The Economist – Blooming

The Economist – MENTION the name of a big European technology firm in Silicon Valley and chances are the reaction will be a mixture of pity and disparagement. SAP, the German software heavyweight? Past its prime. Finland’s Nokia, the world’s biggest maker of handsets? Missed the boat on smart-phones. Ericsson, of Sweden, the leading vendor of gear for mobile networks? Clobbered by the Chinese.

Turn the conversation to start-ups, though, and ears prick up. When will Spotify, a popular London-based online music service, be available in America? Why did Playfish, whose online games attract tens of millions, sell out to Electronic Arts, an American giant? And what will happen to Skype, whose software handles nearly 10% of international telephone calls, after its divorce from eBay, an online auctioneer?

Californians’ interest is most piqued by a French company, vente-privee.com, the pioneer of “private flash sales”: members—and members only—can pounce when told they have a few days to buy this Prada bag or that Dior perfume at a discount of up to 70%. This year the firm’s revenues are expected to reach €850m ($1 billion), a quarter more than the previous year. It already has dozens of imitators. Even Silicon Valley entrepreneurs have been heard saying they would like to do something “like vente-privee”. In the tech heartland, this is the ultimate compliment.

You may joke that America is at last discovering Europe. But that reflects a change in European entrepreneurial potential more than in American attitudes. In recent years, a lively environment for young companies has emerged in Europe, complete with serial entrepreneurs, experienced venture capitalists and the necessary supporting infrastructure, such as law firms and PR agencies. And it is most visible where Europe has been considered weakest: the internet and other parts of the information-technology industry.

Granted, it is not yet clear whether Europe’s tech industries will become big enough to do the things that its entrepreneurs, venture capitalists and policymakers dream of: not just producing brilliant ideas, but turning them into lucrative commercial reality; creating a lot of jobs; and yielding the sorts of innovations that revolutionise old industries and spawn new ones. Nevertheless, the change is palpable.

Hermann Hauser, co-founder of Amadeus Capital Partners, a pioneer of Europe’s venture capital (VC) industry, says that a dozen years ago most of the start-ups his firm financed were led by first-time entrepreneurs. Amadeus, based in Cambridge, had a hard time finding like-minded venture capitalists. Today 70% of the chief executives are repeat entrepreneurs, and there are enough good venture capitalists around to team up on financing. “The progress has been spectacular,” he says, “particularly in Cambridge.”

Other places are blooming too. Europe has a collection of specialised clusters—a bit like Silicon Valley, but spread over a much bigger area. Cambridge resembles Santa Clara, where many big chipmakers are based. For London read Sand Hill Road, the place with the densest concentration of venture capitalists. Berlin is reminiscent of South of Market in San Francisco, the preferred habitat of more artsy start-ups.

Source: The Economist
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