I’m at a party recently where a German professor teaching chemical biology in the Netherlands tells me about this tech startup he and his team have developed. The only money they’ve been able to raise is through government subsidies, so popular in Europe.
When he goes to early stage investors in Europe, they basically tell him to get lost. So he ends up in The Valley this past summer, where – to his amazement – VCs literally are pushing each other out of the way to get to him to fund his startup through a B round: “I always heard this, but I didn’t believe it. It’s true.” I’m thinking, “Well, Europe loses again.”
This is an issue for highly skilled expats, and that’s our Dispatches audience because whether we’re from EU countries, Africa, the Middle East, Asia or the U.S., our biggest career opportunities are in tech. And in the U.S. For decades, Silicon Valley has produced dozens of tech giants while creating world-changing concepts such as personal computers, Internet browsers and high-risk investment concepts. The result? Total domination basically of every industry even vaguely connected to the Internet and integrated circuits. Everything.
Lemmee think. Ahm, there’s Spotify and TransferWise. Skype is owned by Microsoft now. And there are deep tech companies such as ASML, which makes the machines that make computer chips Americans use to dominate us. And, of course, American companies have significant stakes in them.
That’s about it. Europe is larger population-wise, and if anything, European universities are better. Yet, the United States dominates.
Why do we care? Let my expat friends and colleagues ‘splain it to you.
Over hors d’oeuvres and Primitivo, my German friend confirms unsolicited all the things I’ve heard ad infinitum from European entrepreneurs during our two and a half years here.
• European investors are only interested in startups that are cash-flow positive. Duh, who isn’t? By the time the European investors are ready to play, the Americans already are in.
• Wealthy Europeans don’t want to play.
American billionaires such as Bill Gates think in terms of legacies and literally changing the world. Many times that includes injecting capital in various industries and ecosystems. They donate to universities such as Harvard, Stanford and MIT. Or they create their own venture funds to invest in new companies.
Though Frenchman Georges Doriot came up with the concept of venture capital, it was really engineer-turned-investor Eugene Kleiner (an Austrian Jewish refugee from Hitler, by the way) who proved its potential, co-founding Kleiner Perkins back in 1972. Since then Kleiner Perkins has funded more than 850 ventures including Google, Amazon and Twitter.
Today, that tradition continues with Andreessen Horowitz and other venture capital firms along Sand Hill Road.
What, my German friend asked, has anyone from any of the German multinationals ever done to change the world for the better or to build the continent’s tech ecosystem?
• While top private U.S. universities such as Stanford and MIT make serious bank off their investments in their students’ and professors’ startups, there is no similar mechanism in Europe, at least in part because almost all universities here are publicly funded.
• The biggest reason America wins is culture. Here, my German professor noted, Europe is mired in bureaucracy. everything takes forever. And on top of it, everyone is risk-averse, not just investors. “Students in Europe are really only interested in careers with big companies. Only a few are interested in startups.” If the few who jump into startups fail, they risk becoming corporate pariahs, and will never get a job in their fields again.
I hear this all the time from all the expats we work with and socialized with whether they’re from Bulgaria, Germany, Portugal, Spain, Greece or Italy.
There is a war for talent, but Europe is almost willfully losing. Again, why is that?
As my German friend noted at the party, up till now, Europe is NOT about disruption. It’s about capitalizing on established technology while preserving the status quo. It’s about new technology spinning out of old companies. And that works in places such as Eindhoven, where deep tech is king. But it’s not competitive in the 21st century with China and the U.S. always pushing the tech envelope and – let’s face it – much faster and well capitalized.
Okay, enough kvetching.
Here’s how Europe can be more competitive:
CARPE POTESTATUM (SEIZE THE OPPORTUNITY)
Brexit and Trump: These are two historic shifts happening simultaneously, presenting European countries unparalleled opportunities to attract top digital innovators from the U.S. and the United Kingdom, the two countries with not just the most talent, but the most entrepreneurial talent.
At the same time, Silicon Valley is becoming an increasingly expensive and challenging place to build a company because the biggest tech companies now dominate the talent market. Silicon Valley veterans are starting to realize it’s a big world, full of opportunities. But with the xenophobic Brexit and Trump movements, the UK and the U.S. increasingly are off-limits to highly skilled internationals.
Boom! Europe wins the war for talent.
Some countries are already positioning themselves to welcome highly skilled internationals with startup visas and Golden Visas.
France has launched a global advertising campaign to entice international students away from the UK post-Brexit. France is adding more classes in English at its universities. France has started offering significant, long-term tax breaks to bankers to leave London for Paris, and Spain and Germany are offering similar deals.
These moves don’t directly address tech talent, but they build overall competitiveness.
CHANGE THE CULTURE
My German friend noted at the party that European media tend to treat American entrepreneurs such as Elon Musk with skepticism, if not outright derision:
” ‘They say, ‘Oh, he’s going to Mars now! He’s not a serious businessman.’ ” They are loathed to acknowledge the dominant position of Tesla, or Musk’s contribution to multiple startups from PayPal to SpaceX, he added.
As for German entrepreneurs behind Rocket Internet and Zalando, “the German media never write about them.”
By comparison, every American kid with any interest at all in startups and tech knows the legendary entrepreneurs who’ve come out of The Valley. They also know if they fail and get booted from their own companies like Steve Jobs, there actually are second acts in the tech world.
Silicon Valley’s world domination came out of a Wild West culture of swashbuckling founders of renegade tech companies such as Fairchild Semiconductor, which ultimately begat Intel, exiting rigid companies with nightmare cultures such as Shockley Semiconductor to create their own innovation environments.
Apple was/is a brutal place to work, but it changed not just how the world uses personal computers but how we communicate, shop and listen to music. Facebook started out as a way to stay in touch with family and friends, but turned into the biggest social media platform outside China, wiping out several industries, including advertising and – by extension – the news business as we knew it.
Uber and Lyft have pushed taxis to the edge of extinction. Airbnb has disrupted everything from hotels to urban planning and zoning. PayPal began the digital money revolution and Netflix is redefining the entertainment industry, both television and the movies. That’s just Silicon Valley.
Europe needs to not just create, but celebrate, their own startup legends. (See below.)
CHANGE THE RULES
This is happening in Europe more and more. If there is no tradition of rich people investing in startups, then Europe needs to look to its rich companies.
I just read a post that Dutch telecom giant KPN is part of a syndicate that just invested 7 million euros in Isreal-based Cloudify, a visualization company that lets developers and IT staff automate and maintain networks. We’ve covered dozens of big companies including KPN, ABN AMRO and AkzoNobel are investing in startups at an increasing rate. Most of these companies have millions to deploy. Maybe not comparable to American VCs that have billions, but it’s a start … and possibly a better model.
CELEBRATE THE DISRUPTORS
In America, they make movies about Steve Jobs. In Europe, they make movies about The Queen. That’s all you need to know. Okay, a little more.
The best-known person in the Netherlands’ startup ecosystem is a prince. Until she left in 2016 to become a director at SalesForce (I’m not making this up), Neelie Kroes, a 77-year-old Dutch grandmother, was setting the EU’s digital development agenda. To an American digital native who grew up with computers, this makes absolutely no sense whatsoever. If Europe is going to create a truly competitive startup culture, we have to lose the princes and EU bureaucrats and start promoting successful European entrepreneurs.
It’s not like there aren’t any. Ever heard of Michel Perridon, founder of Trust? What about Peter van der Does, CEO of TransferWise? The Samwer Brothers who founded Rocket Internet?
The number of Europeans with any sort of name recognition such as Spotify Founder Daniel Ek, you can count on one hand. But put them in charge of the EU’s digital future instead of some bureaucrat in Brussels and you’ll see how quickly things change.
TO WIN THE GAME, GO AFTER THE BRAINS
One of the most shameful aspects of American life is that in the wealthiest country in the world, a mediocre college education can leave young people with more than $100,000 in tuition debt. That makes European universities, which are often free, one the best weapons in the arsenal to win the war for talent. But many promising American students have no idea this is the case.
European schools – especially the technical schools – have to start investing in proactive, aggressive recruitment of the most promising students, doing things like pop-up embassies at the private and public high schools that send the most students to the Ivys, MIT and Stanford.
In the U.S., we know American investors put money into startups because it’s more fun than golf. My wife Cheryl and I started a media company with a few thousand dollars in friends-and-family funding. But we found a serial entrepreneur who’d had multiple eight-digit deals, and who was – for lack of a better word – bored. He jumped at the chance to invest with us, then bought the company.
Did he do it to make money? Nah, he had plenty. He did it because it was fun. And we met many, many other investors like him.
In Europe, investors don’t have that mindset and risk tolerance. If you make a lot of money, you invest in real estate, because the latent demand for housing or factory space is infinite. So European policymakers have to come up with tax incentives to get the super-wealthy to deploy capital somewhere besides building new fashion outlet centers and luxury apartments.
If there is a country other than the UK that’s embraced the virtue of startups, it’s the Netherlands. My theory: The Dutch like to make money. They like the lifestyle money buys from the fine homes and expensive cars to fabulous Michelin-starred restaurants.
They’ve been riding, or creating, every risky entrepreneurial wave from Tulip Fever through their brief ownership of Manhattan to creating the coffeehouse craze four hundred years before Starbucks. And, by the way, the Netherlands just took the UK’s crown as Europe’s largest private-equity market. Because of Brexit, deal value in the UK dropped by a third to 21.4 billion euros while deals in the Netherlands total 23.5 billion euros, according to a new study by the Centre for Management Buyout Research at the Imperial College Business School.
As far as I can tell, the only reason the Americans rule the world and not the Dutch is that the Dutch embrace quality of life. They’ll skip out early on Fridays to hang with families and friends and enjoy Grolsch and bitterballen in the cafe.
As wonderful as that is, that’s not how the world works in 2019. The startup world demands ceaseless work. It just does. No one ever changed the world working 8-hour days or a 5-day week. Starting with France, every European company needs to give entrepreneurs and startups the legal right to work longer days and skip most holidays. I’ve done this for years and I know the American model works. I would be out on the business party trail in the U.S. and come back to my office at 10 p.m. and find the guys at the startup next door still engineering their Bluetooth toothbrush.
I saw the app designers and IP marketing guys putting in endless hours. And they all succeeded wildly.
As Don Henley said so eloquently, success in the startup and tech world comes down to one question, “How bad do you want it?”
About the author:
Terry Boyd is co-founder of Dispatches Media, based in Eindhoven. Boyd has been a military reporter, business reporter and an entrepreneur, founding Insider Louisville, a pure-play digital news platform, in 2010.
Boyd & Family are long-time expats and have lived in Turkey, Germany and the Netherlands.