More liquidity for start-ups, more women in tech, and removing the barriers to growth are likely to feature large in the second Digital Agenda. That was the impression European Commission vice-president Neelie Kroes made when she met Irish start-ups at Wayra in Dublin today.
Accompanying Kroes at the event organised by the team behind the Dublin Web Summit was Guy Verhofstadt, former prime minister of Belgium. He is also the Alliance of Liberals and Democrats for Europe Party nominee for president of the European Commission in the 2014 European Parliament election.
Kroes was in Dublin to gain an understanding of the unique tech ecosystem and thriving local start-up scene bolstered by a community of global tech brands, such as Google, Facebook, Microsoft, Dropbox and Twitter, to name a few.
“What would you do if you were me?” she asked the community of start-ups in what was a relaxed, collegiate setting.
Kroes made it clear that she felt start-ups need to be a bigger part of the EU research and innovation agenda. “The EU should be more flexible in funding start-ups.”
She said that compared with other countries, Ireland had a functioning local venture capital scene. “We’re hoping that the banking sector is learning from the crisis.”
So what should the second Digital Agenda look like?
Verhofstadt said Europe needs to think big when it comes to the next Digital Agenda and one of the ideas he mooted was that of a European mobile Wi-Fi plan involving vast Wi-Fi networks that cover cities.
“There are 40 or 50 of these in the US but only a handful in Europe.”
He also made the point that more of the EU budget needs to be spent on digital infrastructure. “This year, we shall spend €1.1bn on digital infrastructure. But by comparison the budget for agriculture is €300bn.”
A way of changing that, he suggested, was to possibly raise capital on the private market with future bonds. “These could be a source of finance for the Digital Agenda.”
Verhofstadt pointed out that not one of the top 10 born-on-the-internet companies is European.
He said that in the aftermath of revelations from former CIA contractor Edward Snowden about US government cybersnooping, Europe is working on new data-protection regulations and this could inadvertently turn out to be a spur to put Europe at the cutting edge of new technology.
Verhofstadt admitted changing how European countries approach data retention has been a slow process, but said the ambition is there to lead the world. “In a sense we’ve made progress in just changing the name, moving from data retention to data protection.”
Fluidity of capital
Both Kroes and Verhofstadt asked the various start-ups about their thoughts on what they believe they need to create global businesses of scale and inevitably it came down to the fluidity of capital.
Eoghan Jennings, founder of Startupbootcamp and HealthXL, called for the redirection of capital. “What we really need to do is develop our own unfair advantage in how we attract and use capital.”
Responding to a question from Kroes about how Ireland set about putting together its current venture capital scene, Anna Scally from KPMG pointed to the report of the Irish Government’s Innovation Task Force, which included the creation of the Innovation Fund for Ireland that stimulated international venture activity in Ireland.
Scally said what is needed in Europe is a set of policies that would make entrepreneurs want to succeed. In Ireland, key facets include getting universities to work together to get IP out to the community of start-ups.
She warned, however, that taxation of the digital economy would make it more difficult to conduct cross-border business.
Verhofstadt said one of the problems in the European Union is the allocation of budgets. “Budgets are like the Loch Ness monster of Europe – funds disappear.”
He suggested a novel solution to the liquidity problem in Europe – a single stock exchange or NASDAQ-like market.
“There are 28 capital markets, but no one single unified capital market and this is contributing to the lack of liquidity.
“If we unify the markets there is the possibility to use collateral, create credit and create high liquidity in Europe. The result would be a higher flow of venture capital, interest rates would go down. We would be stupid not to use the liquidity that we could have in Europe.
“This would be key for critical mass and venture capital for start-ups.”
Great at starting, terrible at scaling
Former broadcaster Mark Little, whose start-up Storyful was acquired by Rupert Murdoch’s News Corp in December for €18m and which has just been selected to run Facebook’s newswire service, pointed out that European start-ups need to be quicker to spot the trends.
“Culture beats strategy. Start-ups need to be focused on foreign markets and have bigger visions. They also need to be aware of the social and collaborative nature of the new economy.”
Little also pointed out that, in general, start-ups in Ireland – and indeed Europe – are great at starting but terrible at scaling. “The talent pool in Europe is not focused on scaling businesses.”
Little said Europe needs to focus on creating a digital economy that will compete with Asia from where he believes many of the next big name brands in tech will emerge.
On the subject of talent, Kroes said that interesting things are happening in Europe. “I get fed up every time someone says we need a European Silicon Valley. Don’t copy, start your own exclusively. I’m grateful that the start-up revolution in Europe is not happening in just one place – it’s happening in Dublin, Berlin, London, Amsterdam, Paris …
“They are all different but yet vital in the digital economy.”
Kroes also said she lamented the propensity among European start-up founders to sell their businesses too early.
She said it was imperative that in Europe failure should be respected, not feared. “I’ve learned more from my mistakes than my successes. There needs to be a mindset change towards failure.”
The lost generation
Kroes added that the opportunities of the digital age should not be missed and that coding should be taught in schools across the union.
“Youth unemployment is a big problem. It is totally unacceptable that it is at over 60pc in some countries. We face the danger of a lost generation.”
On the skills question, Kroes argued passionately for more women to embrace careers in technology. “We can’t afford not to use the female part of the population to work in technology. I think the key is education. There’s an idea that tech is not sexy. It is. We need to focus on education and give them the skills and focus and the belief that they, too, can start their own businesses.”
While Europe’s 500m population represents the biggest economic market in the world, it is far easier for US start-ups to target markets on their own doorstep than it is for their European counterparts.
This prompted Verhofstadt to ask an existential question: “Are we 500m?”
Kroes pointed out a truth: “We are the world’s biggest economic market, but the single market is not finalised.”