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Europe’s Hope: Entrepreneurs

Saturday, July 28, 2012

While its politicians dither, startups can take up the mantle of Europe’s economic future.

The news out of Europe only seems to get worse. Each government bond auction and economic data release piles on the bad news, exacerbated by a series of summits that overpromise and under-deliver. Meanwhile, the policy debate is stuck between those who blame government profligacy and those who point to underlying structural problems that plague European economies. These problems include rigid labor markets, dramatic trade imbalances among countries, and, in many places, stagnant industrial production.

Hope, however, springs eternal, and Europe might look for so-called “green shoots” in an organization called Startup Weekend. Over the past few years, this American nonprofit has quietly but quickly overtaken the continent.

Startup Weekend is almost exactly what it sounds like: A 54-hour event during which people compete to form teams and test ideas. On Friday night, attendees take turns making one-minute pitches to the group; following that, teams come together as people choose which ideas they would like to help develop. For the next two days, the teams work as rapidly as they can to build preliminary products, test them in the market (usually by surveys or basic demos), and figure out if they have something viable. On Sunday night, the teams pitch their product to a panel of judges.

What happens after Startup Weekend varies over time and place, but the flurry of activity over the 54 hours is not transitory. Many teams continue to pursue their business idea after the event. Of those who choose, for whatever reason, not to continue, many take the experience and apply it at their current jobs. Others use Startup Weekend as a testing ground either for their ideas or for what joining a startup would be like. Finally, because local individuals take on the responsibility of organizing any given city’s Startup Weekend, and because most cities have multiple Startup Weekends, a grassroots entrepreneurial network takes root.

Many teams continue to pursue their business idea after the event.

In Europe, amid spiking unemployment, fiscal austerity, and falling wages, the spread of Startup Weekend has been nothing short of astonishing. The number of European cities that have hosted a Startup Weekend has grown by more than a factor of five since 2010. Two years ago, there were 26 Startup Weekend events in Europe; this year, there will be 175. Most impressively, attendance keeps growing: Average attendance went from 70 in 2010 and 87 in 2011 to 102 in 2012.

What this means is that thousands of people all across Europe have deliberately chosen to expose themselves to a different type of economic vision and, importantly, they have chosen to take matters into their own hands rather than rely on their elected leaders. The growing participation in something like Startup Weekend reflects recognition that the old way of doing things simply cannot be sustained. Citizens want to be in charge of their own destiny, and Startup Weekend offers a chance to do exactly that.

Cynics might point to continued economic malaise as, perversely, the source of this activity. Unemployment in Greece and Spain is above 20 percent, with youth unemployment in Spain at 50 percent. Portugal likewise suffers from double-digit levels. Italy’s economy basically has not grown in a decade. It is easier, in this line of logic, to devote a weekend to such activity if you don’t have a job, and perhaps the event offers some respite from the poor labor market.

This is probably half right. Some research has shown that, in the United States at least, rates of entrepreneurial activity can sometimes move inversely with overall economic conditions. This, however, likely captures large amounts of low-level activity—side pursuits, self-employment, and part-time businesses that are important in their own way but will not provide the innovation and employment needed for economic growth. What Startup Weekend represents is something different—high potential companies with innovations and jobs often emerge from a Startup Weekend. More importantly, however, is that Startup Weekend helps foster startup communities, particularly in places not previously known for vibrant entrepreneurial ecosystems. Local Startup Weekend organizers have helped catalyze a veritable movement by founding accelerators, incubators, and co-working spaces. From a long-term economic perspective, this is just as vital to European countries as the immediate formation of businesses.

Thousands of people all across Europe have deliberately chosen to expose themselves to a different type of economic vision and, importantly, they have chosen to take matters into their own hands rather than rely on their elected leaders.

If it were true that the rapid European expansion of Startup Weekend and other similar organizations only reflected economic desperation, we would expect to see the map of attendance match that of malaise. But Startup Weekend has experienced strong growth all over the continent, independent of country performance. In 2010, only France hosted more than three Startup Weekends. Nearly every Western European nation hosted one to three, while central and eastern European countries were largely bereft of Startup Weekend events, with the exception of Romania, Bulgaria, and Lithuania. By this year, the map looked far different. In 2012, three dozen European countries will host at least one Startup Weekend. In several—Germany, France, Italy, Spain, the United Kingdom, Switzerland, Poland, and the Netherlands—there will be more than ten events by the end of the year. While some of these countries obviously suffer from high unemployment, others are economically healthier.

The impact in former communist countries is particularly notable. In Bulgaria, local Startup Weekend organizers, with the help of the American ambassador, will soon hold a roundtable with government officials on what the government might do to help support the incipient entrepreneurial ecosystem. And in Romania, Startup Weekend is working with the How to Web conference and facilitating meetings between startups and government officials.

Startup Weekend, moreover, symbolizes the earliest stages of business formation: Developing ideas, testing them, finding cofounders, developing an early prototype, and officially launching a product and firm. Europe has also experienced considerable growth in activities that accompany the later stages of entrepreneurship. The most well-known location at the moment is “Silicon Roundabout” in East London, where a few thousand technology startups now operate, employing an estimated 50,000 people. The British government has jumped in to help with the Seed Enterprise Investment Scheme, which provides tax breaks for investing in startups comparable to those, as entrepreneur Paul Miller has noted, for charitable giving. The recent dustup in Britain (paralleling a similar debate in the United States) over the wealth bias of the tax exemption granted to charities and charitable giving augurs some sort of change in the future. In the meantime, Miller hopes for a “culture shift so that people who’ve been fortunate start to really invest in the next wave of companies trying to solve problems.”

London is also the headquarters of Seedcamp, one of the leading startup accelerators in the world, which holds events all over Europe to find, mentor, and invest in new firms. Over the last two years, for example, “mini” Seedcamp events have been held in Berlin, Stockholm, Prague, Ljubljana, Barcelona, Paris, Tallinn, and Zagreb. In a report issued last year, British research organization Nesta counted well over a dozen accelerators and similar programs across Europe, including Greece. Two of the most impressive—H-Farm in Italy and Startup School by Okuri Ventures in Spain—are in the new epicenters of the economic crisis. Startup Weekend also foresees continued growth. Based on the interest and commitments they have received, they anticipate hosting another 300 events in 2013, with perhaps 30,000 attendees. At current rates of conversion, this likely means 2,500 startup teams embarking on their entrepreneurial journeys next year alone!

Startup Weekend helps foster startup communities, particularly in places not previously known for vibrant entrepreneurial ecosystems.

In addition to the contrast with the macroeconomic meltdown, all of this activity has produced some stark juxtaposition. In February, Athens hosted its fourth Startup Weekend. A year earlier, the startup Babelverse had launched itself out of Startup Weekend Athens and then found itself giving an impressive pitch at the TechCrunch Disrupt conference in New York. This year, Startup Weekend Athens sold out three days after the event was announced, and the 130 attendees produced 15 competing teams. It also happened to coincide with high policy drama in Athens, with the Greek parliament debating debt obligations and terms from the International Monetary Fund that same weekend. This precipitated riots in downtown Athens. By the end of the weekend, someone had posted two radically different pictures on Facebook: The fires and riots in one photo, and Startup Weekend participants hard at work in the other. (Babelverse, meanwhile, went on to participate in Startup Chile, a pioneering entrepreneurship program, and was a finalist in the 2011 LeWeb conference in Paris.)

Neither Startup Weekend nor any of the accompanying activity mentioned here will necessarily save Europe from itself. Governments have backed themselves into various corners, and the hangover from shattered credit bubbles will not subside painlessly. At the time of this writing, there appear to be some signs of progress made by European leaders in overcoming certain points of disagreement. But it is just as true that, even when the present crisis at last passes, someone has to build a more sustainable economy. That process begins with qualitative change. Anca Foster, Startup Weekend’s operations manager in Europe, observes that the organization is doing the most important part of this, which is “changing the mentality.”

So, while politicians dither, startups take up the mantle of the economic future. We elect politicians, after all, with the expectation that they will preen and posture, hash out disagreements, and (eventually) make decisions. We do not elect them to be the source of prosperity. Labor market reform and tax reform in various countries will help release entrepreneurial energy, of course—but only individuals and startups can create such energy in the first place.

Dane Stangler is a director at the Kauffman Foundation.

FURTHER READING: Stangler also writes “Friending Business,” “Hard Times, Bright Futures,” and “Old and in the Fray: The Coming Entrepreneurship Boom.” The Shadow Financial Regulatory Committee says “Two Cheers for the JOBS Act.” Nick Schulz discusses “Oiling the Innovation Machine.” David Shaywitz describes “America's Healthy Infatuation with Entrepreneurs.”

Image by Dianna Ingram / Bergman Group

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