Startup Scene in Europe

scanbucks-startup-europeI’ve spent the past month working from Europe, spending most of my time in Paris and some in London.  I know there are more cities such as ones in Germany and Israel that also have startup scenes will visit them soon!  I thought I’d share my learnings from Paris and London, what founders care about, and even give a little commentary on what it would take for these scenes to grow.

Accessibility

There’s a common misconception that’s been perpetuated that there is a lack of innovation outside of the US.  Entrepreneurs everywhere are passionate about what they are doing, even in Europe.  For many the choice of location comes down to accessibility.  Its not like an entrepreneur tell himself, “No I don’t want access to capital, developers, and the support structure of Silicon Valley.”  Many startup founders would love to move to Silicon Valley and part of the high tech scene, but just don’t have the means to make it happen in part due to funds or immigration issues.  The later being the biggest hurdle because many do take the time to visit and work in Silicon Valley.

Hence many have to change their goals and build a strong base first in their native country, then grow in the European market, and hope to eventually create a global company.

hellofresh-europe-startupCopy Cats is the Pot Calling the Kettle Black

Startups in the US copy each other…  Groupon clones anyone?!  So I don’t think its fair to say European companies shouldn’t be copying US companies.  Yes there is the issue of IP and trademarking.  But leaving that aside, European consumers aren’t going to wait for US companies to think that the European market is large enough or worth selling to.  People everywhere want products!  As long as US companies have a provincial view that the European market is too small and not worth selling to, or that it takes a lot of effort to change a product to fit a culture and isn’t worth it because of the former point, then there will be a market opportunity for startups in Europe to create similar products.

shopandtip-europe-startupMetric System vs. US System

Everyone cares about customer acquisition, conversion rates, customer lifetime value, and of course creating a profitable and thriving company.  Happy to hear that Eric Ries plans to make a cameo in Europe because founders here love the lean startup movement, and are certainly applying the lessons to their startups.

Funding & Founders come in many flavors

There are serial entrepreneurs in the US and there are certainly many here as well.  The Dashlane and Civiliz founders are prime examples.  Due to their past success they have access to capital and have been able to raise a significant amount of money for their startups.  However, the major disadvantage that first time founders in Europe have when it comes to fundraising is access to an Angel investor market (I have been spreading the word about Angel.co).  Some are fortunate to come across Angels through connections or participating in a local incubator, but the rest still have to rely on bootstrapping their startups.

While there are many startup founders who bootstrap in the US, customer acquisition and traction are what drive the majority of startups who are successful at fundraising in the US.  Monetization is an afterthought for most, please don’t argue I’ve noticed this trend in slide decks and pitches since 2005.

The priority of monetization is the major difference for early stage companies in Europe vs the US.  In a large part because it is a criteria for most European investors to even invest in a startup.

This has some side effects of course like not being able to grow as quickly and thereby being seen as not having a “large vision”.

Limitations

There are of course the usual suspects when it comes to the rate of innovation such as the government laws around hiring practice and tax structures, oh and the whole currency and banking crisis, but its not stopping bright and hungry founders from starting companies!

What does limit innovation here is access to capital, talent, and the negative sentiment of failure.  However, these sentiments are common in many US cities outside of Silicon Valley.

There are also some trends in product development such as Agile and User Experience Design that are nascent in Europe, but I think its just a matter of time.

heycrowd-europe-startupWhole new meaning to LBS…

As a founder I’m pretty optimistic about the future for European startups and their founders.  I think there presence will add a healthy dose of competition to many Silicon Valley startups.  The scene and the support structure around it are also growing as evidenced by the presence of bloggers, incubators, developer communities, and conferences here.  While there are hurdles those who are the hungriest will figure out ways to overcome them.  I think the added competition will also cause founders everywhere to start thinking about how to create products and companies that can be adapted to fit a global market, at least for those who want to avoid the innovator’s dilemma :)

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2 Comments
  1. Pingback: A Slow and Steady Approach to Startup Building | Femgineer

  2. Charles 22 February, 2012 at 5:31 am

    Hey Poornima!

    It’s nice to read your learnings :)
    I would add 1 limitation (at least for France): the law
    It’s changing all the time and it’s never in favor of entrepreneurs. For example it’s almost impossible to fire someone in France. Very annoying!
    Anyway, I hope to see you soon :)
    Charles

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