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
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.
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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.