counters that presumption by pointing to the tech hubs that are emerging in some of Europe’s biggest cities: from the likes of Stockholm and Amsterdam on a smaller scale to the grander and more coordinated efforts witnessed in Berlin and London. The British capital, in particular, has pushed hard to become the preeminent location for anyone seeking to start up a technology company in Europe, replete with its own Silicon Roundabout.

Beyond that, it’s worth bearing in mind that the US is a single country, albiet with some significant legislative variation between states, whereas Europe is a mass of different countries, with some harmonising cross-boundary legislation. Each country is going to be very different in the way it accommodates (or doesn’t) startups.

Still, there are some interesting insights into what EC Digital Agenda leader Neelie Kroes is doing to make Europe a better place to do startup business. Huge variations in contract law remain one issue:

Contract law remains, to a large degree, a matter of national jurisdiction, meaning that if Kroes wants to see substantive changes in it, she’d need to first contact the single market minister Michel Barnier, who in turn would have to lobby local legislators to effect that change. Even then, some alterations to Europe’s regulatory patchwork may be impossible to enforce due to their potential side effects on other industries. As Niklas Zennström admits, “a lot of the legislation we have is designed in the old world. Designed to protect large companies with large staffs.”

Generally speaking concerns about Europe’s startup worthiness come down to a few factors:

  • Multiple languages
  • Lack of available investment, particularly venture capital
  • Inflexible labour laws
  • High costs of doing business

While the first two are Europe-wide issues, the latter two are country-specific, and are very much under the purview of the local governments to address if they want to encourage startups and digital culture. If they don’t – well, there are other countries in Europe who will make them feel far more welcome, should they shift their base of operations…

What do you think? Is Europe open for startup business, or do we have a long way to go before we’re really ready to build a digital economy?