Silicon Valley has long been the draw for Europe’s young tech stars. But today they’re increasingly ready to stay closer to home – and try going it alone – thanks to a rise in start-up infrastructure. A new wave of tech campuses, in cities including Berlin, Warsaw, Amsterdam and Dublin, is helping Europe’s millennials take charge of their digital destiny.
In spring last year, entrepreneur Christian Strobl was in Berlin, struggling to attract investors for his digital start-up idea. He decided to turn to NFX Guild, a legendary Silicon Valley venture-capital firm and start-up accelerator. But there was a problem. To be accepted by NFX, you need an invitation code – and Strobl didn’t have one. He had to find some way to stand out from the pack. So he and his partners hacked into the NFX website and changed founder James Currier’s password. They followed up with an email explaining why they did such a crazy thing.
Currier was impressed. “He was so excited,” Strobl recalls. “Who is this start-up from Berlin, why are they so aggressive?”
Strobl got his invitation code, moved to San Francisco and months later launched Hackerbay – a firm that provides on-demand software design teams for companies and counts Twitter and Facebook among its clients. But it was Strobl’s next step after tasting Silicon Valley success that many saw as even crazier than his hack into Currier’s website; he left San Francisco and returned to Berlin.
“My investor was really mad at me,” says Strobl. “He told me that it was a really stupid idea and that I wouldn’t be able to keep up with the pace of Silicon Valley. But I knew we’d have the pick of Europe’s best talent in Berlin.
“Six months later, I saw him again. We’d grown our business 10 times faster than we could have in Silicon Valley – and he said ‘OK I was just wrong’.”
Strobl’s journey is emblematic of a surge in dynamism on Europe’s digital-innovation scene after decades of stagnation, powered largely by a proliferation of “start-up campuses” in cities such as Berlin, Warsaw, Amsterdam and Dublin. (Strobl returned to Germany’s capital to rejoin its biggest campus, Factory Berlin.)
These are places that offer workspaces for entrepreneurs, funders and established tech firms to gather in an ecosystem that allows them to exchange ideas, make deals and collaborate on projects. They are conceived as hi-tech playgrounds of the mind, inspired by Silicon Valley headquarters such as Googleplex – with sleek open-plan offices, event halls, fitness centres and recreation rooms with table football.
Paris this summer will launch the world’s biggest start-up campus – Station F – a 34,000sq m space housed in a historic 1920s railway depot in the grungy-chic 13th arrondissement that its chief, Roxanne Varza, likens to “the Eiffel Tower lying down”. More than in Silicon Valley – where digital density makes the area itself a kind of sprawling tech campus – Europe’s campus ecosystems are seen as vital to fostering the communication and mentoring needed in a region where digital culture is more fragmented. Most often, it is successful entrepreneurs themselves – such as Xavier Niel, the force behind Station F, and Udo Schloemer, CEO of Factory Berlin – who are launching them with the idea of boosting (and profiting from) the innovative spirit.
The growth in campuses comes amid swelling venture-capital investment in Europe’s start-up scene. According to Dealbook.co, a venture-capital database, European companies raised a record €16.2 billion in 2016, with funding up 12 per cent and investment rounds up 32 per cent. That came amid a 10 per cent decline in venture-capital funding in the US. Europe’s venture-capital intake has risen rapidly over the past four years, nearly quadrupling from the €4.2 billion raised in 2012. “Europe has awakened to the potential of all this,” says John Mullins, a London Business School professor of entrepreneurship and the author of The Customer-Funded Business.
It is not venture capital, however, that is driving excitement in Europe’s start-up world. Rather it’s the dreams, energy and risk-taking spirit of young Europeans ditching traditional career paths to walk the tightrope of entrepreneurship even as social safety-nets erode due to financial crisis and the greying of society.
Among Europe’s millennials, there’s a growing sense that freedom is of higher value than job security – and that changing the world is more important than elite corporate status. If a decade ago Europe’s best minds gravitated toward banking and consultancy, they are now plunging into the precarious world of digital start-ups – with an optimism about contributing to the dawning of new era last seen perhaps in the Sixties. Europe’s start-up campuses are designed (amid still unanswered questions about their effectiveness) to provide the environment to nurture that fledgling spirit. “The days of working at some company for 30 years and getting a gold watch are long gone,” says Prof Mullins. “Young people are thinking more about taking control of their own destiny.”
The free spirit embraced by Europe’s millennials is partly born of necessity. France’s youth unemployment rate of 22 per cent is more than double that of the US, and in Italy and Spain it is more than 35 per cent. If there’s a Sixties’ spirit among Europe’s millennials, it may also reflect the Janis Joplin lyrics: “Freedom’s just another word for nothing left to lose”. Meanwhile, the 2008 global financial crisis cut off banking as a career path for many of Europe’s best graduates, while provoking soul-searching about whether they wanted to enter an industry that spawned sub-prime loans in the first place.
“Unemployment. Difficulties in life. These are the things that push people to be brave and to do things that they wouldn’t other-wise,” says Marco Trombetti, founder of Pi Campus, a start-up district in Rome. But he adds that he sees Europe’s start-up energy as mostly coming from its ability to attract the continent’s finest talent: “The most successful start-ups are made by people who would have any job they wanted. But they want to do their own.”
Trombetti reaches deeper into history to explain the phenomenon: the Italian Renaissance. He likens campuses to the court of Florentine ruler Lorenzo de’ Medici, who invited artists and thinkers to his palace and let them thrive under conditions of freedom and intellectual exchange. The cross-pollination of brilliant minds in an intensely fertile space, and the capital Lorenzo made available to those creators, changed the course of history – something Trombetti hopes might be emulated by the world’s best start-up campuses. Moreover, the Renaissance was an era in which Europe’s thought leaders turned the continent into a vast laboratory of innovation by bandying ideas in a common language – Latin. In the digital world, Trombetti says, the dynamic has gone global and the only difference “is that the point of contact, the lingua franca, is no longer Latin but the language of the computer – code”.
There is no doubt that Silicon Valley is the dominant player in the tech revolution, and is likely to remain so for the foreseeable future. The two reasons are scale and intensity – with the world’s tech giants and venture-capital firms clustered in a small patch of California real estate. “Compared to the ecosystem in Silicon Valley, Europe is still super-small,” says Hackerbay’s Strobl. “It’s still not very connected. If I have a super-specialised problem in Silicon Valley, I get the intro [to the problem solver] in less than 24 hours.”
But Europe is increasingly seen as a more attractive location for start-ups precisely because of the dominance of behemoths such as Facebook, Google and Apple in Silicon Valley. According to this view, California is an over-saturated field where competition is so intense that new players find few opportunities for success. After launching Hackerbay, Strobl found himself struggling to hire talent in Silicon Valley because the big players are able to throw unlimited funds into snapping up the best product developers.
“The main reason we came back was the wall of talent in San Francisco,” says Strobl. “During our time there, there were people from Google, Facebook and others who wanted to hire our co-founders out of us. I had an offer from Google – and the signing bonus was higher than our entire seed funding.”
Meanwhile, the magnetic pull of Silicon Valley for the world’s tech entrepreneurs means that life in San Francisco can become one of hardship and penury, battling astronomic rents, fear of the immigration authorities (because many stay on tourist visas) and poor freelance wages. From an outside perspective, the life of the digital start-up in San Francisco may sound glamorous but for most the reality is darker. “They live in a dingy apartment, they work long hours, they’re depressed, but you can’t leave it because compared with all the other places in the country, you’re still at the top of the world,” says Strobl. “That’s one of the reasons there’s a group of people who say, ‘I don’t care. I’ll go try and survive in Estonia’.”
Compared with San Francisco, life in Berlin can seem attractive. Rents are affordable, the lifestyle is exciting and competition is less cut-throat. Most importantly, there’s a vast pool of superlative tech talent increasingly gravitating toward the European start-up scene from traditional German manufacturing powerhouses. “This is an underdeveloped phenomenon in Europe,” says Prof Mullins of the London Business School. “Young people are saying: ‘I like living here, I’m a European, I speak two or three languages. Why do I have to go to California to do this?’”
The recent start-up buzz in Europe has caused some business leaders to set a high bar for the continent’s success in the digital age. Christophe Bavière, CEO of French venture-capital firm Idinvest, wrote recently in the Independent newspaper: “It’s only a matter of time before these ideas and this optimism help France and Europe to challenge Silicon Valley’s mantle as the world’s home of innovation.”
Even among optimists in Europe – on the frontlines of tech innovation – such thinking is widely considered to be overhyped, and even irrelevant. “The idea of unseating Silicon Valley as the number-one technological hub seems over-excited,” says Lukas Kampfmann, co-founder of Factory Berlin. “There will be no competitor to Google or Facebook or Apple coming out of Europe. It’s not so much about competing with Silicon Valley, or cloning it, but rather building our own economic force in digitalization.”
In this view, the world’s digital adventure is only just beginning, with an ever-expanding pie for those societies with the imagination to capture pieces of it. And if Germany will never produce the next Google, there’s no reason why a Berlin start-up would not leverage Germany’s world-class technological expertise to launch the next disruptive innovation, for example, in the Internet of Things.
For now, the key is that today’s young Europeans are abandoning risk-adverse social norms for the unknown challenges of entrepreneurship – and finding support networks in phenomena such as Factory Berlin, Pi Campus and Station F. Unlike their baby-boomer parents who put a high premium on security, millennials are comfortable with 90 per cent failure rates. They know competition is fierce both from Silicon Valley and from Asia – with start-up campuses cropping up in China and South Korea. Amid such pressures, many are embracing the philosophy that failure, rather than being an experience to be shunned, can be seen as an opportunity to acquire the skill-sets for success. “Failed start-ups are basically like grad school in the sense that they are giving formative experiences,” says Factory Berlin’s Kampfmann.
Today start-up campuses are a vital step forward in Europe’s digital awakening, because they provide networks that young entrepreneurs would struggle to find by other means. But Trombetti of Pi Campus sees tomorrow’s campuses as not so much physical locations but rather a philosophy shared by like-minded individuals – as in the Renaissance.
“Human capital will be the only value in the future economy. This does not depend on geography,” he says. “I see the campuses as being a momentary step. I will try to grow it... and then let it disappear.”