November 10th, 2011
04:39 PM GMT
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London (CNN) – Europe’s internet economy is growing, but the continent lags far behind Silicon Valley’s high tech community in the U.S.

And while there are plans are afoot to level the playing field, Europe might want to be careful what it wishes for. Growing this sector may be painful.

Europe has pockets of highly-skilled and innovative brains in various cities around Europe: Silicon Docks in Dublin, Silicon Sentier in Paris, corners of Vienna and East London. But it takes more than bits of modern architecture and a few flat-screens to create the business environment for big-scale, global, web-based success.

Internet entrepreneur Ilya Laurs - whose company has become one of the biggest apps supplier in the world - tells me Europe is a great place to nurture start-ups. But growth is difficult.

“There are people in various niches. You can find maybe a hundred people in those specific areas. But this is pretty small-sized for Silicon Valley and you really need thousands of people. It is a level that I don’t think any European place can do.”

Even if there was a sudden, unexpected glut of just the sort of skilled workers he was looking for, he would still be reluctant to hire big and fast in Europe. It is a cultural thing.

“The European set of values in general is pretty much incompatible with innovation. When you think about innovation it is all about trial and error… if I hire fast and it doesn’t work I will have to fire fast. Try that in France,” he says.

He adds, “the metabolism of your company needs to be high speed. Facebook was not built working nine-to-five, with government regulations of six weeks vacation. Europe needs social security, creativity, family, hobbies and work itself is not in the top set of values for Europeans. It is in America.”

Europe is trying to boost its potential in this sector. Last year, British Prime Minister David Cameron talked about introducing an Entrepreneur Visa and far reaching changes to intellectual property rights, to create the right environment for high tech start-ups. He spoke about his vision for London’s East End becoming a rival to Silicon Valley, name dropping big internet brands like Google and Facebook as committed to investing in the area after the 2012 Games.

Dublin too is fast-establishing its renovated Docks area as a high tech hub. Billed as “Silicon Docks”, Google, Facebook and LinkedIn have all set up their European headquarters there.

No doubt they’ve been lured in part by a low corporation tax rate of 12.5%, which is less than half the rate of some other European countries. But Noel Ruane, the Entrepreneur in Residence (a mentor for internet start-ups) of Dogpatch Lab Europe says the community in Dublin is about more than the tech titans moving in.

He believes the start-ups face a welcoming landscape in Europe, and particularly Dublin. According to Ruane, there is “over a quarter of a billion dollars available for seed stage investment.” Dublin, he adds, “can serve as a gateway into the market for larger tech companies.”

But even he concedes the tech industry’s leaders will have had to dip their toes across the pond first, regardless of where they end up. He believes many of the tech leaders across Europe have come through Silicon Valley and New York.

“I meet companies all the time where the founders have returned home after perhaps spending some years working either on the West Coast in Silicon Valley and or in New York, with the large Internet companies,” he says. “So they have all of that experience and then return home to set up their business back in Europe.”

To keep them here – and attract more – will create growing pains. It will mean sweeping change, Europe-wide, to finance laws, capital gains tax and labour laws, at least for start-up companies.

More flexibility for employers could well mean that cherished job security for employees is out. Investing in innovation looks good on paper, but it will cost dear in other ways, opening up another can of European Union worms.

soundoff (33 Responses)
  1. Nuno

    I can live without facebook but I can't live without family
    And yes I prefer having 6 week vacations than to have a mercedes

    November 10, 2011 at 7:48 pm |
  2. to Nuno

    couldn't be a better validation of the point of the article than the comment above :) Why don't we give the choice to people to decide on their values rather than enforcing the same on everybody?

    November 10, 2011 at 8:45 pm |
  3. to to Nuno

    Agree with both above. When you're living in certain areas of Europe, you feel absolutely no need for material luxury.
    Example: If you're living in Bologna in Italy, chances are that you're there because you love the food and the culture (unless you're born and raised there all your life). You're not there to rant about not having your tech toys and Mercedes.
    That being said, I am a tech boy, but when I was living in Europe, I didn't feel the need to be updated on any tech news around the world.

    November 10, 2011 at 9:15 pm |
  4. Pandelaki

    Europe less innovative than the U.S.?
    Europe is actually much more innovative than the U.S.
    And I'd watch my word when you are speaking to the continent that brought you 99% of not only technological, but social, and political innovation.

    Where did democracy come from?
    Who created the strcutre of a city? (Sewer, roads, streetlights, etc...
    Who created the tank?
    Who created literally nearly everything in use nowadays?


    Remind me of the fine american cuisine compared to european? Oh wait...

    November 10, 2011 at 9:16 pm |
  5. Pandelaki


    November 10, 2011 at 9:18 pm |
  6. Nathan

    Pandelaki – "And I'd watch my word when you are speaking to the continent that brought you 99% of not only technological, but social, and political innovation."

    Did you know that 80% of statistics are made up on the spot?

    If you really want to compare Europe to America, that's fine, but, just so you're aware, you're comparing a CONTINENT whose government has been around for hundreds of years to a COUNTRY whose government has been around barely over 200 years. I wish there was a chart of everything EUROPE (the continent) has created/discovered in the last 500 years compared to everything America (the country) has invented/discovered in the last 236 years. I have a feeling the ratio of inventions/discoveries:years would surprise you. With ACTUAL facts even.

    November 11, 2011 at 12:13 am |
  7. Lovecraft

    This article is a load of Americentric bull...

    November 11, 2011 at 12:20 am |
  8. Karl

    A lot of european IT companies develop for their own market, american companies by lack of language barrier goes international more often. So what you really need to do is compare American companies vs grb or bi-lingual countries. This is when the whole theory of social & job security being a disadvantage to innovation will fail as you'll find Scandinavian countries having a lot of both big and small companies(Nokia, skype, spotify, etc) making it on the global stage continuously, even though the countries themselves are tiny in comparison. I think innovation comes from giving people solid education and through social climate and security the confidence to try out new things. If it was all about firing people as easy as you can India would be no 1 in IT innovation already.

    November 11, 2011 at 12:47 am |
  9. lolo40

    @skype and spotify are not examples of tech giants, they are fine companies but certainly not the type of company that the article is talking about, im not trying to be a dick, but thats the way i understood the article. Building a climate for innovation gaints, and the article makes some decent points, those yanks seem fine with the boom of bust method of trying a new business and when it's bust, they try again...generally

    November 11, 2011 at 1:25 am |
  10. Jim456

    PS: The Silicon Valley of Europe is considered Munich/ Germany.

    November 11, 2011 at 2:44 am |
  11. power4things

    I love all this "quality-of-life" pontification from the (obviously) European posters here, but the facts are that most European countries are starved for tech talent because it has all gone to USA, mainly due to higher salaries and lower taxes, but also because the tech mentality in Europe is not there. They're just getting used to fax machines, e-mail almost never answered except at large companies, and forget about mail order – they can't take orders and won't look at a credit card, or even PayPal (bank wire only, please), the exception being UK where they might, but not from another country (even EU) ... nope, there's room to grow here. 20 years on the continent and from what I see, they still think the internet is some form of black art they'd rather avoid.

    November 11, 2011 at 6:01 am |
  12. NWO

    What if you change that GOOGLE logo and Replace McDonalds 1600 Amphitheatre?

    November 11, 2011 at 6:25 am |
  13. John

    I am English, and no problem to say, European are bunch of toothless poodles. No wonder the yankees always ahead in political arena, military and innovation.

    England should be out of EU full stop, but instead opt for EEA, like Norway and Switzerland

    November 11, 2011 at 8:59 am |
  14. Hotdoginbuns

    Europe has higher internet speeds. Their signals are faster and frequncies higher. It is illegal in US to crank that high. The only difference is that US charges more for a crap product, where Europe charges good for superior product so yes, Europe losses some cash because of integrity, but so be it you filthy Americans

    November 11, 2011 at 11:01 am |
  15. Beve Stalmer, CEO, Macrohard

    This article completely misses that numerous internet success stories eminate from Europe, maybe particularly in the Nordic countries. Skype, MySQL, and Spotify are a few examples that comes to mind that were founded, seeded, and developed in Sweden (with just 9.5 million people). The "inventor" of Linux – Linus Torvalds is from Finland. The browser "Opera" is from Norway. Bjarne Stroustrup from Denmark invented C++ (although at Bell Labs in the United States)

    Outside of Scandinavia, German SAP dominate the global corporate world. Of course, there are many others. These are just a few I happened to know about.

    Mobile phones may be off the subject, but Nokia is from Finland, and Ericsson is from Sweden.

    November 11, 2011 at 11:26 am |
  16. David

    As long as Eurpoean business doesn't enbrace trial and error and a just do it mentality they will never excel in internet

    November 11, 2011 at 11:33 am |
  17. David

    go on...LIVE in Bologna. Not visit – LIVE. Try it. Make sure your kids deicde on a career by 8th grade so they can be channeled through school so that they can then live with you 'til they are 40.

    Go on....

    November 11, 2011 at 11:38 am |
  18. European

    It's easier to produce more, of whatever you might think of, if you can exploit labours. If you convince them that work for money is the meaning of life and that you too can be the uberchief one day (you cant, its the carrot and the stick!). Nevermind, having people living in trailers, tents or having to work at two jobs to pay the school for them kids, it must be their fault if they are not as bright as, say, us? Right? After all, God created man just a few 5000 years ago (40% of americans are criacionists) and it will be all fine after you die. Right? Wrong. America can not continue to exploit its workers. There are people complaining in the streets everyday and China it's beating US on that particular game. And besides, european workers, are more productive... And although they dont live to work, they knoe that they need to work to live.

    November 11, 2011 at 11:39 am |
  19. European

    And notice something... I like America. Its hard not to. Its just a country of extremes...

    November 11, 2011 at 12:00 pm |
  20. Beve Stalmer, CEO, Macrohard

    @European, what are you talking about? Salaries in the IT industry are generally considerably higher in the U.S. than in Europe. "Exploit labor..." ??? European brain-power move to Silicon Valley because of better opportunites and higher salaries – not the other way around. Yes, you are offered a paltry 2-3 weeks vacation in the U.S., but who cares if you are being paid a lot more in the U.S. and you can take unpaid leave? Money talks and attracts talent.

    November 11, 2011 at 12:08 pm |
  21. Cheerio624

    As an ex-pat who has lived in both Eastern and Western Europe for the last several years, I have to agree that the US does tend to be more 'innovative'. However, that innovation comes at a very high price. I sometimes get angry/jealous that my European friends here have a free education, good health care, and so much vacation time that more than most have a house on the sea to accomodate such lengthy absences from the working world (my Italian friends were baffled with the idea that Americans waste money on renting the condos and hotels that fill our coastlines instead of just buying a house nearby until I explained that we would probably spend less than two weeks a year at a vacation home). In the US we are asked "what we are" or "what we do", whereas outside the US, assuming that someone dares to ask our profession, we are asked specifically about or "work". While living in Paris I found that people rarely identify nominally or personally with their professıon, whereas in the US it is assumed that not only did we train for such a career but we likely have a 'dream job'. If you ask a Parisian what their dream job is they will probably answer 'to live my life and have no job.!' (this is assuming, of course, they don't think they can just move to New York and be a famous actor/singer/tv personality) What is really shocking, however, is the discrepancy you will find between northern and southern Europe. The German work ethic is notorious , and believe that if a 'European Silicon Valley' were to employ only Germans or even Danes, we could have twice the innovation while still providing 6 or 8 week vacations and mandating holidays. If we were to employ the French, we would have strikes on a weekly basis. If we employed Italians, we would have 3 hour long lunch breaks, and a good 5 hours for the Spaniards (for siesta, por supuesto). For the Turks we would need prayer breaks because they can't seem to agree as a whole whether society should be religious or secular. All in all we would probably end up just employing the Lithuanians, Estonians, and Latvians that already speak perfect English, are incredibly educated and have immigrated to Western Europe to pursue our poorly recompensated careers.

    November 11, 2011 at 12:24 pm |
  22. Messymarsy

    This article is not the normal CNN quality. It is seemingly a gaggle of different opinions, many of which are bogus. For example, most young people now are hired on temporary contracts so you do not have to fire during slow down, the contract just expires. And, yes Europeans in general value security more than Americans. This reflects in bankruptcy laws which require the debtor to pay back the debt. This burden does dissuade entrepreneurs. Still, Europe is creating a highly educated and trained tech work force which has great innovation if not mega- companies.

    November 11, 2011 at 12:28 pm |
  23. European

    "@European, what are you talking about? Salaries in the IT industry are generally considerably higher in the U.S. than in Europe" Never denied that. Just complained about treating peolpe like machines.

    ""Exploit labor..." ???" From wikipedia : "An exploit (from the verb to exploit, in the meaning of using something to one’s own advantage" So yeah, people are not working to have a life but living so they can produce at work.

    "European brain-power move to Silicon Valley because of better opportunites and higher salaries" That's not for the majority, as only those looking for and geting very high payed jobs will do it. And many come back. But thats not the point. Those are who can choose. You assume that everyone who could choose would prefer to live to work that work to live. You assume wrong.

    "Yes, you are offered a paltry 2-3 weeks vacation in the U.S. , but who cares if you are being paid a lot more in the U.S.

    and you can take unpaid leave? "

    Unpaid leave? Can they? Or when they are back the job went to someone else? And how much they lose with that unpaid leave? And how much do they have to make to compensate for that unpaid leave?

    "Money talks and attracts talent." Yes it does. But life is not all about that. And even those who dont have talent desearve to leave well. And even if you have talent you should not be forced to forget about other things that humans like to do.

    November 11, 2011 at 12:33 pm |
  24. European

    @ Beve (continuing...)

    The point being, that producing inovation or whatever and being marginaly better on that should not be an end in itself, specially when you have a society that's created by – and for – those who dont want to let you chose.

    November 11, 2011 at 12:41 pm |
  25. europe\US

    Lived in US for a decade and now in Europe......
    Quality of Life (in general) – lot better in Europe
    Job security – very stable in Europe
    family Time – Can really plan months ahead in Europe......

    Overall.....US is alright for making money but in long terms it is not promising....payment methods here may not be the latest ones but lot safer....atleast banks don't have to give out credit cards to defaulters......
    Yes – the salary here is less compared to US but at the end you are living a much better life than in US (after paying hundreds of $ in health insurance and other amenities)......Thank You.....

    November 11, 2011 at 12:46 pm |
  26. precious

    africa is the emerging market! europe has reached its brink

    November 11, 2011 at 1:37 pm |
  27. Neo

    Well dont know how it is in rest of europe, but here in germany, wages in general are higher than in US..

    November 11, 2011 at 3:03 pm |
  28. dr A Kruger

    Microsoft. Apple. Facebook. Google. Oracle. IBM. Intel. Why are all the success stories in the USA? There are more people with hopefully the same brains in Europe. What makes such a difference? Socialist politics comes to mind... and with it the criminalization of the success phrase in economy: "You are fired".

    November 11, 2011 at 4:15 pm |
  29. Charles J Farrugia

    Malta is a European Country, and I highly recommend that the European Union should make a study to see, that with such bright young students at the MCAST, it is the ideal place to invest in such a trade. Microsoft , Lufthansa Technik, and many others, have already placed a foot here.

    November 12, 2011 at 4:21 pm |
  30. Don Canard

    since American companies are sitting on their capital, or spending it in cheap third world labor markets, soon this comparison won't be quite so relevant.

    November 14, 2011 at 3:08 am |
  31. Hans

    America is slowly evolving into what western and northern europe have become; a society that was built on hard work and risk that have since become much more relaxed, complacent and comfortable. There is nothing wrong with that and in fact it probably provides and overall better quality of life. It just troubles me slightly because that mentality goes against what the USA was founded on, an oppertunity for great success. With that oppertunity comes the possiblity of great failure, which so many people understandalby want to avoid. Thus we have socialism which does it's best to reduce the possiblity of failure and desparity, which inharently reduces the oppertunity for advancement, inovation and success. For me personally, life is not about playing it safe and being comfortable, it is about taking chances and enjoying the thrills along the ride. Everyone has their own definition of success, so I must say to each their own.

    November 14, 2011 at 10:33 am |
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