Do you know that there are over 742 million people in Europe and only 4 million people in Silicon Valley? How is it then, that, Europe has too little successful startups while Silicon Valley has too many successful startups with amazing innovations?
I believe the reason for this difference is how both sides view what a company is. For Europe, any company that keeps losing money from the beginning is considered not viable or even a fraud; while on the other hand, Silicon Valley believes that great companies should have great ideas and that losing money at the beginning does not mean the ideas are worthless.
Europe, most of the time, is extremely reluctant to invest in innovations. As a matter of fact, most companies take the path of emulating great ideas from the US and compete on price, as they feel it will reduce market risk.
It is a common knowledge that many US startups end up as failures, leaving investors in tears because of their investments into the project. Nevertheless, some of those startups end up being great ‘Unicorns’ like Facebook and Google.
Some investors in Europe are very comfortable taking risks on minerals in third world countries. They are good in perceiving possible reserves of oil, but when it comes to investing in technology they back off. It is only those investors with entrepreneurship and vision that could make a project succeed.
Don’t misunderstand me, I am not trying to degrade European investors, I am just trying to analyze why the majority of them don’t venture into investing in tech. This is also true for entrepreneurs – in France, anybody who invests in a startup for three good years and fails, you will be seen as a failure, and would be led to feel like “I would have just taken the job at France Telecom”.
There is no doubt that California’s tech ecosystem has evolved over time and is still evolving at a very fast pace to overtake the technological scene in Europe.
It is time for Europe to wake up. They should not be afraid to invest in startups, as long as the startups have great ideas.