Microsoft’s Craig Mundie: Europe has to up its game.
Europe’s education system has “some deficiencies” and its venture capital market is “remarkably weak”, he told journalists at a press briefing held during a conference on venture capitalism hosted by Microsoft.
“European policymakers need to focus more on the university system and they need to create more policy to encourage the availability of venture capital funding,” he said on one of his first foreign trips since taking over the technology strategy and policy roles for the company after Gates’ retirement.
“Nowhere in Europe is there a large cluster of elite universities today” as there is in Silicon Valley in California, he said.
Some European companies could have the potential to create an environment for explosive growth, as seen in Silicon Valley, but it’s not clear what field that could happen, he said.
There is a risk that Europe will be overtaken as an incubator for innovative science and technology by the likes of China and India, Mundie warned.
A study by UK-based research company Library House warned that if Europe doesn’t up its game it will start to see venture capitalists turning to China and India instead.
Venture capital firms invested €6.4 billion in total in Europe last year with almost a third of that targeting UK-based ventures, the study, which was sponsored by Microsoft, said.
This is a fifth of the amount invested in start-ups by venture capitalists in the US, the study said, and it warned that “China is set to match European venture capital investments within two to three years and India is likely to follow within four to five years.”
“China and India have a stronger production of engineers (than Europe) today,” Mundie said. “They are promoting clusters of academic excellence. There is a risk that Europe will get a smaller share of foreign direct investment if it doesn’t up its game,” he added.
“Policy has an impact. Universities are a policy issue in Europe. In many ways businesses have their genesis around universities,” Mundie said.
Wait and see over EIT
He welcomed the proposal by European Commission president Jose Manuel Barroso for the creation of a European Institute of Technology, modelled on the Massachusetts Institute of Technology, but he cautioned: “Let’s wait and see. It’s still a little unclear whether this will ever be implemented.”
Policymakers could do worse than emulate the tax policies in the US that have, since the 1970s given generous breaks to long-term capital gains made on stock holdings.
“That was one thing that promoted VCs – they were willing to take risks if they could benefit from the tax break,” he said. “As a result VCs have been a tremendous force in the US for the past 30 years.”
“Policy matters, whether it’s tax or education strategy – these things can be material,” he said.
Just as material are the negatives of some immigration policies enacted in recent years by the US government. After the attacks on New York and Washington on September 11 2001, the US made it far harder for foreign students to come and study in the US.
As a result many of the sharpest young minds were deterred from studying in the US.
“Immigration policy has been a limiter to us,” Mundie said.
Receive the Funding Newswire each Tuesday, our Policy Bulletin each Thursday, and news about bridging Europe’s east-west innovation gap twice a month in The Widening. 
A unique international forum for public research organisations and companies to connect their external engagement with strategic interests around their R&D system.
