While policy makers and government show big interest and claim noble intentions – there is still a big gap between ambition and reality.
Many alarm bells are ringing across Europe for tech startups. From Berlin to Paris, and from Warsaw to Milan, thousands of innovative and ambitious startups are hustling every day. But are regulatory risks and threats overtaking their strength to grow? While policy makers and government show big interest and claim noble intentions – there is still a big gap between ambition and reality.
While our founders should be nurtured as the winning ingredient of Europe’s economy – startups create jobs three times faster than the rest of the economy – the reality of day to day life is that Europe’s innovators risk regulatory overkill. There is an unfortunate pattern in which the voice of Europe’s startup community is taken on board for more soft PR and window-dressing than allowed to the policy table at full extend. By nature, governments have a hard time understanding and catering for, companies of tomorrow.
Unfortunately too often, the Commission and Parliament are taking a destructive interest in tech rather than promoting the kind of companies they’d like to see. May this be privacy, data or competition related cases – the European Union policy makers should hold themselves to the same standards of positive and constructive rule making rather than playing the heavy handed enforcer. This is not a one off.
Aspects of the General Data Protection Regulation were the latest example of regulation which was conceived and designed with a prohibitive degree of complexity as well as a fair share of ignorance for technology. Examples like these with the hungry cry for more European unicorns don’t go well together. Digital Copyright is another chapter, where startups are caught up in the schizophrenia of policy makers. Sometimes they’re all about ‘stealing content and have to pay’ or they are ‘not concerned at all’. Across the board they are hoped to develop the artificial intelligence and machine learning Europe needs to compete with the US and China. Whether they can raise the funds or access the data they need is less of the EU’s concern.
The positive contribution of Europe’s tech startups needs to be far better understood and their perspective and insights listened to in a meaningful way by policy makers in Europe.
Europe’s mobile economy has been thriving and with it, Europe’s startup community. For instance, there has been a rapid growth of apps over the last decade, from less than 5,000 to over 2 million today. Compared to the US, Europe actually hosts more app developers. How does that sound?
Thousands of startups and businesses across Europe nurture their geniosity with the open source and architecture of the digital applications. Innovation is not limited to the software applications, new hardware manufacturers in Europe, like BQ, which has over 1000 employees near Madrid, or Fairphone, building a fully sustainable smartphone in the Netherlands, both using Android’s open source operating system. Open platforms, like Android but also Tizen, LineageOS or PostmarketOS enable new jobs and opportunities for developers in Europe too — in fact, there are estimates of roughly 2 million jobs created in Europe, with another 2 million-and-some closely associated to mobile development.
The mobile economy has not only fostered innovation, it has ensured strong competition amongst apps and app-stores. This isn’t just something that benefits companies and businesses. It ultimately enables consumers choose between a myriad of freely available solutions. Judging, reviewing and endorsing the best has given the consumer more power and voice than ever before.
Preserving an open mobile ecosystem to the benefit of consumers
After GDPR and copyright, this topic concerns the European Commission’s decision on the Android operating system which will, in one way or the other, impact the ability of startups and developers to thrive. Unfortunately so far, any government intervention has brought more complexity, legal or administrational effort, and ultimately trouble for tech communities. This makes it hard to see good things in the Commission’s actions.
Taking often far-reaching decisions about where such ecosystems for startups and developers are bound to go, policy makers need to be sure to have the full picture. Are actions about to be taken having a net positive or a net negative effect on the ability of our entrepreneurs to succeed? What are the right instruments to tackle occurring issues? Europe’s app economy has generated 2.05 million jobs, as of April 2018, at an annual growth rate of approximately 6.6% (link). We shouldn’t such developments for granted and should focus on strengthening those who build our future.
It’s hard to underestimate the ability of European entrepreneurs to innovate and to disrupt for a better future. But at the same time we cannot blame them for taking the best way towards success. Their role is to innovate while the role of public policy is to provide the best conditions to do so. Ultimately, if not founders themselves, its investors who will apply a strict due diligence.
Despite the arguments put forward by European policy-makers, short-sighted regulatory interventions interfering in the digital economy risk unbalancing ecosystems which depends upon an open and flexible approach to ensure continued innovation. The oxygen needed for startups has and always will be open access, allowing them to be part of a global community able to compete and build our future.
In the same way that users enjoy the benefits of innovation, regulatory constraints will also have a knock on effect on consumers. Take the European Commission’s proposal on the platform to business relationships or any of their competition work. Often decisions are motivated from a particular set of interest or constituency, and is not always fully weighted against all interest and benefits such as for consumers.
Take Be My Eyes, an app developed in Denmark that connects blind people with volunteer helpers from around the world via live video chat with 100,000+ downloads on smartphones. In the field of fitness and wellness, from sleep pattern optimization in Sweden to healthy home cooking in Germany, European apps improve the way people around the world approach their well being. Such stories are nearly endless and show a 21st century face of our diversity. These apps could emerge thanks to platforms like Google Play and Apple’s app store, which allow startups to scale quickly and reach billions of users over night.
Startups in Europe have to run the extra mile
We fear that regulatory interventions which fail to take full account of startup communities could lead to increased product prices, less choice and entry barriers for startups. Just think of the apps we use to help us improve our travel experiences. Most of Europeans download more than two new apps a month and spend hours playing games, shopping or doing our finances.
Startups are at the heart of innovation in our economy. Most new applications see the light of day in startups and startups aren’t shy challenging the status quo. We have to learn to get comfortable with disruptive innovation as long as the product benefit aims at the user. We need policy makers to understand how the startups of today will be shaping the economy of tomorrow. To capture incredible success stories like those of our mobile economy and other verticals like deep tech and manufacturing. Doubling down on regulation and enforcement will cause the contrary of the success stories we want to see so many more of.
Picture credits: Steve Halama
How a law to reign in large platforms will end up costing large platforms least of all.
Policy making is, by nature, one step behind technology because it tends to focus on (and is lobbied by) today’s companies. When lawmakers, however, by virtue of universally applicable and EU-wide laws, try to come after a hand full of big players, society and smaller startups suffer. With the Copyright Directive, the EU risks shooting itself in the foot. Worse even, it is launching a torpedo at its own vision of becoming a startup continent. Here is the gist of it:
The proposal to filter online content fundamentally misses its aim. By targeting a few big video platforms, it will ultimately uplift and fence their market share. The scope of the proposal is flawed. While intending to govern only licensed content, it targets all types of content and all platforms regardless of licenses or copyright.
Filtering itself is technically ineffective and will cause more damage than good on the internet. Seemingly easy on text through hashing but disproportionately expensive for anything more complex or even impossible. The suggested filtering technology will raise the cost of launching a startup in Europe and drive talent away.
First-buried-then-leaked evidence suggest it will not solve the problem anyway. For all of us it will result in lower quality, less variety and content online, as the law favours those who delete content.
Let’s take this in turns. To start, the proposal aims to address a grievance by rightsholders, namely the fact that certain large platforms don’t pay as much as the content industry is wishing for. While it’s one thing whether we want laws in favour of individual industries, this proposal will actually not do anything to abate this discord.
Ironically, this proposal makes it even more likely that small platforms and innovative startups pick up the tab, as they don’t have the market power and legal teams to go through thousands of licensing agreements. To be clear: Startup founders fully respect creation and its remuneration. But this law is drafted in entire disregard of Europe’s startups and its citizens’ fundamental rights.
Besides fundamentally missing the target, the proposal is carpet bombing the entire digital world. Regardless of whether one uses licensed content or not, everyone will now have to enact a costly regulatory prescription. Content can range from images over text, audio visual content, objects to code.
While policy makers probably would have liked the idea of squeezing one online video platform into the business model of another, their proposal made startup founders across Europe worry about their future. Github, for example, is an open source code-sharing platform that helps developers to stay on top of trends.
It too, would be within the scope of this law. Another example are crowdfunding platforms that, by design, host content uploaded by users. Is this where copyright infringement happens? Again, the scope of this law overreaches its aim and creates more problem than solutions.
Content industries may be yelling about a problem but it is lawmakers’ duty to find a proportionate solution for everyone in our society. In this case, technology can’t offer what politics wants. Several examples underline this: Shapeways, a 3D printing marketplace, hosts more than 300,000 pieces of copyrightable content per month but processed fewer than 1,000 copyright notices in 2016. Which were based on the description, not products themselves and in most cases unsubstantiated.
Earlier examples of crowdfunding platforms, code-sharing platforms or e-commerce are no different. Because content recognition does not yet exist in an affordable and efficient way these startups can either break the law or break ties with Europe and move where common sense governs. Anyways, they are stuck between a rock and a hard place.
With audio files, a comparatively easily recognisable content, state of the art fingerprinting techniques resulted in error rates of 1-2%. Sounds acceptable? In comparison, spam filters for emails get dismissed as unsuitable with error rates of 0.1%. These cases illustrate: Filtering is ineffective with some types of content, and non-existent for others.
Even if filtering were to work properly across all formats, it would price many innovative ideas out of the European market. Studies have underlined this. Unlike an assessment by the European Commission suggested, filtering does not cost 900 Euro per month, but easily between 10.000 and 50.000. If the average initial funding of a startup was 150k, you can ask yourself whether you want to launch that company or just run your idea through a bad filter for three month.
Kickstarter, a crowdfunding platform, hosted 366.622 projects since its inception. In 2015 it received copyright infringement notices targeting a mere 215 projects, only one third of which were valid complaints.
If article 13 of the proposed copyright directive became reality, the removal of 100 out of over 366.622 projects would easily cost 500.000€ annually. Why? Because some policy makers think a straightforward notice-and-takedown procedure is not enough. What was it again about proportionality in law?
When filtering is prescribed with complex and expensive rules, companies will be inclined to remove content rather than run the risk of getting sued. And who are platforms do decide if that video or drawing is a copyright infringement or parody, or maybe an entirely new work?
While so far a well founded notice triggers removal, in future the benefit of the doubt will be with an armada of copyright trolls chasing anyone hosting content. The result will be less variety and content available online. This ranges from creative content of any kind to critical thought Here is a proposal that will lead to less investment, less startups and less free speech. Right before half of the world’s population will be able to benefit from a free internet, the most developed continent will go partly dark.
There are a myriad of startups like Kickstarter and Shapeways or Github. And even more young and talented Europeans are planning the next generation of content platforms today.
The collateral damage of such out-of-touch legislation is not only a shot in the foot of Europe’s ambition to become a startup continent, but also a contribution to a generation of entrepreneurs seeking success elsewhere. Europe will be stuck with companies that are already big enough to comply or those who never want to be that big.
Startups are not one single industry but innovate across all sectors. They are the most mobile companies we’ve ever seen and are successful because they approach problems differently. Regulators are still catching up to this reality.
While there is no simple answer to copyright, building walls will have unintended effects while missing the actual aim. Exempting startups, as suggested before will not crack the nut because startups aren’t SMEs. What then?
Picture Credits: Frankieleon
Filippos Zakopoulos the Executive Director of the Found.ation, discusses the evolution of the start-ups ecosystem in Greece and the Balkan region and how the European Union is supporting and enabling further growth.
The Digital Post: How the Found.ation operates to help tech startups build?
Filippos Zakopoulos: Found.ation has been a key player in the startup scene since 2011. Starting as a co-working space and then acting as an incubator, it has provided a great number of startups with valuable advice and access to a big network of key players of the startup ecosystem, such as mentors and investors. Also, having some of Greece’s largest companies as its clients, Found.ation has contributed in organizing acceleration programs, innovation competitions and hackathons, thus contributing in creating more opportunities for Greek startups, as well as startups from the greater Balkan region.
Looking more specifically into the acceleration and incubation pillar, a number of the companies that have taken part in Found.ation’s programs have raised 6M Euro in funding from local and international VCs. This corresponds to 15% of all VC-backed technology companies in Greece during 2013-2016.
Moreover, Found.ation acts as the local touchpoint for many international institutional investors, VCs and accelerators. Found.ation events have hosted so far Seedcamp, TheFamily, T-Ventures, Hub:raum, Axel Springer Plug&Play, Eleven, Launchub, Kompass Digital, Mojo Capital, 212 Ventures and the European Investment Fund, among others. Since 2015, Found.ation signed an exclusive agreement with the European open innovation organization EIT Digital, under the Arise Europe Program, with the objective of strengthening the Greek startup ecosystem, through the implementation of common, well-structured initiatives. The aim of the collaboration is to foster the ecosystem, support startups, give them faster access to the wider European market and hook them up with potential investors.
TDP: What are the plans for the forthcoming future?
FZ: Found.ation originally established in 2011 as one of the first co-working spaces in SE Europe, but has evolved also as a digital transformation consultant for corporations and a tech education hub. Our team strongly believes in the interaction between established corporations and startups. One of the key roles of Found.ation is to highlight these opportunities for cooperation between these two polar opposites and we already work with companies and organizations such as COSMOTE (Greece’s top telecommunication provider), Eurobank (one of the country’s largest banks) and the Municipality of Athens to make this happen. But startups are not the only ones to benefit from this kind of cooperation. Incumbents need to transform in order to stay agile and competitive and Found.ation helps them design innovative digital strategies, by teaching them how to adopt a more entrepreneurial mindset.
TDP: How do you see the European startups ecosystem evolving?
ZP: Europe is still far from becoming a new Silicon Valley, but on a more local level there are a lot of cities emerging as mature hubs, providing fertile soil for entrepreneurial bloom, like Amsterdam, Paris and Stockholm, among established spots like Berlin and London. The rest of the European countries are following their lead –Hungary and Estonia are emerging nods–, although they have yet a lot of distance to cover. Even in Southern and Eastern Europe, where the financial situation poses a significant barrier for prosperity, one can see optimistic signs of progress.
TDP: Is the European Union doing enough? What further actions should be taken in your view?
ZP: The first step towards solving a problem is identifying it. Europe has understood that it needs to take action and help local startup ecosystems in order for them to help boost their countries’ economies. A good example in this direction is the launch of EquiFund in Greece, part of the Commission’s Investment Plan for Europe. The new €260m Fund-of-Funds program, managed by the European Investment Fund, aims to boost entrepreneurship, by attracting private funding to all investment stages of the local equity market. But unlocking the equity potential in the market is only one part of the equation. The next step is to create policies that will enhance survivability and strengthen the ecosystem, such as tax and regulatory incentives. These measures need to be applied in local as well as pan-European level.
One of the most remarkable crowd-fuding stories of the last years comes from Sweden. The Digital Post talks with Minut co-founder Marcus Ljungblad about how his project Point made a splash on Kickstarter.
The Digital Post: Behind “Point“ there is an outstanding crowd-funding story. Tell us more.
Marcus Ljungblad: Although we founders, Nils Mattisson, Martin Lööf, Fredrik Ahlberg and I are all from Sweden, we actually started out in Shenzhen, China. By the time we arrived in China we had put together a working prototype of a connected fire alarm. But no first prototype survives contact with user testing.
On the ground in Shenzhen, we were able to utilise the enormous eco-system to rapidly prototype and test different ideas—those who survived ultimately lead to Point. We knew we were on to something when, during a customer interview, the customer asked to buy one of the products then and there.
At that time we didn’t even know if it could be mass produced, let alone had we given Point its name. Fast-forward a couple of weeks and we launched on Kickstarter.
Over the next 30 days we raised almost 5x our goal and had received customers from every continent all across the world.
After the crowdfunding campaign ended we headed back directly to Shenzhen to get to establish the supply-chains we needed and to get Point to production. Today we are shipping our first batch, which is all sold out, to more than 2000 customers and we are a week from producing the second batch.
The Digital Post: What is Point about? How does it work?
ML: As apartment owners ourselves we felt there is a disconnect between us and our homes when we weren’t there. How can I know everything is OK at home when I’m away? Point is camera-free option to stay informed about the important things when you are away.
Did my fire alarm go off? Has there been unexpected noise? Or, if I rent out my home, how do I know that no one is smoking inside or staying quiet during late hours? Point uses a range of sensors and combines a lot environment data to inform users when something is amiss.
Everything is computed on Point, so no sensitive information ever leaves your home. It’s dead-simple to install and is designed to blend-in into any home.
The Digital Post: What should be improved in Europe to help young startups?
ML: Make it easier to offer shares and options to the earliest employees in the company. It is not only the founders who contribute to a company’s success, your first hires and are equally important and you want to reward them accordingly. While starting out, however, it is often expensive to compensate on salary only.
Shares and options offers a way to reward your employees if the company does well. A reward they are rightly entitled to! We’d love to see governments in Europe make it easier for startup founders to share their success with their employees.
The Digital Post: Can Europe match the success of Silicon Valley and Shenzen? What should be the ingredients?
ML: The aim should not be to compete with Silicon Valley or Shenzhen, these are unique ecosystems and they are extremely good at what they do already. Rather, Europe as a whole, should spend its energy doing what it does best: nurturing companies that start global from day one.
Sweden is an important market for us. Users are connected and it has an tech friendly culture. But it is too small on it’s own. If we want to truly affect users relationships with their homes we need to look beyond Sweden.The EU should continue to focus on lowering the barriers to entry to other European markets.
Soon every new company will be ready to take on the much larger, and much much more diverse, global market. And it can do so faster than it’s American and Chinese counterparts. Europe is small, diverse and open, we should use that to our advantage to compete—not to become another Silicon Valley or Shenzhen.
Photos Credit: Iwan Gabovitchhttps
Two years ago the European Commission launched the SME Instrument to address a notorious funding gap in small early-stage companies that is a major barrier to innovation. Here’s the key steps your start-ups should follow to enjoy this funding opportunity.
The European Commission has fully recognised the key role of ICT in improving the business landscape in Europe and many efforts are being made to foster digital entrepreneurship.
Firmly embedded in Europe 2020 – the European Union’s ten-year growth strategy – the Digital Single Market strategy (formerly known as Digital Agenda) recognises the revolutionary potential that information and communication technology (ICT) offers to boost growth, increase productivity and improve the welfare of citizens and consumers.
The Digital Agenda has set goals with 101 actions, spread over 7 pillars, which will help to reboot the EU economy and enable Europe’s citizens and businesses to get the most out of digital technologies. ‘Pillar V: Research and innovation’ hopes to attract Europe’s best minds to research, acknowledging that world class infrastructures and adequate funding are crucial.
From an economic perspective, the importance of SMEs for economic growth and jobs creation is increasingly obvious: Start-ups create the majority of new jobs. However, Europe is clearly lagging behind other geographical areas in terms of global leadership in this sector.
Therefore, EU level action is essential, as a complement to existing initiatives at local, or national level. The issues identified, such as the need for a stronger culture of entrepreneurship and innovation, or insufficient access to financial resources and human capital, extend well beyond the borders of individual EU member states.
In an effort to maintain Europe’s competitive edge through increased coordination and its attempt to go beyond national fragmented efforts, the European Commission has taken action to help entrepreneurs and SMEs fully exploit the potential of technologies, both in terms of supply of new digital products and services and in terms of demand and smart use of these technologies.
In this spirit, Start-up Europe and the Entrepreneurship 2020 Action Plan were designed to unleash Europe’s entrepreneurial potential, to remove existing obstacles and to foster the culture of entrepreneurship in Europe.
The challenges ahead
Yet, efforts to remove obstacles alone are not enough; turning research/science based innovation into new services and products is a challenging endeavour, as commercialising new forms of innovations is inherently high-risk and requires significant investments and follow-up funding.
It is worth noting that private investments in ICT research in Europe continue to lagging behind (less than half of investments compared with the US).
As such, the EU is currently losing the race on scaling-up disruptive, market-creating innovation with the US leading the pack (101 Unicorns) and China following (36 Unicorns). By contrast, the EU only counts 19 Unicorns.
The lack of sufficient public information for potential investors about technologies developed by small firms or the leakage of new knowledge that escapes the boundaries of firms and intellectual property protection, are amongst the many different challenges young entrepreneurs face.
The challenges of incomplete and leaky information pose substantial obstacles for new firms seeking capital. The difficulty of attracting investors to support an imperfectly understood, as yet-to-be-developed innovation is especially daunting.
Indeed, the term, “Valley of Death”, has come to describe this challenging transition when a developing technology is deemed promising, but too new to validate its commercial potential and thereby to attract the capital necessary for its development.
Lacking the capital to develop an idea sufficiently to attract investors, many promising ideas and firms perish.
Despite these challenges, many firms attempt to make their way across this Valley of Death by seeking financing from the wealthy individual investors (business “angels”) and, later in the development cycle, from Venture Capital firms.
But because the angel market is dispersed and relatively unstructured, with a wide variation in investor sophistication, few industry standards and tools, and limited data on performance and VC funding typically oriented towards much later stages of development, capital remains very difficult to obtain for many high-technology start-ups.
The SME Instrument
In this spirit, the European Commission launched the SME Instrument within Horizon 2020 in the purpose to address a key funding gap in financing for small early-stage companies that is well recognised as a major barrier to innovation.
The instrument addresses the financing needs of internationally oriented SMEs, in implementing high-risk and high-potential innovation ideas. It aims at supporting projects with a European dimension that lead to major changes in how business (product, processes, services, marketing etc.) is done.
The purpose is to launch the company into (new) markets, promote growth, and create high return on investment. The SME instrument addresses all types of innovative SMEs so as to be able to promote growth champions in all sectors.
Unlike private risk capital which flows relatively freely during good times but plummets during economic downturns, this programme provides stable support for high-risk ventures throughout the ups-and-downs of the volatile business cycle. It cushions economic shocks that might otherwise lead to major extinction events for the industry.
To achieve these goals, the SME Instrument project has been bolstered with an €3 billion budget until 2020.
A piece of Advice: 3 steps you should follow
Define the reasons for application
Are you an entrepreneur who has established your own startup/SME? Is your startup/SME based on an innovative IT concept, product or service harnessing the potential to disrupt existing markets? Moreover, don’t hesitate to use the SME instrument basic eligibility check which can tell you if your project is eligible or not.
Build up your business strategy
You are an entrepreneur, planning to start your Startup / SME or have already started and are in the early stages. Your startup / SME is an innovative ICT based concept, product or service which has the potential to ultimately disrupt existing markets.
Bear in mind that a professionally written business strategy is the first thing that will help you grow and sell. Whatever your capital source, you will need to demonstrate to potential investors and lenders that you have taken the time to research the market and competition, identified your target customers, developed a business model and have a marketing plan in place to accomplish your goals and achieve success.
In short, you will need a well polished and compelling business plan that will satisfy lenders and get you in front of potential investors.
Check the application process and start implementing
Make sure that:
– you know the deadline for the phase you apply for. There are three phases: phase 1, phase 2, phase 3, each of them having a different deadline in each semester of the year. All proposals are submitted online;
– the written proposal has met all the requirements proposed by the European Commission;
The Commission has an online register of the organisations participating in the EU research and innovation or education, audiovisual and cultural programmes. This allows consistent handling of the organisations’ official data and avoids multiple requests for the same information.
Interested in learning more about EU funding opportunities for your startup?
The EU Startup Services Team can provide you the useful information you need for every phase of your application process. The services include consulting, evaluation, proposal writing and workshops.
The EU Startup Services Team worked with more than 1300 startups, operates in 21 countries and has held 33 workshops on EU Funding so far, with 9 successful proposals in the last year. The representatives can provide expertise on who should apply, when and which are the steps, but also help you choose the instrument which best fits your stage and your current needs.
Planning to attend the upcoming workshop? Here you can find all the details you need.
 Source: Fortune, ‘The Unicorn list 2016’; ‘Unicorns’ are start-ups with a market value > $1 billion
Picture credits: Susanne Feldt
Licensed drivers don’t have any disadvantages that couldn’t be fixed with the right motivation, says Markus Villig, founder and Ceo of Taxify, the “anti-Uber” application aiming to help traditional taxi firms and drivers respond to Uber and its likes.
Markus Villig: Taxify helps taxi companies grow their business with great technology they couldn’t afford themselves. In most countries a taxi license costs just 300€, so taxis don’t have a big fundamental disadvantage to ridesharing apps with unlicensed drivers.
With the help of convenient booking applications & improved service standards, taxi companies can successfully adapt and grow their market share.
Most people actually prefer licensed drivers who can use fast-lanes, if their service, quality and price are on the same level as private drivers.
The Digital Post: Is the idea behind Taxify concretely working? What is the response of taxi firms and that of the consumers?
Markus Villig: Taxify has thousands of drivers and hundreds of thousands of customers using the platform every month. This shows that people have nothing against taxis, but they have a problem with the bad quality and high prices taxis historically have had. Taxify solves that, by making licensed drivers actually attractive.
The Digital Post: How does your start-up operate nowadays? What are the plans for the future?
Markus Villig: We are growing fast and opening new cities every month. We already are the market leader in Eastern-Europe and our first goal is to become the largest taxi app in all of Europe by number of bookings in 2016.
Our goal is to provide people with the most convenient and affordable transport we can, so taxis are not a niche service, but a mainstream alternative to public transport.
The Digital Post: Your experience shows that the so-called “uberification” of the economy can be turned in favour of the very traditional business models it is said to threaten. What do you think?
Markus Villig: Licensed drivers don’t have any disadvantages that couldn’t be fixed with the right motivation. Historically taxis have had the freedom to overcharge and offer low quality services.
With the launch of new unregulated ridesharing apps, the licensed providers are feeling enough pressure to change their offering. Taxify is there to accelerate this process and provide the tools needed to survive.
Markus Villig is the founder and CEO of Taxify, the largest taxi booking app in Eastern Europe.
photo credit: Gisela Giardino
Despite what many people may think, there is no real lack in capital supply for Europeans interested in launching their own start-ups in the digital domain.
The rise of (digital) technology start-ups is a global phenomenon, with extensive start-up ecosystems – such as the one in Silicon Valley – being replicated all over the world. Like any other region, Europe is highly interested in reaping the economic and societal benefits of a flourishing start-up economy.
In a recent speech, Neelie Kroes (the former Commissioner for Europe’s Digital Agenda) stated for instance that two out of three (!) new jobs in Ireland are created by start-ups in the first five years of existence.
Not all is rosy, though. Critics often say that it remains hard for European start-ups to get access to the proper financial means to kickstart their businesses.
But is that really the case?
It’s definitely not their biggest problem. Despite what many people may think, there is no real lack in capital supply for Europeans interested in launching their own start-ups in the digital domain.
Virtually each region has done a good job in developing the appropriate funding mechanisms to support start-ups’ launch activities. In other words: it’s not (all) about the money. As a matter of fact, three bigger threats to European start-ups’ longer-term growth can be discerned – culture, regulation and mindset.
A first issue is Europe’s fragmented market – not so much from a geographical perspective, but rather from a cultural one. Indeed, in spite of all good intentions, it remains difficult for European start-ups to sell their products across ‘cultural’ borders. The use of different languages is one obstacle, of course, but divergent social aspirations and cultural values are equally important barriers.
For example, selling a solution for personalized online advertising might be perfectly acceptable in one region because of the advantages it brings (instead of being spammed, one only gets to see those ads that are in line with his/her interests), but it may fail completely in cultures where this is perceived as a direct assault on people’s privacy.
Intra-European legal and regulatory barriers present additional obstacles. A concrete example is the burden that accompanies the launch of pan-European digital health solutions, with each European country having issued its own regulations related to the development, sale, usage and reimbursement of products and services in the digital health realm.
And finally, there’s mindset. Contrary to the US, where everything is big and aimed towards rapid international expansion, European start-ups typically have a more ‘provincial’ mindset. In today’s global, digital economy, though, that’s a major shortcoming. In order to really succeed, start-ups should have international ambitions right from the start.
As we observed already, none of those barriers exist in the US – making this geographical and cultural region a single, big ‘unified’ market with more than 320 million consumers.
Both its scale and transparency make it an easier target to introduce products and grow. A bit ironically perhaps, even conquering the rest of the European market is typically easier if done from the US…
So, how can we address those challenges? I see three important lines of action, in which European policy makers have a major role to play:
– From a regulatory perspective, measures should be taken to further unify the European market – so that its full potential of more than 500 million consumers and potential investors can be tapped.
Streamlining regulation in domains such as digital health, for instance, would already open up a wide range of growth opportunities for potentially hundreds of European start-ups.
Obviously, this would not help us overcome the cultural boundaries overnight; but to that end, instruments are already in place, such as the European Network of Living Labs (ENoLL), to help companies investigate how people will respond to new products and features – before the actual market launch.
– To foster the pan-European growth of start-ups and overcome the provincial mindset, a number of good initiatives have already been taken as well.
One concrete example is the creation of EIT Digital, which helps European start-ups accelerate their growth – o.a. by finding European and worldwide customers for their products and solutions, or by helping them raise funds.
– And finally, when it boils down to securing first customers, Europe should investigate the concept of ‘innovative procurement’– a best practice that has already been widely adopted by the UK and US administrations. It requires government bodies and local branches of big multinationals to allocate a certain percentage of their public procurement activities to innovative start-ups.
As such, start-ups can more easily get the necessary credentials and references to continue growing their businesses. According to certain estimates, public procurement is worth €2,000 billion to the EU economy – so dedicating even 1% of that amount to innovative procurement still equals €20 billion per year to support the European start-up ecosystem.
But also for that, a cultural and regulatory shift is required…
photo credit: Shumona Sharna
Which EU countries have been so far successful in exporting digital services and which are not? The result is surprisingly mixed.
Earlier this month the European Commission presented its new strategy of the Single Digital Market. Several of DG Connect’s most important goals are to give everyone a fast connection to an open internet and to support European innovators, entrepreneurship and start-ups.
The creation of a true Single Digital Market should impact the export performance of firms active in the digital economy. This columns ask which countries in Europe have been so far successful in exporting these digital sectors (i.e. services) and which are not. The result is surprisingly mixed.
The figure below shows the relationship between the exports of digital services on the vertical axis and an index measuring the so-called network readiness of countries on the horizontal axis.
This latter index on is taken from the World Economic Forum which measures the extent to which an economy is prepared to apply the benefits of information and communications technologies (ICTs) in order to promote economic growth and well-being.
Included in this measure is whether countries have the latest technologies available, whether firms absorb technology, or whether multinationals bring in new technologies into the domestic economy, etc.
Data-intensive services exports and network readiness index (2012)
On the vertical scale, digital services are defined as the producers and users of data services. The producers of data services are those active in sectors such as data processing services, software publishing services, telecommunications, or internet publishing and broadcasting services.
These are sectors that bring forward data in their production process, which is then used in many other sectors inside the wider (downstream) economy. Using much disaggregated data, it is possible to measure in great detail how much each and every industry uses these data services from data producers.
Unsurprisingly, the biggest users are at the same time the producers. Users of data services are therefore in turn telecoms, software publishers, internet publishers, data processing and hosting services firms, but also sound recording industries and the motion and video industry.
Taken together, these services are data-intensive as they work a lot with data. Using a different data set and connecting data-intensive services with trade, the vertical axis shows how much each country in the world actually exports these data-intensive services as defined above. This export measure is put in logs.
The figure shows that there is a pretty clear relationship between the readiness of a country in terms of ICT networks and the level of exports a country has regarding data-intensive services. In other words, a stronger ICT network in countries is positively associated with exports of services which intensively use data and the ICT network.
Countries with low network readiness show low levels of data-intensive services, but countries with high network readiness exhibit a higher level of services which precisely depend on a strong ICT network in order to transmit data. In the figure above, the European countries are given in blue and are marked with their 3-digit country code. It shows that overall most European countries are doing well.
However, there are countries which are doing better than others, even between countries sharing a similar level of network readiness.
For instance, although some countries such as Italy, Spain, but also Poland and Romania have an average score on ICT networks, they nonetheless are very successful in exporting data-intensive services compared to Lithuania, Estonia and Slovenia which actually share a similar level of ICT network.
Similarly, countries such as Great-Britain, France and Belgium are outperforming Scandinavian countries whilst actually having the same potential to export when looking at their ICT networks.
In fact, surprisingly Finland and Denmark export as much data-intensive services as Romania and Poland despite having a much higher network readiness index.
What can we therefore say about the success of Europe’s new strategy of the Single Digital Market?
Well, in terms of trading it, much scope still exists for the Nordics and the Baltics to improve their performance in exporting in the digital economy of Europe. Perhaps the Commission’s new digital strategy should focus first on these countries and try to figure out why these are the underperformers.
This post was originally published on the ECIPE (European Centre For International Political Economy) webpage.
photo credit: Peter Bromley
We have great minds in Europe, highly-qualified young people, good infrastructure, financial resources, strong industries. And yet not a single world tech champion has emerged in Europe in the last 30 years. A specific StartUp initiative within the Digital Single Market Strategy is the right way to address these concerns.
European StartUps expect the European Commission and policy-makers in Brussels (and across the EU) to deliver an ambitious and clear signal that the Digital Single Market Strategy will address their needs and expectations. And this for one single and clear objective: be able to grow and scale in Europe.
However, this cannot happen by magic, nor by chance.
We have great minds in Europe, highly-qualified young people, good infrastructure and financial resources. I see this everyday in our activities with the European Young Innovators Forum in our more than 16 hubs across Europe.
Yet, our best people are leaving – or willing to – to StartUp ecosystems that are more welcoming to their ambitions. We have a world-leader automotive industry, yet the automated cars are coming from Google or Apple.
We have strong industries but not a single world tech champion has emerged in Europe in the last 30 years. I believe that a specific StartUp initiative within the Digital Single Market Strategy is the right way to address these concerns.
The European StartUps Initiative would see a set of measures addressed specifically to support highly innovative small companies and create the conditions for the emergence of a strong pan-european tech scene.
Such an initiative would send an unequivocal message to the emerging –and everyday stronger – European ecosystem, but not only. It will also be a signal to foreign investors that something is changing in Europe and there are more opportunities and potential deals to be concluded in this continent. The story-telling is as important as the content.
Moreover, such an initiative would not only be symbolic but would have an concrete effect: unlock startups growth and scale capabilities. How do we achieve this?
One key measure –and highly symbolic – would be the creation of a European Statute for the highly-innovative small companies.It’s nice when European leaders and policy-makers talk about regulatory simplification. It would be even better if they actually do it.
One statute, that would enable European StartUps to operate in the Digital Single Market without any obstacle and burden would be a great step and would definitely attract investment for young entrepreneurs and innovators.
Investors want simplicity and certainty. Such a statute would also facilitate the emergence of a true European Venture-Capital Market where capital flows more easily to different startups ecosystems.
Finally, copyright. We need to adapt it to the Digital Single Market. It’s a shame that Spotify had to leave Europe due to regulatory issues to be able to grow and scale.
A StartUp initiative would not be successful if we do not work on the ecosystems and people’s skills. It goes together. One supports the other. Making the European startup ecosystem stronger means supporting the diversity of actors who act as the enablers and builders.
It is through them that young entrepreneurs and innovators could access better mentoring and training opportunities, improve their digital skills and be connected to other innovators and entrepreneurs in Europe and the world.
On February 18th, the European Young Innovators Forum organized a European StartUp showcase at the Global Innovation Summit in the Silicon Valley as part of its Disrupt Europe Year activities.
I can tell you that American investors were seduced by the bright European minds and ideas. And you just need to visit the Silicon Valley to discover that there are more Europeans entrepreneurs than any other nationality. It’s great time that Europe seize the opportunity, the innovation train is leaving, and we shouldn’t be the losers of the digital boom.
As the Internet of Things takes off the market for connected car will rapidly expand. GSMA estimates that every car will have some type of connection by 2025. This means that more and more developers are poised to enter the automotive space.
The demand for constant connectivity spreads to many industry sectors and the automotive sector is no exception to this trend. Our cars have become central hub not just for transportation, but also for communication.
According to Alec Saunders, a technology ecosystem, platform and developer relations leader, “people want uninterrupted connectivity and intelligent personalisation, and this experience is now moving into a new medium – the car.” Developers ought to be on the cutting edge of this rapidly growing market, and car manufacturers have eagerly started recruiting.
As consumer expectations evolve, the market for connected cars will rapidly expand. A 2013 forecast by GSMA found every car will have some type of connection by 2025. Furthermore, the market for technology to connect cars was an estimated $18 billion in 2012 and is expected to increase three times that number in the next four years worldwide.
Our research shows that more than just expectations are changing.
[Tweet “Road safety will also soon become a factor in connected car development.”]
Think about the risks we take during all manual tasks, such as reaching for a phone, dialing, and texting while driving. As vehicles become more connected, standardising interfaces and reducing the amount of time needed to take a driver’s eyes off the road becomes important.
Liz Kerton, the Executive Director of the Autotech Council, says: “A car that drives itself is 90% software and 10% hardware. We’re about 70% software now, so you could say there are many opportunities still out there.” Liz’s aim is to connect car manufacturers with entrepreneurs, venture capitalists, and suppliers.
Nowadays, drivers can unlock their cars, check the status of their batteries, find where they parked, and remotely activate the climate control system. With more and more developers entering the automotive space, this is just the beginning.
Learn more in our white paper, “Automotive as a Microcosm of IoT.“
The combined efforts of promoting the digital sector and a sound tax policy appear to be stimulants that are helping Spain’s economy recover. The new European Commission should look closely at these simple pioneering approaches.
Investments require a good framework to restore growth. Valdis Dombrovskis, Vice President of the European Commission and ex-Prime Minister of Latvia, accurately pointed this out during the Martens Centre’s annual Economic Ideas Forum in Slovakia.
Europe is in desperate need of restoring growth across the Member States. The International Monetary Fund has warned there is now a four in ten chance the Eurozone will slide into a third recession since the financial crisis. The triple dip is already a reality for some countries in Europe.
Two months ago, a new European Commission took office. It’s an opportunity for a fresh start and to find ways we can improve economies across the region. We know there are solutions to the similar problems faced in different countries.
We need to look to the digital economy. We need to think digital in everything we do. The Internet economy will impact every business and industry over the next few years. The success of Europe’s economy will, in large part, depend on how we promote the information and communications sector.
Our regulatory model desperately needs modernization if the private sector is to be encouraged to invest in the networks needed to support a European renaissance. Only a future-focused regulatory framework that embraces technological change will facilitate the much-needed investment in infrastructure, technology and research.
Creating a digital single market is the unique solution for the development of investment, making it possible to attract more money from the private sector to push the recovery and to decrease the high level of unemployment. According to its priorities, the new European Commission will soon present an ambitious plan to achieve a truly connected digital single market. It may draw some inspiration from Spain.
Last year, the Spanish government approved the Digital Agenda for Spain, which, among other goals aims to boost the digital economy; improve e-Administration and adopt digital solutions for an efficient rendering of public services; boost research and development; and promote digital inclusion and literacy and the training of new ICT professionals.
[Tweet “Is it coincidental that Spain is the best performing among the crisis hit Southern States and that its start-ups are booming?”]
According to data gathered by Venture Watch, startups in Spain raised €158 million for the third quarter of 2014, a 187% increase compared to the same period in 2013. Google recently announced it’s opening a new campus for entrepreneurs in Madrid “because of the thriving entrepreneurial spirit in Spain.”
Adding to that initiative, Spain has also announced a package of income and corporate tax cuts in an effort to increase investment and consumption across the country. Spain’s corporate tax rate would drop from 30% to 25% by 2016. Overall income-tax rates will drop by 12.5% over the next two years.
The combined efforts of promoting the digital sector and a sound tax policy appear to be stimulants that are helping Spain’s economy recover.
Digitalization permits simplification of procedures and the Doing Business 2015 of the World Bank shows improvement of the Government with a progress of 19 positions in the rankings.
The benefits for the economy are already clear. The unemployment is decreasing from the top levels of the last years and the economy is one of the most well performing in the Euro Area.
To break out of the present negative downward spiral and avoid economic freefall and stagnation, President Juncker and his team during their first 6 months must look closely at Spain’s simple pioneering approaches and bring forward an agenda that opens markets, encourages investment and propels entrepreneur led growth and employment creation.
photo credit: . SantiMB.
Investing in e-skills and promoting digital entrepreneurship may be the salvation of our children from the unemployment shackles. The EU heads of government should wake up from their nap and seize the opportunities provided by the Internet economy.
Europe doesn’t have time for complacency. Yesterday does not count in the digital world. We need to think about what our future economy will look like, what sort of society we want to live in 5, 10 or 20 years’ time and go out and build it.
In nearly every part of life, the digital world is part of the solution in this quest – education, health, transport, energy, environment, etc. The way governments decide to implement new technologies will impact the development of entire regions.
The digital economy is growing seven times faster than the rest of the economy and it connects our friends, and families and colleagues in ever more extraordinary ways.
This is a revolution we can all be part of, and which must be shaped to be of benefit to us all.
Like all bureaucracies there is too much risk-avoiding in Brussels, and even more in Sofia and other national capitals. However, civil society, business, Internet communities and digital enthusiasts can bring additional dynamics to the building of the foundations of Europe’s Digital Agenda.
[Tweet “We have to overcome the stereotype that the Internet kills jobs.”]
This is a similar dispute to the one led by the coachmen when the automobile taxi was introduced for the first time in the early 20th century. Their arguments, however, could not stop the course of progress.
It is the same today – the Internet is the most revolutionary means of communication created by man. The full implementation of the Digital Agenda for Europe would in fact create four million jobs in Europe. That would make Europe infinitely more competitive.
Now let’s compare this fact with the reality of shocking youth unemployment in Europe today. Moreover, let’s impose them on the desperate need for more ICT skilled workers.
The result is a giant social paradox – monumental unemployment, coupled with a vast labour shortage. This means that an entire generation in the world does not live in its time and lead someone else’s life.
In early 2014 we need actions, not words.
Internet highways are the 21st century communications. The European Commission has set up a package of measures to ensure that all Europeans have broadband Internet access that is not slower, than in the rest of the world. Countries that act proactively will outrun the others. For example, the initiative of Bulgaria for turning public places into free Wi-Fi zones is also a part of the innovative approach for providing universal access to the Internet for all European citizens.
We need to rethink Education to build skills for the 21st century: New technologies and digital skills will completely change the education background, and we must be ready to take advantage of this change. English language has become the lingua franca, and if we do not admit it, we doom our children to isolation.
Last year, the digital sector launched a “Grand Coalition” with the main aim for Europe to take the necessary measures to prepare professionals for ICT sector.
Thousands jobs require new competences, which could be the salvation of our children from the unemployment shackles.
To accomplish this, we would need help from the business sector, social partners and educational institutions.
A shortage of more than twenty thousand software engineers in Bulgaria is expected in 2015. It is impressive what purely Bulgarian software academies like Telerik and others are doing in Bulgaria in order to fill the gap. Such alternative education institutions will have the potential to increase the competitiveness of the country and to position it in the heart of Europe as a hi-tech destination.
Reforming whole sectors by means of ICT – from health, through e-government and smart solutions in transport and energy.
Investing in entrepreneurial culture. Europeans should be infected with the entrepreneurial spirit, and every country should create a background and a culture, in which the start of one’s own enterprise to be an exciting experience. Entrepreneurship change lives and communities for better life.
The young and promising entrepreneurial community in several EU countries encouraged the European Commission in 2013 to bring into play Startup Europe – Central platform to support those who wish to start and develop their businesses in Europe on the basis of the Internet.
Euro scepticism is the biggest deterrent for Europe! Our continent has a promising future, and the digital world is the basis of that future. It is time to face the truth. Digital industry must take responsibility for its new role as the backbone of the European economy. The heads of government should wake up from their analogue nap and seize the opportunities of the day.
Today Europe does not have its own innovative company with the scale of Google or Apple, Facebook, Amazon.
This could change, if Europe becomes fully connected continent by 2020, if we rethink education, if we manage to overcome skills shortages, if we support the creation of 5,000 new companies in the Startup Europe until 2015, if we double the number of web developers. If … The road that would get us there is called education and innovation.