IT entrepreneurship – the transatlantic view

Entrepreneurs in Europe often look longingly across the ocean to America, imagining streets paved with venture-capital gold. “That would come as a surprise to most American entrepreneurs,” says Jonathan Zuck, a small-business lobbyist and professional networker on both sides of the Atlantic.

Research by Zuck's organisation, the 3,000-member Association for Competitive Technology, finds American entrepreneurs fret no less about fund-raising than do Europeans; it’s all relative. In fact, he says, entrepreneurs on both sides of the Atlantic stay up worrying at night about much the same issues.

That universalist view of small business has prompted Zuck this past autumn to try expanding his US-based network to Europe – recruiting new members, organising workshops, and Europeanising his online reference library for entrepreneurs, www.innovators-network.org. An entrepreneur himself (books, software), Zuck recently offered Science|Business editor Richard L. Hudson this transatlantic view of entrepreneurship.

What do American and European entrepreneurs have in common?

We’ve had focus groups on this – what challenges do you face? We wrote down 80 items on pieces of paper and hung them up on the wall, and then tried to narrow them down. When you have them all up around the wall, whether in Europe or the US, they’re identical: it has to do with access to markets, access to venture capital, loans. It has to do with intellectual property. They fall into two categories in both the US and Europe: one category is the environmental variables – financial market barriers, for instance – and the other has to do with a lack of knowledge about how to run a business.

One of the interesting features of an entrepreneur is they tend towards domain expertise, and not procedural expertise. In IT, for instance, they don’t have MBAs; they have computer science degrees. They know the substance of what they’re doing, not how to run a business.

But there are differences?

There’s a stigma of failure in Europe that doesn’t really exist in the U.S. (At a workshop) an SME in Poland said European entrepreneurs spend more of their time trying not to fail than they do trying to succeed.

And the difference in the environment?

Well, there’s just a little bit of more of everything here (in Europe.) Many of the same kinds of regulations exist in Europe as in the US, but they all just seem a little more onerous in Europe. The nature of public, European policy is top-down. If you start looking at these 10-point plans, they have an almost Soviet feel to them: ‘If we are missing venture capitalists, then we will make sure there are venture capitalists.’

Take incentives policy. Europe has structured its programs as grants instead of incentives.

There’s a real difference between self-selecting into an incentive program and navigating a maze to get to a grant. Most incentive policy in Europe is grant-based: "We’ve set aside this amount of money to help you and here’s the application process to get it." There’s a whole cottage industry of people whose job is to get it. You not only create a large bureaucracy, but you create so many hurdles that only a few businesses try; and they end up being the larger ones. It becomes more profitable to lobby a big company for a percentage of the grant than to get that directly out of the Commission.

Is it changing?

I think because of the objective set out by the Barcelona agreement (to raise European R&D spending to 3 per cent of gross domestic product from 1.9 per cent today), there’s a more aggressive approach by the Commission to create an environment conducive to investment. For instance, R&D tax credits: making those liberal enough to be inclusive for small business.

Why does this matter?

The why-bother: it’s entrepreneurial businesses that are able to fill the cracks in the economy. When you build a wall you need a combination of big stones and little ones. It’s the same with the economy. When there’s a huge shift in a sector, these small businesses are often agile enough to find a business model that there’s now room for, and pick up people who have been displaced.