Why is Europe so bad at producing ‘Disruptrepreneurs’ such as Uber and Airbnb?

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Michael Moszynski of LONDON Advertising.

I have just returned from presenting the keynote address with the Prime Minister of Malta on ‘The Future of Europe’ at the Follow the Entrepreneur Summit, which is the largest meeting of entrepreneurs and investors in Europe.

The Silicon Valley mantra of “fail fast, fail often” is currently a phrase rarely heard in the Rhone or Ruhr valleys. Why? The simple and rather depressing answer is that the approach to entrepreneurship throughout the EU, according to a recent FT Report, is that whilst Europe is supportive of startups, we do not provide the capital to support the type of business growth that could lead to a home-grown Amazon or eBay.

This sad fact has led, in my opinion, to a huge gap in economic growth between the Europe and the US. In fact, over the last 20 years the average growth rate of the EU zone has been a paltry 1.7% compared to America’s 4.2%, making it 2.5 times bigger.

So, what’s the big problem? There are definitely some success stories to come out of Europe: Skype, the ability to have VoIP (thank you Estonia), and let’s not forget Angry Birds. However, given the immense skills bank in the EU these success stories are a mere trickle compared to the white water rafting experience of US entrepreneurial efforts like Uber, Airbnb and Facebook. All were shaky startups in their day, plucky Davids standing up to the established Goliaths of transport, travel and media.

So where are our own Davids? The good news is that they are still out there, but they are being stifled by a cultural and political ecosystem that does not back long-term innovation or risk taking. Faced with endless red tape, little help from the banks and a lack of long-term venture capital, most ideas fail to break through to the sunny uplands and those that do, such as Skyscanner, are sold to foreign investors who can provide them with the long-term growth capital they need to get to the next stage.

The big difference

The difference between the EU and the States is palpable and American business is thinking long and hard about the UK on the eve of our departure from the EU.

I was in Washington recently and many of those I met expressed the opinion that the UK has the most vibrant start-up environment in Europe. Our departure from the EU is seen as an opportunity for the US to foster greater links with the UK when we are freed from some of the Union’s red tape (as well as from some of our own limits on issuing Visas to US tech gurus wanting to set up here). So, talk of a significant and rapid free trade deal between the US and UK is more than political posturing.

One American pointed out that just two generations ago Silicon Valley was a desert. Now the ‘Valley’ is a global byword for tech innovation thanks to a ‘can do’ attitude from both government and investors. Silicon Valley’s success illustrates America’s predisposition to funding innovation and its supportive regulatory landscape which is more dynamic than the EU’s.

There is also a cultural difference at play here. A US entrepreneur is happier to fail than his European counterpart and becoming bankrupt is a badge of ‘honor’ rather than a label of failure. In fact, 90% of US startups founder and entrepreneurs simply dust themselves off, learn from the experience and move on, whereas in Europe failure is not regarded as an option and is stigmatised.

Going forwards, if Europe is to close the gap in its growth rate versus the States it also needs to do things differently and innovation needs to be at the heart of everything it does.

Day of the Disentrepreneur

Entrepreneurs setting up with exactly the same business proposition as established players is the last thing we need. This copybook approach lacks both inspiration and innovation and is based on being ‘safe’, a formula that whilst it may deliver another restaurant, another corner shop, another laundry, does not lead to a step-change in growth.

On the other hand, when we look at the most successful startups in the States, we see ideas that have fundamentally disrupted existing business models for the ultimate good of consumers, staff, investors and indeed the nation. Here we see evidence of innovative thinking, the desire to overturn accepted wisdom, and the courage to embrace the possibility of failure. We also see braver venture capitalist activity, as growth capital underwrites the years of significant losses that are required to build an Uber or Apple.

What Europe needs to do is encourage the maverick insurgents that can turn a sector on its head. A cut above the entrepreneurs of old, they are a new breed that I have christened ‘Disruptrepreneurs’. We are seeing evidence of disruptrepreneur activity in areas like banking right now. Here, the challengers’ success demonstrates how the courage to be different can change a sector that appeared to be in the stranglehold of the big players who had long served up the same smug customer offer.

The London look

Change-resistant markets, where old behaviours rule the roost, are always the best targets for new thinking and this was certainly behind my decision when I created my own startup, London Advertising.

I take pride in the fact that with my partner, Alan Jarvie, we have transformed our business sector by applying the internet to the back office and processes of creating and distributing international advertising. This means clients no longer need to work with the slow, expensive and mediocre creativity of the traditional network agency with the millstone and overhead of offices all over the world.

From our one office in London with 16 people, we have run work in more markets than WPP, with 190,000 staff, has offices. We have produced work for our clients that is proven to deliver the highest ROI – for example our ‘She’s a fan’ campaign for Mandarin Oriental Hotel Group according to Ipsos Mori achieves the highest ad recall they have ever recorded for any advertiser, despite having a tiny global media budget of only $5m. And having a strong brand multiplies the ROI for performance marketing activity, with Mandarin Oriental achieving a multiple of seven times the industry average on their tactical online spend.

As a result of disrupting the approach of our industry we have bucked the trend of its long decline in profitability by posting financial results that have achieved for the last three years a profit margin four times higher than the average UK ad agency.

London Advertising is a ‘disruptrepreneur’ and Europe needs more of them, because as Einstein said, to keep doing the same thing and expect a different result is a definition of insanity.

Michael Moszynski is founder and CEO of London Advertising

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Michael Moszynski

Michael Moszynski is the founder and CEO of LONDON Advertising.

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