November 10th, 2011
04:39 PM GMT
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 Getjar.com 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.
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