Catalyzing Europe's Technology Innovation Ecosystem
Over the past three weeks, I’ve been visiting with technology entrepreneurs in London, Paris, Madrid, and Geneva. These conversations have confirmed my belief that the technology development on the right side of the Atlantic is absolutely world class.
In fact, despite the constant refrain that Europe is “behind the U.S.,” I find that European-developed technology is quite contemporary with – and often exceeds – U.S. innovation. In certain markets – such as mobile content and services – the U.S. lags considerably behind much of the world.
Still, there is this perception among American investors and customers – and even among Europeans -- that Europe is lagging.
The perception is fueled in large measure by the lack of strong, recognizable global technology players to come out of Europe in the last 20 years. Today, when you list the great European technology brands, you can count them on the fingers of one hand: ARM from the UK. Business Objects and Gemplus in France. Nokia and Ericsson in Scandinavia. SAP in Germany. And this despite some €73 billion being spent on technology R&D throughout the European Union
So why -- with innovative engineering, significant public investment, world-class universities, a growing venture capital industry – has Europe not produce more great global companies?
The answers are not easy – and they do vary among Europe’s geographical and technical markets. But one thread is consistent: European countries, individually and collectively, do not have a cohesive ecosystem to support entrepreneurship and to move great, innovative ideas from conception to product reality. The parts are in place, but they are not working together effectively.
European entrepreneurs, for example, are a growing but still rare breed. Culturally, Europeans are risk adverse in their careers. Why take a chance on a startup venture when a public service job will pay you, if not exceptionally well, at least for the rest of your life? Besides, new ventures tend to spin out of large, established companies controlled by wealthy families or state interests. How can a small startup compete with that?
Contrast this cultural mindset with the United States, a country built on risk taking by the earliest settlers, explorers and prospectors. And whereas a failed venture in the U.S. is an opportunity to learn from mistakes, failure in a European venture is an indelible blemish on the record of the entrepreneur. So while hundreds of initiatives from the European Commission through local government outreach outline marked increases in technology growth, the initiatives themselves are thwarted by a cultural proclivity toward safer research positions inside large companies and public and private universities.
The entrepreneurial mindset is changing, albeit slowly, fueled in part by an emerging venture capital industry. Yet it is a mistake to closely associate European venture capital with U.S. venture capital. As an asset class, technology venture capital is some 10 to 20 years the junior to its counterpart in the United States. And because European venture investments have relatively fewer and smaller exit strategies to exercise, European venture is considerably more conservative and more selective than U.S. venture funds.
In the United States, early-stage companies are also supported by a network of service organizations. Lawyers, accountants, market strategists, communications specialists, strategic consultants, and a raft of others have deep experience in the specific needs of
early-stage companies. Many of these firms work with startups in exchange for ownership share, dealing in the one currency most startups have in abundance – equity. In Europe, these service businesses have neither the depth of experience nor the flexibility to work with startups on an equity basis.
The fourth leg of the ecosystem is the early adopters of technology itself. In Europe, large customers tend to be conservative in their adoption of technology. They are hesitant to do business with all but the most established of companies. As the CEO of a French software company told me last week, “My customers are more likely to examine my P&L before they will look at my technology solution.”
U.S. companies, on the other hand, have adopted the practice of embracing technology as a competitive lever. And while they can be cautious about working with young companies, they will weigh the competitive reward against the risk an early-stage company may pose.
Without a robust ecosystem to support technology innovation, European innovation is a lot of great ideas – but not a lot of great products or great companies. Worse, Europe risks becoming a second world technology market after North America and China, as early stage ventures pass over Europe to do business with the larger markets to the East and West.
The good news, however, is that things are changing in Europe, and changing quickly! Where just a few years ago, I was told that an event such as Innovate!Europe could not happen because the market is too fractured, today, I am told that it has to happen because the market is so fractured.
Indeed, that is Guidewire Group’s goal with Innovate!Europe – to bring together the pieces of the European technology innovation ecosystem and to act as a catalyst to encourage a unified and productive European marketplace. Innovate!Europe is a dialog among the actors who together can build a pan-European infrastructure to accelerate European innovation and product commercialization, and to build the next great European – even global – technology companies.
The ambitious goal of Innovate!Europe is – in a few years’ time – to require more than one hand to count Europe’s great global technology companies. In ten years or less, we ought to be able to name a dozen or more global technology brands grown from European soil.
This is not a simple task, and it cannot be achieved by simple conversations. Europe must address challenging questions and build an agenda to move forward together to create a great European Technology Innovation Ecosystem.
Posted by Guidewire Group at April 25, 2005 11:08 PM
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