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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