Entrepreneurial Europe – fit to fight?

Europe can learn from the USA, Canada, China and Brazil? Why is it that Europe’s culture is so deeply inhospitable to entrepreneurs. It intrigues me and for obvious reasons I am not happy with it at all. Two weeks ago the Economist stated that Europe not only has a euro crisis, it also has a growth crisis. That is because of its chronic failure to encourage ambitious entrepreneurs.

Data shows that continental Europe has a problem with creating new businesses destined for growth. According to the Global Entrepreneurship Monitor in 2010 “early-stage” entrepreneurs made up just 2.3% of Italy’s adult population, 4.2% of Germany’s, and 5.8% of France’s. European countries are well below America’s 7.6%, let alone China’s 14% and Brazil’s 17%.
Many “early-stage” aspiring entrepreneurs simply leave. There are about 50,000 Germans in Silicon Valley, and an estimated 500 start-ups in the San Francisco Bay area with French founders. One of the things they find there is a freedom to fail. In Europe, a business blow-up leaves a lasting stain, akin to a moral failure.
On top of this, young ambitious firms will find that established European companies tend not to like dealing with tiny ones. And trying to hire professional people to help their young firms grow is a real struggle, because European executives turn out to be extremely risk-averse.

Last year the European Commission examined insolvency regimes in trying to discover what holds entrepreneurs back. They found that many countries treat honest insolvent entrepreneurs more or less like fraudsters, though only a tiny fraction of bankruptcies involve any fraud at all. Some countries keep failed entrepreneurs in limbo for years. Britain will release a bankrupt person from his debts after one year. In Germany people expect it to take six years to get a fresh start and in France they expect it to take nine! In America it is usually less than one year.
Another important hurdle the Commission found is finance. Getting seed capital up to €1m ($1.2m) from “friends, fools and family” is pretty easy. For the €1.5m-4m that firms need to work an idea up into a real business model, though, money is in desperately short supply. Institutional investors such as pension funds regard European venture capital as a bad asset class. Some people argue that if there were enough ambitious entrepreneurs with brilliant ideas in Europe, the money would come from America and elsewhere. There is some truth in this. But investors who put money into very young firms tend to prefer operating in their own language and culture, so start-ups depend mostly on backers from their own country.

A solution overnight will not be found. Yet there are magnificent stories to share of great and courageous (women?!) entrepreneurs … from European entrepreneurs themselves or those outside Europe who deal with European entrepreneurs.

Please share a positive European experience or encounter