Europe has some catching up to do. There are many examples of successful European internet companies, such as Spotify, a Swedish music streaming service, or the Berlin-based audio distribution site SoundCloud. Compared to the United States or Asia, however, EU companies could be doing even better.
EU cities including London, Berlin, Madrid, Paris, and Stockholm are all keen to be seen as tech hubs, hoping to model themselves as Europe’s answer to Silicon Valley. Yet startups and entrepreneurs often complain about access to financing, and about a fragmented digital market in Europe that is preventing them from growing their businesses. What’s the secret to success? How can EU-based startups be encouraged to grow into ‘internet giants’?
Want to learn more about the tech startup scene in Europe? Check out our infographic below (click for a bigger version):
We recently spoke to Jake Ward and Catriona Meeham from the Application Developers Alliance, a non-profit organisation supporting tech developers and entrepreneurs around the globe.
First up, we asked them to respond to a question from Graaf, who said European entrepreneurs often complain about access to financing or venture capital in the EU. What would be the best way to improve the funding environment for European start-ups?
The response from Jake Ward, President and CEO of the Application Developers Alliance, was that Europe needs to concentrate on allowing startups to better “scale up” their businesses, so that the potential rewards for investors are worth the risk:
A lot is already being done to improve access to funding for early stage companies and young companies [in Europe], but to improve the digital economy and reap the benefits of those investments we need to allow companies to succeed at a higher, more scalable level so that there is more of a reward for that initial investment.
We had a comment from Iulian on exactly this issue. He believes the problem is that the EU’s digital market is still too fragmented and there are too many obstacles for companies wanting to provide digital services across borders.
Progress has been made recently on harmonising Europe’s patchwork legal framework. After nearly four years of negotiations, the EU finally agreed to new data protection rules on 15 December 2015. Fines of up to 4% of global turnover have been introduced, potentially amounting to billions of dollars for large internet firms breaching the rules. Privacy activists have hailed the agreement as a success.
Catriona Meeham, Director of EU Policy and Government Relations at the Application Developers Alliance, agreed with Iulian, but cautioned that there was also a risk of the EU introducing further burdens for small companies:
Yes, I would agree… In order for startups to do better there needs to be greater harmonisation of EU legislation in this area. Obviously, the Commission has come out with proposals and will continue to do so over the coming months and years, and we welcome these. There are definitely issues to be discussed at the EU level.
However, we wouldn’t really want there to be over-regulation, which in the end creates more burden. This would just make it more difficult for startups, especially the smaller guys who can’t really afford legal teams to jump through all the legislative hoops the EU could potentially create. So, I think the EU should focus on having greater legislative harmonisation between EU countries, but I also think the EU needs to look at how it can lower barriers to digital access to other countries outside the EU as well. ‘Digital’ doesn’t have any borders, so that’s something we need to look at as well.
On this point, Jake Ward warned against the EU adopting a policy of “data isolationism”:
Data, generally, has become the new global commodity that is both essential to commerce but also essential for governments to protect their citizenry from. But an isolationist approach is not a successful business strategy. And if you are trying to advance growth and innovation, that goal is diametrically opposed to an isolationist policy and red tape.
How can we encourage more European internet giants? What would be the best way to improve the funding environment for European start-ups? By focusing too much on data protection, is the EU at risk of adopting a policy of “data isolationism”? Let us know your thoughts and comments in the form below, and we’ll take them to policymakers and experts for their reactions!