What’s holding back European tech?
The ecosystem on the continent is booming, but it’s still small fry compared to the US scene. Research from GP Bullhound in June 2015 pointed out that Facebook alone is worth twice as much as every single European “unicorn” (a startup worth $1 billion or more) put together.
Everyone has their own pet theory for this disparity. Some point to the lack of venture capital funding available to help startups grow; the gap between funds raised by American and European VC firms is as high as six-to-one.
Others blame Europe’s fragmented markets, which force companies to deal with dozens of different languages and regulatory regimes — something the EU’s “digital single market” aims to help fix.
Sebastian Siemiatkowski, the CEO of one of Europe’s big tech success stories, doesn’t think any of these things are the key issue.
To him, the biggest issue facing European tech and entrepreneurs starting out is simple: “Bad advice.”
“Who do you learn from?”
Siemiatkowski is the founder and CEO of Klarna, a Swedish payments company. It was founded in 2005, and offers merchants an easy way for customers to buy things with a single click — without even having to enter their card details. Since then it has grown into a multi-billion dollar business; in its most recent funding round, in August 2015, the startup was valued at $2.25 billion.
Business Insider sat down with the entrepreneur at WIRED’s Retail Conference in London recently to get his perspective on the challenges facing those trying to build a business in Europe.
“If you’re one arrogant person, who doesn’t listen, I have a low likelihood of you being successful,” Siemiatkowski says, “because learning is part of that core es sense of what entrepreneurship is about. So what’s crucial is: Who do you learn from?
“And the huge advantage San Francisco has is that if you have the slightest level of talent and you have some interesting ideas, you are so quickly through that network going to be connected to individuals who have done this a couple of times before. While in Europe, you have such a high risk of stumbling into somebody who claims they know stuff or whatever, but have never been part of a true growth story.”
He continues: “There aren’t many growth stories [in Europe]. So what you’re going to end up with — because every entrepreneur is honest, moderate, and listening — is they’re not going to recognise that they’re going to sit and listen to this poor advice for a couple of years before they realise this was really bad advice, right.”
“There’s starting to be a network of older people that have been [there]”
Has Klarna been affected by this problem? “Oh absolutely.” The company has some great startups and mentors over the years (“there’s still stuff [one mentor] said that I’m like ‘oh f**k, he was right!’ seven years later”), but some shoddy ones too.
“We definitely had some people that advised us on technology and other stuff that I just should not have listened to. You were searching — you know, it’s a youth thing, you’re out there trying to get someone to guide you — and someone sounds very convincing and has this great CV on LinkedIn. And you’re like ‘oh my god, I’ve got to listen to him,’ even though your gut feeling might tell you actually I don’t think this makes sense …”
This is, Siemiatkowski says, less of an issue than it was — especially in established startup hubs. But it’s certainly still something to be wary of. “It has changed, you can definitely see in London and Berlin and Stockholm — which to me are the three cities that have had some success — [there’s] some kind of ecosystem … Now there’s starting to be a network of older people that have been [there] … that have had a couple of success stories and now connect to this next generation of startups and can really help them and give some advice.
“Actually, I think that’s more important than the money issue, and all the other stuff that’s being debated — access to talent, all that stuff. We hire 50% of our people not from Sweden but outside, we hire tech people from all over the world. Of course it would be easier in San Francisco, but that difference isn’t the major one. The major one is that you have mentors, people you can talk to. “