There have been some great comments in reply to my post about the startups in Europe, but this one from William B Dollars caught my eye:
Interesting question and interesting selection of responses. I am from the US, but work as a VC in Europe and am continually frustrated by the challenges of finding great start-up companies to work with. The reasons are complex and include:
- social issues: if you start a company and fail, there are often serious results from a career perspective; basically, failure is not accepted and this adds to the overall risk.
- VC issues: Although some VCs have been around in Europe for a while (e.g. 3i in the UK has been around since the 1950’s), most were spawned by the craze of the late 1990’s and were/are staffed by ex-investment bankers who had never been inside a business before, but thought they knew more than everyone else because someone had paid them a load of money in their previous job. Seriously, though, the big issue is that the VCs in Europe are typically unable to take on the level of risk that US VCs are happy with because on their first or second fund, they cannot afford to have failures. Often when you meet a Euro VC they say “we have not had any failures” which actually means they have not taken enough risk. The decent US VCs have been going for a while and recognise that having failures is part of the game and are thus more willing to take risks.
- Specifically with regards to software, it is usually important for software start-ups to be able to work with/collaborate with/grab the attention of larger software companies. In Europe that means they can go talk to … SAP. Maybe Business Objects… in general, this industry is so dominated by US companies that I think some of the management/commercial expertise required to create viable, investible software start-ups is not readily available in Europe and certainly not to the extent that VCs need to feel comfortable investing in the sector… it is v. hard to invest in enterprise software in Europe.