Europe’s Road to Entrepreneurship and SME Growth by David Drake
Europe’s challenges
The US with the EU Commission and local agencies are looking to spur job creation and this starts with equipping Europe’s 28 million Small and Medium-size Enterprises and startups with economic tools and political solutions to some of the challenges of cross border trade.
The focus of recent discussions at the TransAtlantic Economic Council have been around enabling easier access to capital, removing red tape and allowing streamlining of education and capital formation.
The Transatlantic Economic Council Forum was in Brussels
The challenges are substantial and include reducing the number of administrative procedures, simplifying the procedures retained and avoiding duplication of tasks in each EU country in which a business might operate. This refers specifically to ways government documents might be shared cross-border within the EU.
Cultural differences between EU member states form another stumbling block as is a more recently formed modern entrepreneurial infrastructure compared with the US brother economy. Granted, entrepreneurism started in Europe. Christopher Columbus got venture capital from the royalty of Spain for his expedition. That was seed capital, venture capital, angel investments from a king to do something hitherto unheard of – sail to India by going west.
There is an argument that the EU should have a one stop shop for entrepreneurs but David Drake of The Soho Loft argues that each country should have its own one stop shop in order to accommodate both cultural differences and also the differences in accounting practices in different states.
According to Mr Drake, “The reason the few angels we have in Europe don’t invest outside their cultural borders could well be because those angels do not have the understanding or confidence to regularly check the ‘books’ from firms in other countries, given that they will use different languages and be written to meet the requirements of different jurisdictions (with individual expectations about trade, receivable, collections and local laws).“
Sven Weber formerly of Silicon Valley Bank maintains “Europe has to overcome its fragmented regulatory environment especially on trans-Atlantic investments and has to overcome the differences between its member states regarding financial investments in innovative companies.”
An important early step would be to speed up and simplify licensing and permit procedures across a continent whose central unifying mechanism now has 28 member countries and 500 million inhabitants. Yet the US, Europe’s brother continent of 300 million people, has 4 times its level of angel investments ($20 billion) annually and 4 times Europe’s level of VC investments ($20 billion) made annually.
The opportunity for growth in angel and VC investments in the EU is clear, but the challenge of reducing red tape is significant. It will take stronger and more coordinated and culturally disruptive solutions to resolve.
David Drake at the TEC Forum in Rome
Mr. Drake attended the TransAtlantic Economic Council July 12-13 in Rome with the US and the EU Commission to discuss this. “The transatlantic cooperation is bearing fruit and we have already started see work between a few US and EU entities in this direction on the private side. We really need to see more done on education through conferences and roadshow seminars across Europe.”
According to Mr Drake, part of the solution is to raise the awareness of government administrations and their staff about challenges experienced by entrepreneurs and SME. The other part would be to hone in on what he terms “low hanging solutions.”
“I see efforts like the Swedish government’s unemployment bureau offering startup training for the unemployed. That is a clear opportunity for job creation. Let’s expand these low hanging programs with actual and real tools for capital formation and capital access.”
Another grassroots solution might be to leverage angel investment type support for significant events involving local children. For example, private and leading companies of each country might offer to match their employees’ kids’ school fund raisers for key projects and/or sport trips. Local school sport teams might even crowd fund their efforts to pay for travel to another city while leading firms match the amounts raised.
“We see the creative solutions but then again, we [investment in The Soho Loft Capital Creation educational series] strive to be visionaries and we are often, to our detriment, ahead of our time.” Innovation is key and capital access and formation are the tools we need.
David,
In my experience speaking “from the ground” (I have been a US resident for over 13 years now, originally from Europe) and dealing with Europeans on a daily basis, one of the key things that I see missing is the drive for success and sheer ambition to “make it big”. I would argue that there is an urgent need for a different “risk taking” attitude that now steers young people away from entrepreneurial zeal. The fact that in countries like France (and others), the majority (!) of young people’s only goal in life is to work for the government (civil service), should make us pause. In a world with free movement of capital and people and ideas, it’s easy to vote with your feet, i.e. pack up your bags and leave (Europe) for greener pastures (US mainly). Unless there is a cultural change (in Europe) towards more entrepreneurialism, a brain drain will continue.
Yvan, we conveyed this at the TransAtlantic Economic Council Forum in Rome July 12-13, 2012 with ministers and legislators. It was generally acknowledged that Round A fund raisers and there after normally would head to the US for fund raising. I would agree to your cultural mentality for France and many other countries. However, the Scandinavian countries and individual entrepreneurs as we saw in Eastern Europe from the fall of the wall are asking for help. Yes and specifically in European crowd funding, entrepreneurs early this year started planning for expansion in the US; departing from European growth and focus. The brain drain continues. Yet, there is two objectives – build the infrastructure to keep them, reduce red tape, make capital access easier yet again offer incentives for the brains to come home and bring their knowledge back.