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Which is the best place for Startups? - Silicon Valley retains its title

Sunday, 22 February 2015 12:46 Tech Startups
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he question of whether or not Silicon Valley is still the best place to scale up your startup shows no signs of abating. Every city now seems to have a silicon something or other – whether it be London’s Silicon Roundabout, Berlin’s Silicon Allee or the Silicon Slopes of Salt Lake City.

My own experience with Zendesk, however, leaves me convinced that, at present at least, the original Silicon Valley remains the best place for budding tech startups looking to take their business to the next level.

There are many reasons for this. Some are economic – the EU is a smaller marketplace than the US. In fact, it isn’t a single market but a collection of many smaller markets, each with its own language and customs. This can make business difficult.

Beyond economics, however, there are deeply rooted cultural issues. Take Denmark’s famous law of Jante – an aversion to seeking or celebrating individual success. This undermines the imperative to think big and it’s a completely different mythology to that in the US. The American dream remains an irresistible draw for would-be entrepreneurs.

That said, things are changing in Europe. Take this recent study from the LSE, for example, which shows that despite popular perception some of the differences between the US and the EU are not as pronounced as we might assume. European startups raised more than $2.8bn in the last quarter of 2014 and are just as likely as their American counterparts to reach the hallowed ground of the Initial Public Offering (IPO).

Despite all this, there are still differences. According to Fortune Magazine, in 2013 venture capitalists invested $33bn in US companies – more than four times the amount invested in the entire European Union. The gap is even wider in the tech industry. Venture capital invested in US tech reached $8.67bn in 2013 compared with just $1.44bn in Europe.

So, what can Europe do about this?

There is still a perception of Europe as being overly bureaucratic, a perception that Europe sometimes reinforces. Take the EU’s tech-hub in San Francisco, catchily named the European Institute of Innovation and Technology Information and Communication Technology Labs (EIT ICT labs to friends).

Joking aside, it is this image that helps fuel opinions such as those of Peter Thiel, who recently commented that European regulations represent a “cure worse than the disease”.

Another thing holding Europe back is the persistent idea that failure is something to be ashamed of. This flies in the face of Silicon Valley’s fail fast, fail often mantra. Speaking from experience, failure has been a necessary and useful step on the road to success. For Americans, failure is a rite of passage.

Europe is taking steps in the right direction. In my home country of Denmark, for example, the likes of Podio are achieving great success along with a wealth of great startups, including Tradeshift, Unity and many more.

A bigger question for Europe, however, is: do you need to compete with Silicon Valley? Ultimately Europe and the US are very different markets with very different needs. There is no one size fits all when it comes to startup success. Take SongKick – a great live music startup based in London. London is the world’s biggest live music hub, so why would they want to move?

Ultimately Europe needs to recognise its own strengths and its own uniqueness. Silicon Valley and Europe face many challenges in breaking the vast new markets of China and other emerging economies. The question for everyone is not who’s the best, but how can we best meet these challenges?

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