Entrepreneurs told to fail quickly, cheaply and small

You’ve heard it before: Europe’s risk averse culture is inhospitable to entrepreneurs and more must be done to create the secret sauce used in the US.

In the US there is freedom to fail. In Europe, graduates, gloomy about the prospect of bouncing back from watching their ideas hit the buffers financially, are not beating a path to start their own company.

This was the view of many young participants meeting in Brussels on Wednesday, at the European Young Innovators annual Forum.

“There’s a necessity to push for greater acceptance of failure in Europe,” said Nicholas Zylberglajt, co-founder of the forum. Until the idea that it is okay to fail becomes ingrained, Europe will continue to play second fiddle to the US.

A counter-narrative found cause for more optimism: with enough enticement and encouragement, and the right policy push here and there, the risky career move of leaving your job to start a business, can become more attractive, said policymakers present.

Poaching America’s business spirit

How can Europe create its own Silicon Valley? This is of course the question that haunts just about every technology conference in Europe. Neelie Kroes, European Commissioner for the Digital Agenda, has heard it so often, she says she is fed up by the notion. Instead of trying to copy Silicon Valley, Europe should concentrate on creating its own unique culture of digital entrepreneurship, in her view.

For modern-day entrepreneurs in the US, failure is embraced as a rite of passage on the way to success, said David Zylberberg, an adviser to Belgium’s vice-prime minister. Many investors in America even favour companies or individuals who have come back from defeat. “I was lucky to spend some years in the US,” Zylberberg said. “I witnessed a great mindset.”

It is estimated that 50,000 live in Germans in Silicon Valley, while around 500 start-ups in the San Francisco Bay area have French founders, statistics that are both testament to European entrepreneurialism and the supportive environment of Silicon Valley.

Zylberberg would like to see European failures quickly dust themselves off and start all over again. “Here most people don’t differentiate between failure and fraud – we tend to single out bankruptcy and defeats,” he said.

While accepting failure is not as common here as it is in Palo Alto, there are examples of companies that had to try and try again before they became an entrepreneurial success. These should serve to inspire others in Europe, said Pablo Zalba, a member of the European Parliament.

Angry Birds, the online game made by the Finnish developer Rovio, may be one of the most downloaded in the world now, but it failed many, many times before it succeeded, Zalba noted.  

The greater ease of accessing capital is always cited as one of the key differences between the US and Europe. There is also an element of trust in the US that does not exist in Europe, according to Björn Lasse Herrmann, a young serial entrepreneur with an ambition to create a billion dollar company.

“I’ve spent four or five months trying to get investment, of €100,000, from a bank in Europe,” he said. “A 30 minute chat in the US with a venture capital fund I was meeting for the first time got me €500,000. In Silicon Valley, people are more likely to give you the benefit of the doubt, Herrmann said.  

An entrepreneur’s tale

Eleftheria Zourou’s start-up in Greece, Doctor anytime, helps people choose the right doctor for them and book a visit. “I had a very well paid job in Procter & Gamble but I was restless,” she said.

She found her country to be unfriendly to entrepreneurs and her idea to start an online forum where people can rate their doctors was considered countercultural – and even unwise. “Everyone told me I would end up in court for criticising doctors,” she said.

“I don’t have all the time to tell you how much ignorance you face – people laugh and you wonder why you’re doing it?” she added.

The venture has cost Zourou €600,000. “We thought it would cost €200,000. At the beginning, I made a lot of mistakes and spent a lot of resources. “Experience helps you minimise cost and optimise spending.”

Policy push

“Our job as policymakers is to make entrepreneurs fail quickly, cheaply and small,” said Zylberberg, who founded a company of his own when he was 15.

The public sector is trying to make the environment better for entrepreneurs. Belgium, for example, is trying all manner of tricks to boost business creation, he explained. For example, there is an initiative that allows entrepreneurs to keep their unemployment benefits while setting up a business, there is finance for incubators and platforms where entrepreneurs can meet, guarantees for bank lending to reduce risks, publicly-funded VC and publicly-funded mentoring programmes.

But Zylberberg said, “I don’t think the only answer is in politics; we don’t have to always rely on the public sector.”

It is obvious that when state-funded enterprise bodies are looking for proposals to back, they have to find investments that both have commercial potential and fit the political agenda. Agencies with one eye on justifying next year’s budget cannot take the same risks as a VC fund.

Zalba wants a more active push from the European Commission overall. The Commission has talked about a “second starter” initiative with policy ideas on how entrepreneurs can recover after failure, he said. He is still waiting for it to be published.