40 Nordic entrepreneurs, we decided to take a trip to the startup mecca, looking for opportunities and lessons to learn.During the holidays, the Web becomes an even more significant part of our lives, connecting us to our relatives and friends around the world. The Internet might be truly global then, but the world of startups still revolves much around Silicon Valley. Together with
To my surprise, the ideas and technology behind that startups were not superior to the ones we have in Finland. The incubators and co-working spaces are on par with what we have. The business environment, however, is vastly different: Schools such as Stanford facilitate and encourage entrepreneurship. The market is larger, less fragmented, the consumers are earlier adopters. Startups are keen on business development and will seek partnerships.
There are probably 10 events equivalent or larger than Le Web throughout the year, as well as smaller events every day. We regularly ran into Robert Scoble and other major blogs, and they were very keen on listening to us. Local event organizers were even eager to help make a Finnish Angry Birds event happen and to introduce us to hundreds of people!
Readjustment of Expectations
These elements fit with each other and form the ground for growth business to happen. The old continent often looks up to the Valley as a sort of Eldorado of IT. Countries such as the UK, Russia and Finland are trying to replicate its ecosystem, to stimulate their local industries. Silicon Valley is a hub. Its value lies in two generations of people with unique know-how that are given all the tools necessary to create growth. No amount of EU or taxpayer money is going to recreate this perfect storm.
Not Businessmen, Entrepreneurs
We Europeans think of entrepreneurs as businessmen. This might be valid for lifestyle, predictable businesses, but the job of a startup entrepreneur is different: to test assumptions, to learn, and to create something new.
A trader on Wall St. can make money circulate without ever creating anything of value. In contrast with a startup such as Kiva, the drive to fix real problems, make and impact and give to the community makes traditional business feel vain, and startups all the more inspiring.
Down to Earth
Hearing and meeting thought leaders such as Eric Schmidt, Paul Buchheit or Steve Blank gave me a lot of food for thought. I have yet to see a Nokia executive at a startup event; these people on the other hand were approachable, down to earth, and relaxed. The pursuit of quality people makes this a meritocracy. Quite the contrast with our local successes who tend to behave like suits. Talent takes precedence over nationality or title, which would explain why Loic Le Meur and Om Malik are so well integrated, and Carol Bartz isn’t.
We received better customer service from Taco Bell and the police department than from Stockmann, the top tier department store in Finland! One time, a bus driver was more comfortable at speaking than most startups I’ve heard pitching. It seems they are more comfortable with small talk with the customer.
This tendency to be more outspoken could also be seen in networking and pitching, where there was much less awkwardness than with Europeans. Though it rarely feels genuine, it certainly is more effective.
Bigger is Better
More events, money and startups, means more competition, making it all the more necessary to stand out by hiring outstanding people, being more ambitious, more risk-taking. Unsurprisingly, this seems to weed out the less passionate people, while encouraging others to put in sweat equity in their own ideas.
This is something I feel we Europeans aren’t very good at. It’s compelling to start in your home country rather than aiming big, because it feels safer. The last thing you want when you launch is to tailor to several languages, cultural differences, distribution channels and small blogs and other media. You can easily get complacent when you succeed in your own country, but if we mitigate risk, we place the odds against us from the start.
Access to Finance
The most striking difference was to see a fully fleshed out capital market, where hobbyist and professional angels, superangels, top tier VCs and smaller firms compete for the more attractive deals. This makes for a more fluid deal flow, with more standardized and competitive terms, with more contacts and experience on top.
It wouldn’t surprise me if there were more angels and VCs in the region than on the entire European continent. In 2009, business angels invested 160 times more than their counterparts in continental Europe. It is also unclear whether we have any superangels (e.g. we don’t). Like our startups, our VCs tend to aim locally or regionally. Many of them aren’t reviewed on TheFunded, so there is little track record to refer to. With major exits being few and far between, the amounts of money reinvested as well at the experience offered is less.
At times, the Valley feels like a bubble, its inhabitants sheltered from the real world. Foreign markets seem to be an afterthought, space for local startups and copycats. It is unclear whether foreign companies can realistically raise money from where they're at: though Accel invested in the Lithuanian company GetJar, and more recently Esther Dyson invested in Finnish Valkee, I was also told that some VCs would only invest in startups within a short drive.
U.S. legislation is not on the foreign entrepreneur’s side. For some odd reason, it is easier to get a visa by being hired, than by establishing a U.S. company and creating jobs. Hopefully, the Startup Visa can correct this in the near future. This process should be streamlined, as I believe many European startups have a lot to offer.
Silicon Valley is an unfair advantage for startups. Its ecosystem serves as an accelerator for world-class growth business. In comparison with Europe, lesser teams with lesser technology have access to more resources and will get further, faster. Ambitious European entrepreneurs face three choices: should we aim smaller and within our comfort zone, take greater risks in the Valley, or try the hard way in the old continent?
Photo by luigig