Apple, Google, eBay… Those company names are instantly recognisable and have one thing in common: they were founded in Silicon Valley, California. These firms have created significant wealth for the United States in terms of employment as well as tax revenue and cultural influence. Why have all of these start-ups been created in the same place? And to which extent can a similar environment be created in Europe?
There is no single factor behind Silicon Valley becoming an entrepreneurial Mecca but rather a collection of different ingredients. To start with, California plays host to many of the world’s best universities including Stanford and Berkeley which are the engineering powerhouses providing the technical innovation at the roots of most start ups in the region. On top of having talented students and researchers, these institutions have mastered a culture of commercializing research breakthroughs. Then, Silicon Valley also boasts a unique concentration of financial capital as well as legal expertise tailored to the needs of technology start-ups and providing them with the environment they need to grow fast. Finally, talented and experienced engineers and entrepreneurs are clustered there, providing the necessary workforce in terms of technical and management skills to the companies created in the area. All together, those ingredients form a unique ecosystem enabling research and ideas to be turned into successful fast-growth companies substantially contributing to the US economy.
Replicating the Silicon Valley is difficult if not impossible considering the many historical circumstances that paved its development. As Babson College professor Daniel Isenberg puts it, “even Silicon Valley could not become itself if it tried today”. However, there is no doubt that if Europe plays with its strengths it can easily create tremendously successful entrepreneurial ecosystems across the continent. Actually, the seeds of very strong entrepreneurial hubs are already visible in Europe. Denmark is often celebrated as a growing force in the greentech entrepreneurship sphere. Similarly, the Shoreditch district in east London is a rising star of the high-tech sector which saw its number of start ups jump from 16 in 2008 to 340 today. But how can those local examples be grown and sustained as well as replicated across Europe?
The European Commission has already taken steps towards spreading this type of local successes across the continent. It is currently under the process of establishing a European “passport” enabling venture capital funds, which are specialized in providing money to start-ups, to operate cross-borders without having to register their business multiple times in the different member states where they are active. This step is necessary to bring the different entrepreneurial ecosystems across Europe together into a stronger network of financial capital.
However, at Stronger Europe we believe that much more is required to be done for those success stories to reach a critical scale and spread across the continent. Indeed, creating an entrepreneurial revolution is not just about making financing easier but rather about building local entrepreneurship ecosystems that grow and connect together.
We believe European policy makers have a key role in achieving that by:
- Making enterprise and intellectual property registration requirements uniform and as simple and fast as possible across Europe so as to lower the barrier to the establishment of start-ups.
- Unifying business regulation as a whole across Europe so companies can operate across the continent without having to have a large legal team to interpret laws across 27 countries, as is currently the case.
- Unlocking the 27 billion euros worth of public sector data available across Europe in order to provide small companies with market visibility.
- Developing a framework incentivizing and providing support to researchers under European funding to turn their academic breakthroughs into start-ups. Efforts should first be concentrated on specific research hubs and then replicated. Former entrepreneurs and the private sector should be involved in this initiative from the start.
- Pushing for students to be taught the accounting and finance basics required to start a business as early as high-school and incentivise the employment of young people in small businesses.
- Developing a European online portal enabling start-ups to be registered and providing them with support and services such as mentoring schemes and online business classes among other things.
What do you think?