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Venture capitalists or is crowd financing sufficient for European startups?
Can Berlin Be The Next Silicon Valley? Should It Be?
A debate between two major venture capitalists at NEXT conference in Berlin.
by +Richard Muscat Azzopardi; +EuroTech, Malta

The quick answer is: “No.” There is only one Silicon Valley and trying to replicate it is useless.

This question was debated at the NEXT conference in Berlin earlier today (Tuesday) between two leading venture capitalists: +Stefan Glaenzer of Passion Capital and +Charlie O'Donnell of Brooklyn Bridge Ventures. Both agreed that trying to replicate the Valley would not work because it has far too much of a head start to catch up to.

O’Donnell and Glaenzer agreed that the most important question to be asked (and answered) is whether Berlin is a suitable place for companies to start in. If I had a good idea and wanted it to grow, would Berlin be the right place to head to?

O’Donnell argued that it is a good place to start up in because of the density of startups in the area. Being surrounded by people who have done it before is crucial for anything. Berlin has a thriving startup culture and is therefore a very good potential hotbed for startups.

Glaenzer, on the other hand, exalted another virtue of the German City’s people. He said that the Germans have an incredible ability to execute. This is true – other Europeans might have more flair, but when it gets down to business, few people can roll up their sleeves and get the job done with utmost commitment.

The biggest problem is the lack of flair, which means that German businesses tend to be very conservative and usually imitate each other with only slight modifications. A startup culture must also have a good injection of new ideas – which is where pan-European collaboration needs to come in. Whereas people from all over the US flock to Silicon Valley, Berlin is still not seen as the Mecca of IT startups in Europe.

Glaenzer touched upon it in the debate, GigaOM quoted him: “We have hungry IT talent in Eastern Europe, fantastic capital in London and fantastic executional power in Germany. My ideal would be to have a Brit heading up business development and a Swede as CEO.”

Are VCs needed anyway?

What I think is that if we want to look at a new model, we should start at the very roots of the system. Is the culture of venture capitalists the only way to fund businesses? It has been that way for decades in Silicon Valley, but it does not necessarily mean that it is the only way to go. The Internet has revolutionized many things, and funding is one of them.

With services like Kickstarter, for example, we can see that you don’t necessarily need to sell part of your company to venture capitalists in order to launch. If you just have two venture capitalists debating the subject, I’m pretty sure they will not come up with alternatives. They have too much to lose.

However, just like the music industry has been revolutionized by giving the voice back to the people, by removing the control and the decision between success or failure based on a 15 minute meeting, we can see new projects that would never have seen the light of day otherwise.

Venture capitalists usually look for the best projects for a quick buck or phenomenal returns. I can’t blame them, it is their job and many of them do it exceptionally well, however certain projects that might not appear to be immediately profitable to a small group of elite investors could hit the right vein with enough people around the world to make sense.

Do you think Europe needs its own version of Silicon Valley or should we be looking at alternatives to venture capitalists?

On GigaOm:
Next Berlin 2012:
Picture credit: BZ Berlin
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Dublin, Ireland has been recognised as a second Silicon Valley for a long time now: “It's more than just an easy marketing hook. Beginning in 2004 with Google’s office on Barrow Street, in the shadow of the historic Boland’s Mills, a cluster of the world’s leading internet companies has established a presence within a mile of the rejuvenated Grand Canal Dock (see map).With more than 2,000 employees and having just spent close to €190 million for three office blocks on Barrow Street, Google is the centre of this cluster and the most deeply embedded. It has been joined by Facebook, Zynga, LinkedIn and Gilt Groupe.”
But these companies (you forgot Apple) don´t do their R&D in Dublin +Eileen O'Duffy It´s mostly European logistics as European HQ´s get a low tax rate in Ireland.
And if I feed you by asking ´how come you have the youngest population´ +Eileen O'Duffy You still won´t bite ;)
No, too tired to bite. But we’re doing well in Dublin! But maybe closer to Berlin than Boston so we’re still friends :-)
Is there something in the European Culture that could serve as differentiating?
Almost everything is different over here I would say. Less ´awesome´ and one time wonders, more ground up engineering. A more critical audience, different regulations like privacy concerns, etc.
Good points. The engineering angle, writ large, is important.
+John Kellden I sense a dissertation on the way….Yes, I’ll be interested in reading it. Back to Dublin for a minute: No, +Max Huijgen I didn’t forget Apple (they are located in Cork). I omitted Dell, Microsoft, Intel, PayPal and Ebay (I was only referring to the Barrow street area in Dublin) and yes, there is lots of R and D going on in these companies in Ireland. I am obviously too biased (!) to comment on our skills set. However I think that when you have such a huge ‘technology/entrepreneur cluster’ within any city it has a domino effect.
I believe you +Eileen O'Duffy I was just joking around. We have a topic where best startup cities were discussed based on a post by me and hardly anyone supported Dublin while I recall mentioning it the post.
Thanks Max, now how did I miss that discussion!
+Eileen O'Duffy I'll try to behave - I will only send you the exec sum. :) Seriously though, you made me think of Richard Florida, and his notion of Creative Class/Creative Cities. I'm still not sure how much substance there is in his idea, but if there is - it ties in on many levels with this thread...
I’ve just been reading over the comments on Max’s European cities post (posted late on a Friday evening, no wonder I missed it….)
+John Kellden , I haven’t read Florida’s book, but yes, this is exactly what I was talking about.
Re The unique European differentiators, I am looking forward to the exec summary Now, for a title: “The American Dream vs. the European Reality” / "American Artists vs. European Engineers"……
A most interesting debate. Glad to follow and being connected back here in +Dresden. Not in the center of the visibility, yet the center of hightech in Europe maybe, at least at second sight. The area not just stands out for centuries of innovation, invention, ruthless entrepreneurship, and an art legacy unprecedented, after the GDR the #SiliconSaxony of the COMECON became a multi-disciplinary research & development center around microelectronics, and semiconductors once again.

Has it the power to regain the status before the 2nd World War? Certainly it has the potential, yet the right spark to also set on flame the entrerpreneurial eco-system has not yet arrived. However +Abundance has arrived in the city, not just in word, also in action, as +LockSchuppen is working on since 2008 in the most inspiring halls of Hellerau, the entrepreneurial densed hotspot of innovation 100 years ago (the suburb just applied as one of the Saxonian examples for the World Culture Heritage a couple of days ago).

If I would not see the potential of making it to the top as one of the leading hightech centers not just in Europe, but in the world, I wouldn't have come back to this more than awesome place back in late 2008. #HTxA (read what other visions go with the city and +HTW Dresden +Sheridan Tatsuno +Jennifer Sertl +GLOBALFOUNDRIES Dresden (to be also in English soon) >>
tnx +Ralf Lippold very informative. Would also be in place in the ´best city for startups´ post I recently shared.
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