European digital entrepreneurs are moving to Silicon Valley rather than set up their business in the EU, European Commission President José Manuel Barroso today (22 May) told delegates at the Lisbon Council’s Europe 2020 Summit.
The president of the EU executive said the reason so many Europeans were in the US tech capital was because it is a cultural environment encouraging innovation, new businesses and risk-taking. His comments were challenged shortly afterwards by Commission Vice-President in charge of the digital agenda, Neelie Kroes. She said she was fed up with calls to copy the Valley and wanted to create a European culture of digital entrepreneurship.
Barroso insisted: “I was there not only with the big brands of Silicon Valley but the start-ups and the incubators of start-ups. I met so many Europeans there. One of the reasons they were there […] was precisely because of the general environment, the cultural environment in favour of innovation.”
Europe had to find out why young people are “attracted to other more dynamic places” for their careers, he said.
Some issues could be changed through regulation, such as the removal of national barriers between member states’ markets. The Commission continued to press the European Council to create a digital internal market and had proposed concrete regulation to achieve it, he added.
“[But] there are parts that have to do with mindset and culture,” he said. “This are not something you can solve with a directive […] this has to do with a culture of entrepreneurship.”
Europe has often struggled with comparisons to Silicon Valley. Entrepreneurs and their investors have cited the availability of finance, the willingness to fail and take risks as the world-renowned hub’s advantages over Europe.
Kroes said Europe still has a lot to offer. “I am starting with a little bit of a correction of my President […] It [Silicon Valley] is indeed a very fascinating area but let’s not copy it. Let’s be ourselves,” she said.
“I am a bit fed up that after a while everyone was saying we want to create our own Silicon Valley in Europe and those we are lagging behind. We do have so much talent in Europe.
“One of the things that really gives me hope is Europe’s army of web start-ups, the entrepreneurs using the power of technology to innovate because their bright ideas can help anyone,” she said.
The European digital economy was already employing millions of Europeans and generating billions in revenue, she added. Tech entrepreneurship will power the economic recovery, according to the Commission. The app economy workforce is predicted to triple its revenues from €17.5 billion to €63 billion from 2013 to 2018. That translates to 4.8 million jobs by 2018, according to the EU executive.
Lack of private capital
There is also a lack of private capital in European venture capital, an investor class that often backs start-ups, which are recognised as drivers of jobs and growth. 38% of venture capital fundraising in Europe comes from government agencies, according to figures from the European Private Equity and Venture Capital Association.
Teemu Suila, Chief Operating Officer of Angry Birds’ maker Rovio, echoed those concerns. Finnish Rovio is one of Europe’s flagship digital successes but was forced to go to the US to fund a movie based on the mobile and tablet game.
“Where does the private money go? It goes to great ideas and great teams. And it goes to where the great teams and great ideas are. They are in Silicon Valley and why?”
“There are more than 50,000 Germans in Silicon Valley, there more than 500 start-ups established there by French people because the environment, the ecosystem for being entrepreneur is better there,” he said
“We need to influence the root causes to make people want to stay in Europe and then the private money goes to where the great ideas are.”
Boris Veldhuijzen van Zanten, founder and CEO of The Next Web, said another reason for the lack of private capital was the scarcity of exits. Exits are where investors make returns on their investment by selling a company or listing it on a stock exchange.
He said, “There are not the number of exits and not for the numbers you see in the US, which explains the whole thing. Why would you invest if there was no exit?”
“We have to change our mindset which is linked to our risk avoidance. If we are not losing that we are really facing a problem […] Optimistically we can see now in London that a couple of those Silicon Valley venture capitalists are smelling their chance and they have offices there now,” Kroes added.
Both Barroso and Kroes agreed that the digital economy had huge untapped potential to create jobs and growth. “I believe it is still not too late for Europe to benefit from the digital revolution,” Barroso said.
Europe’s business leaders have also identified digital as critical to growth. A study by Accenture, commissioned by BusinessEurope, also showed those leaders feared that Europe would be unable to compete with China and the US.
61% of those surveyed said that Europe lagged behind the US and more than half (53%) expected that to still be the case in 2017. 51% thought Europe was ahead of China in development and use of digital but only 30% think that will still be the case in three years.
Mark Spelman, managing director of Accenture Strategy, said, “Europe’s business leaders should not underestimate the US’s strength and capacity for innovation, which will help it maintain its health advantage over Europe in digital competitiveness. Europe has growth potential but, in an increasingly competitive world, its policymakers will have to act to accelerate and scale the digital economy.”
The summit marked the launch of the European Digital Forum, a new think-tank spearheaded by the Lisbon Council and Nesta, an innovation charity, and the Startup Europe Partnership.
The EU's strategy to help digital technologies, including the internet, to deliver sustainable economic growth is called the digital agenda. Despite widespread recognition of its importance, there remain difficulties in overcoming national barriers to developing a culture of digital entrepreneurship.