We (SAP Ventures) faced this continually, an abnormal degree of risk aversion among both the young entrepreneurial class and among professional investors in Europe. I am not an expert on the cultural nuances of the various countries, but it does strike me that a good number of people in their twenties would be better off abandoning doctorate programs in favor of spending their most productive years building companies. Speaking of education, countries like Germany need to seriously reform their education system to increase investment with the goal of improving the quality, and to abandon the antiquated three tier system that is failing students by limiting their ability to participate in higher education that will serve as a cornerstone for evolving the overall economy. Rather than looking to government to fund and direct R&D, the EU should just get out of the way and encourage risk capital, entrepreneurship, and if they insist on getting involved it should be to attack the cultural barriers that entrepreneurs face from the very beginning and then the stigma that invariably goes with failure.
Having said all that, not all hope is lost. There are some very cool companies and U.S. based investors are still heavily involved in Europe (although the EU should be concerned that India and China is drawing a lot of capital away from Europe). I’m going to write about one such company later in the week.
Despite some relatively recent efforts by U.S. venture capital firms like Benchmark Capital abroad and the notable recent success of Index Ventures out of Switzerland (driven largely by the spectacularly successful outcome of Skype), Europe remains more or less devoid of risk capital.