European Startups Find Success When They Stop Trying to Be Like Silicon Valley's
European technology companies have often taken a back seat to Silicon Valley's startup machine. Yet, Europe is the home of Spotify, Skype, SAP, Deliveroo, Candy Crush and many more big technology companies. Sweden alone has produced more unicorn companies (those valued at $1 billion or more) than any other European country. Clearly, there is plenty of potential in the European startup community. But, until we stop trying to be Silicon Valley and start embracing the unique capabilities of European startups, our success will continue to be restrained.
My former career was with Ericsson. Ericsson is a de-centralized company that gives its employees plenty of autonomy and room for creativity. It offered a good training ground for becoming an entrepreneur. At least for being a European entrepreneur. For all our ambitions, Europeans will always generally be more cautious than our Silicon Valley counterparts. While failing is now seen as a learning opportunity in many European businesses, failure still has more fallout in Europe than in Silicon Valley. Therefore, we tend to hesitate when it comes to big risk factors.
However, that means Europe has been less vulnerable to the bubbles that have hit Silicon Valley. Our economies are less volatile or driven by the high-stakes bets of startups that may or may not make it. Our venture capitalists invest less money, less often. Therefore, companies are weeded out early if they're not going to work. If the startup is not meeting milestones, European investors are more likely to cut it off early. And the ones who do make it are stronger. We now see European tech IPOs outpacing the U.S.
The drawback to risk aversion is that startups need time to grow. Almost every startup must learn from the market and pivot accordingly at some point. That takes time. Without the backing of investors who are willing to not only guide the company through those growing pains, but also let it try new markets and ideas, some great businesses will be put to rest before they have a chance to flourish. That's what Silicon Valley does for its startups, sometimes to a fault.
We've all heard of Silicon Valley companies who kept getting funding even when they weren't achieving financial success. Theranos was valued at over a billion dollars before spectacular crashing to the ground. No one thought to stop dumping money into Theranos until it could prove the product worked. That's a uniquely Silicon Valley phenomenon.
On the other hand, companies like Twitter wouldn't exist today if Silicon Valley had not allowed it to pivot. Twitter started out as a podcast company called Odeo. Faced with fierce and dominating competition from Apple, the founders asked the team to brainstorm some ideas to pivot the company. One of those ideas became Twitter. A European investor may not have afforded the team the chance to start over.
But, Europeans are starting to find their own way. Companies like Cool Blue out of the Netherlands are competing successfully against big tech companies like Amazon by understanding the local market. Cool Blue sets itself apart by providing extensive customer service requirements of all its online retailers. And my company, Idka, takes advantage of the unique privacy and transparency concerns of Europe, as established by the new GDPR privacy regulations. Deliveroo is a food delivery service started in the U.K. that has grown rapidly with the rejection of Uber and Uber Eats in London. All of these companies are delivering uniquely European products and services, and none have even expanded to the U.S. yet, much less considered moving to Silicon Valley.
European startups seem to have found a happy medium between Silicon Valley and old Europe. They've developed a unique approach to entrepreneurship. The European startup success formula includes the following:
- Build products based on your understanding of the unique needs in your local market.
- European startups achieve more with less. Less funding, often fewer mentors, fewer partnerships, but we find a way to succeed with the resources we have. And those successes are more likely to stick for the long-term.
- Go to Silicon Valley only if it's the right market for your company.
By embracing our unique perspective on the different needs of our local markets, European startups have stopped trying to be Silicon Valley and started building our own brand of success. More importantly, our customers are happier because of it.