Hard times in Europe may be a startup's advantage

This guest post is written by Robleh Ali, founder of Zoinetworks.

Although the Internet’s killer application – the Web – was invented in Europe very few of the great consumer web businesses have come from here. The true giants, like Amazon, Google, Yahoo and eBay all rose to become profitable public companies, making billions for the Silicon Valley VCs who invested in them. And share options created hundreds of newly minted millionaires ready to seed the next generation of entrepreneurs in the way Andy Bechtolstein – employee number one at Sun – had for Google.

Europeans see the cash, the culture and dream of how much easier it is to start up in the Valley. Angels and VCs flock to promising founders hoping for a repeat of the last grand slam when Google began life 12 years ago. The following generation has produced some great services but not yet sustainable businesses. Including its most recent loan Facebook has so far taken $446m of external funds, Google needed $26m of outside investment between its launch and IPO. This ready availability of cash has tempted Facebook employees to start selling shares which led Sarah Lacy to wonder:

“It has become strikingly apparent to me in the last few months that this lauded culture of risk taking in Silicon Valley may not actually be so pronounced. In other words: Has our class of startup worker bees gotten soft and spoiled on us?”

Success is forged in adversity, all the great tech founders have been through the fire. Steve Jobs and Steve Wozniak’s first venture together, the blue box, was a failure. When Jobs left college he was reduced to sleeping on friends’ floors and reclaiming the 5 cents on recycled coke bottles. Wozniak showed the Apple I to Hewlett Packard and his bosses confidently predicted failure. In the 90s every big web company turned down Google because a great search engine would only take people away from their ad-laden portals. These founders carried on despite the setbacks.

The value of hardship

I know from founding a company that startups don’t have an easy ride in Europe. Our current environment is like the Valley of old when only visionary investors understood the Internet. Because there are fewer of those raising money is harder. Fortunately money is not the most important component of success – determination is. A few miles from me is Wimbledon. Every year the tournament produces vast sums which the Lawn Tennis Association pumps into the the best facilities, the best equipment and the best coaches. But British players still haven’t won Wimbledon in 30 years. Compare them with the current crop of outstanding Serbian tennis players. They had to train on cracked courts with old equipment. Current French Open champion Ana Ivanovic practised at the bottom of a drained swimming pool. Yet they win whilst the expensively trained British players languish in Futures tournaments.

Making do with less is actually an advantage. It keeps you focused on delivering products people want to use and imposes a discipline which evaporates when you have too much money. Cuil had $33m but it didn’t lead to a great product (so far) and made them think they could mask it with an expensive launch. At a similar stage Google had raised $1.1m and spent it all on perfecting the technology. Their “launch” was an email from Sergey Brin to his friends asking for feedback.

Europeans will continue to build up our own networks but we should play to our unique strengths and not always think “Valley knows best”. Right now we have fewer advantages and it is tougher, but easier is not necessarily better. Ultimately it is the hard times which make us.