The New York Times has an interesting article today about how a lot of European entrepreneurs are learning their trade in Silicon Valley before moving back to their home countries to try to create local start-ups. Interestingly, the article notes that in many cases, European entrepreneurs convince some of their US colleagues to return with them to improve their chances of creating successful start-up ventures.

There is data in the article that is cause for some optimism:

• European start-ups attracted $970 million in 2006, the highest level in a decade since the Internet boom ended in 2000.
• Overall venture capital fund-raising in Europe is more than twice the levels of 2002.

But there is also some cause for concern:

• In the US, failure is valued; in Europe, failure is professional suicide. Some US professors, for example, teach by looking at “constructive failures”. And we Americans are taught at any early age that “if at first you don’t succeed, try, try again.” The key insight is that you probably learn more from your failures than you do from your successes. You must analyse each mistake, try not to repeat it and never give up. This is the essence of the scientific method / trial and error, which is the best way to gain useful perspective and valuable experience for future success.
• Bureaucracy and rigid labour (and tax) laws inhibit the entrepreneurial process. Start-ups need to move fast and work hard, two concepts that are not always appreciated in European labour environments. Cash flow is key for any start-up, and as one observer has noted, Spanish tax, employment and bankruptcy laws, for example, seem to note little difference between a small start-up like Goa Internet Services (my company) and multinationals like IBM.

In the end, there are really only two options: i) change the structural constraints that inhibit entrepeneurs from succeeding; or ii) accept that the majority of European start-ups will never be competitive at an international level. The civil servant will continue to be king. I don’t really see a middle road. It’s funny to me, for example, that the French entrepreneur interviewed by the New York Times notes that his lawyers were angry with him for asking his employees to work late or on weekends given France’s 35-hour limit. In Silicon Valley, this would be a non-issue; it’s simply something that goes with working for a start-up. (In this sense, I suppose that stock options help to create a sense of employee investment in the project. Stock options are common in the US, particularly in start-ups. They don’t appear to be so common in Europe.)

How can Europeans compete in the global marketplace if they are not willing — or legally able — to make the same sacrifices as their US competitors who dominate the international marketplace? Is it logical to assume that US companies will adapt to European customs? Or is it more logical to assume that the European start-ups will need to adapt to “international” standards in order to compete at an international level? And what are European governments going to do to help along that process, other than invest in PR campaigns (including unattainable or dreadfully slow subsidies programs) and complain constantly about the need to create more and better European entrepreneurs?

Please don’t misunderstand me. I don’t think that the US obsession with work and materialism is healthy from a personal perspective (even though Western Europe — the centre of many luxury companies — is not free from materialistic tendencies). And I’m not trying to say that extraordinary and determined entrepreneurs cannot succeed in Europe. (Here I am thinking about two friends of mine in particular, Jesus Encinar and Juan Julia.) But it does mean that they will be more the exception than the rule, and that all of this talk about creating a European Silicon Valley will remain simply that–empty words–until important structural and cultural changes are implemented.

It’s a simple matter of survival of the fittest. Adapt or die (or in this case, be destined to failure and/or mediocrity). It’s that simple.