I was asked some questions about being an American entrepreneur in Europe by a major international business magazine. I wrote down my answers and I thought I would post them on my blog. This is related to my blog on Global Competition Workshop at Davos.
How long have you been based in Europe?
I have been in the UK since 1995 this time. I originally moved to the UK in 1987 to set up Ingres’ European Technical Center, but went back to California to set up a company in 1989. I didn’t believe you could start a company in those days in the UK. This was a hard decision for me, because I enjoyed living and working in Europe. I site visit to one of the capitals of Europe was much more interesting and educational than the site visits I was making in the mid-West of the US.
I then started Documentum in 1990 with Howard Shao. Once Documentum was up and going, I returned to the UK, but still had a large portion of the organization reporting to me, so I ended up going back to the US once a month until 2001. At that point, Documentum had become the leader in Enterprise Content Management, the stock prices was at an all time high, so I felt it was a good time to leave.
When you founded Alfresco in 2005, why did you decide to set up shop in Europe instead of the US or somewhere else?
We set up in the UK because it is hard. The UK is our home and we believe that all it needs is role models of success. All the elements are here in the UK to create great technology companies. Just like Silicon Valley, there are great ideas in universities like Oxford, Cambridge and Imperial College (Britain’s MIT). There are mid-level managers working in European headquarters of American companies that aspire to greater things, have been trained to a world class level by Americans, and have been able to work independently due to the distance from the headquarters in the US. Venture capital is freely available, especially since the substantial changes in capital gains tax in the mid-1990s. All that remains are the success stories and examples to show that it can be done.
Also John Powell and I found it easier to start a company here than to continue to commute to the bay area in order to have the influence that one gets from being at headquarters.
Have you recruited other Americans to work for Alfresco?
Yes. Although I am the only American in the European organization, about a quarter of the organization is in the US in sales and marketing roles. This is a reversal of roles, but we are more sympathetic to role that remote people play and try to find other channels for communication and engagement. We are big users of Skype and use it to freely communicate with each other wherever we are. The nature of open source is that it can happen anywhere and tends not to have a geographic center. Since we allow people to work at home often, there is less of a barrier between people in the US, people at home or people in the UK office.
Is entrepreneurism on the rise in Europe? If so, why?
It’s funny that George Bush claimed that the “French don’t have a word for entrepreneur.” I don’t think he was trying to be ironic, but to a certain extent he is right. I know a lot of people who are dying to start a company in France, but real changes have to happen in employment laws and work rules before they can become successful. Business Objects is the only success story that I can think of and they had to move to Silicon Valley to really succeed. France is burdened with a high level of bureaucracy and the level of bureaucracy has been increasing here in the UK, but that hasn’t stopped ambition. I wouldn’t confuse the politics and industrial sclerosis that infects much of Europe with what is happening at the ground level of entrepreneurs and in areas that are more loosely regulated.
It is clear to everyone that Europe is falling behind in a lot of areas and people are particularly concerned about the emerging threat from Asia than even American entrepreneurism. They know that it requires something different and that start-ups are a powerful force of competition. With the laser like focus that can run rings around conglomerates, they know that it is a way to make money for them as well as compete. Also, there is no shortage of creativity in Europe. European universities and labs can create as many new ideas as those in America. The trick is productizing and marketing them.
The force of entrepreneurialism is strongest in countries that have strong university traditions connected to industrial development. Essentially these are the areas that created the entrepreneurialism that created the Industrial Revolution. There are lots of startups in new devices, telephony and new Web 2.0 properties in the UK, Germany and Scandinavia. The former Soviet bloc has been bursting with activity and is now starting to take a chunk of business that would be going to India. With strong mathematical and computer heritages in places like Hungary, Poland, the Czech Republic, Belarus (where they used to copy American computers), and Russia, there is potentially a real factory of software that can be coming from the Eastern European countries.
However, some of the most powerful concepts to be turned into companies are around open source and Web 2.0 internet properties. That is because the internet has become such a leveling force in the delivery of information-based services. When starting Alfresco, we wanted to take what was a disadvantage, being in Europe, and turn it into an advantage. Much of the projects that have been successful in open source have come from Europe, such as MySQL and Linux. Skype came out of Europe as well. These types of companies don’t require lots of people, so they are not as affected by labor regulation, and the location of their services is completely irrelevant, even more so in a totally global market.
Do you know of other European-based startups that have Americans in top management slots?
There is a model discussed in the European venture capital community called the Israeli model. That is to take the ideas generated from the labs and universities and to set up sales and marketing operations in the US and keep development and operations in Europe. Amdocs and Check Point are examples of Israeli companies to do this. European companies that are following this model are hiring Americans in America. Other than that, most European companies are on their own relying on their own smarts and the training that have generally received from American companies.
This is not a whole lot different than the early days of Silicon Valley where a lot of the management was hired from the middle ranks of IBM or other technology firms east of the Mississippi. It took time, but the culture was self-developing after a decade or so.