Europe’s Got Talent — Informilo

By James Silver, Contributing Writer, on May 24, 2013

An invited audience drawn from 50 high-growth companies and investors gathered at the Irish Embassy in London on May 22nd to hear a panel discussion organized by Informilo on how to go about building European tech giants with staying power — and challenge U.S. dominance in the process.

On the panel were the serial entrepreneur Martin Varsavsky (pictured on Informilo’s home page); Julien Codorniou, Facebook’s head of platform partnerships; Ian Dendle, Shazam’s European head of business development; Passion Capital’s Stefan Glaenzer; Nicholas Brusson, co-founder of BlaBlaCar; Sinead Finn, a former Ryanair executive who now helps U.S. and European companies grow their web businesses in the EU; and Joe Morrisey, a former executive at MySQL, now vice-present of EMEA at 10gen, an open source database company.

During the event, which was sponsored by IDA Ireland, a consensus quickly emerged that unprecedented opportunities abound across the European ecosystem in sectors such as gaming, music, advertising, collaborative consumption and open source software.

Facebook’s Codorniou argued that Europe already has a host of fast-growing global companies, particularly in the gaming space. He listed, among others, London-based skill-gaming site King.com, the second-largest Facebook developer (by number of monthly users), as well as Finnish Angry Birds creators Rovio Entertainment and a second Finnish company, Supercell, a tablet-first mobile gaming company which currently generates over $3.7 million a day in revenues.

Passion Capital’s Stefan Glaenzer added that having switched over “to the dark side” by becoming an investor after 15 years as an entrepreneur, he has noticed a sea change in Europe over the past decade. “We see now in 2013 for the first time global market leaders [coming out of Europe],” he said, citing not only gaming companies but music companies like Spotify and Songkick. “We shouldn’t believe this U.S. [viewpoint] that Europe can’t create global businesses — it’s not true.”

Take the case of London-based Shazam, which is planning a $1 billion initial public offering. The company went global from London with a category breakout businesses after the founders failed to raise capital in the U.S. Iain Dendle, business development director for the music discovery service, explained that although the company was founded by three Americans, every U.S. venture capital investor they approached turned them down flat — impressed by the technology, yet not so impressed with the service’s commercial viability. At the time, mobile services were far more advanced in Europe and U.S. VCs were less bullish on the sector. Shazam eventually found backers in London. Shazam now has offices in San Francisco, New York, South Korea, Singapore and Australia and it has branched out into an entirely new line of business.

How did Shazam — a European company — go on to conquer the US ‘second screen’ market by securing exclusive deals with major American events including the Super Bowl and the Grammys and striking partnerships with all of the major U.S. television chains? asked Jennifer Schenker, the event’s moderator and Informilo’s editor in chief. “Through our music service we’ve generated a user base of 300 million users and 60 million monthly actives,” Dendle replied. “That’s invaluable to broadcasters — and it’s what’s driven growth in the TV space for us, especially in America.”

In terms of talent, too, Europe is raising its game to match and even outperform the U.S., said 10gen’s Morrissey. “We can certainly create great European software companies,” he asserted, pointing to MySQL, which was sold to Sun Microsystems for $1 billion in 2008. “One of the big things that scaled that business so quickly was that MySQL went after talent wherever it was and often that wasn’t in Silicon Valley,” Morrissey said. “ I think the greatest cluster of talent is in Dublin and most of the developers were in former Soviet Union. So [great software] companies can be built out of Europe, for sure.”

However as the debate approached the 40-minute mark (of its allotted hour), the bullish optimism concerning Europe’s prospects began to give way to discussion about the all-too-familiar roadblocks which impede growth — and stifle the development of the continent’s tech ecosystem.

Glaenzer lamented the lack of big exits in Europe, arguing that even those that have occurred have failed to enrich enough people to ignite the wider ecosystem. “Skype’s exit didn’t create enough millionaires,” he said, before citing Tumblr’s recent $1.1 billion sale to Yahoo, which saw the blogging site’s first 10 employees netting an average of $6 million each and the first 30 receiving an average of $3.6 million each.

“Why it’s important to create these millionaires and really successful people is because they start new companies or invest in young developers which creates an ecosystem and jobs for the next 20-50 years,” said Glaenzer. “That is what the Valley has done for generations [which is why] they are miles ahead. We need to create [a similar ecosystem in Europe].”

Handed the microphone, serial entrepreneur Martin Varsavsky — who has founded more than half a dozen companies including Madrid-based Fon, the world’s largest Wifi network — was far more blunt. “Since everyone is so positive, let’s really talk about what’s wrong with Europe,” he said. Suddenly the somewhat reverential tone lifted — as laughter filled the ballroom.

“Why are Ireland and the UK getting an edge over the rest of Europe?” he asked. “Because they are adopting certain measures, which are distinguishing them from continental Europe. In Europe there are a number of [laws and regulations in place] that are not only unfriendly to startups — but are the enemies of start-ups.”

Among the issues he listed were laws surrounding personal bankruptcy, social security charges and mandatory severance pay. He also vociferously challenged what he described as the widely-held view in many European countries that stock options are simply a scheme to pay employees less.

Laws and regulations around start-ups urgently need to be relaxed, he said. “Start-ups are born in an incubator. They are born fragile — they are bound to die. You want all of the money which goes into a start-up to stay in that start-up. [It shouldn’t go] to stupid people in government, who don’t deserve that money because they’ve never earned it,” said Varsavsky. “Instead, there has to be recognition that there’s a time to pay taxes — but that time comes when a company is really successful, not when it’s starting up. That [in particular] has to change in Europe.”

*This article was originally published on Informilo.com on 24th May 2013.