In November, 2013 I gave a presentation at the Slush conference in Helsinki on why I was long on entrepreneurship in Europe and why my bullishness for the region had led me to create White Star Capital.
In the session, I alluded to research from the InterAmerican Development Bank, which highlighted cultural support for risk taking is one of the key requirement for entrepreneurship to thrive. I still believe that the social acceptance of failure continues to be one of the key impediment for Europeans to take the entrepreneurial plunge.
A research report by the Global Entrepreneurship Monitor states that
“…those aged 18–35 in the EU were much more likely than anywhere else in the world to report that fear of failure would prevent them starting a business. 41.9% cited fear of failure as a barrier, compared to just 24.0% in Sub-Saharan Africa and 27.7% in Latin America.
Although almost two thirds (61.2%) of young people in Europe think starting a business is a good career choice, this is dwarfed by the figures for their peers in Latin America (74.9%), the Middle East and North Africa (75.5%) and Sub-Saharan Africa (76.5%).”
A recent article in the Wall Street Journal reinforces the impact that acceptance of failure has on entrepreneurship. In comparing overly-risk adverse Germany to the US, it states that “only 2% of Germans aged 14 to 34 years old have started a business, compared with 9% in the U.S.” Given the relative size of the US vs German population, that is a lot of entrepreneurs!
The good thing is that we, as Europeans, are beginning to realize this is an issue. The European Union has recently launched an initiative called LIFE (LearnIng from Failure in a collaborative Entrepreneurship network) with the support or a number of organizations including Tech.eu. The initiative seeks to use stories from peers and events to help make failure more ‘normal’ and seek to “generate and grow awareness that failure is an inherent part of the process of entrepreneurship and innovation.”
If Europe aspires to be its own version of Silicon Valley, we must also learn to change our paradigm around failure and ambition. As Robin Klein, considered by many as the godfather of early-stage tech investments in Europe, wrote in a piece on TechCrunch “It has often been said that Silicon Valley is not a place, rather a state of mind; a state of mind that celebrates ambitious innovation, coupled with a healthy disregard for fear of failure.”
So at least Europe is now talking about its cultural inhibitors and trying to do something about it, but how does Europe overcome this fear of failure? I believe it has to come from a combination of role models and policy.
By role models, I don’t necessarily only mean successful entrepreneurs on the cover of magazines, but I also mean us, as parents, as teachers, making digital technologies accessible and entrepreneurship an accepted and respected choice.
This week my father (now 73) changed his cell phone number and we reminisced that he had had the same number for 21 years (his original phone was one of the Motorola bricks!). He was always an early adopter! In the mid 80's he bought a Commodore 64 to be able to build VisiCalc sheets from home, but gave me unfettered access to it, which led to many hours of simple BASIC programs (and a fair share of Summer Olympics and Jungle Hunt). He made interaction with (and eventually a career in) technology acceptable. He also continuously encouraged me to try (and fail) at new things. A Commodore 64 (purchased on eBay) now proudly sits behind my desk reminding me of the inspiration it gave me at a young age.
Last year, when my son was 6, he came up with a paper toy that he dubbed PocketMonsters. We joked about putting them online and selling them, but I quickly realized that we should just do it. Thanks to the plethora and ease of use of online platforms, within a few clicks we had created an e-commerce shop on Tictail, powered by Stripe for payments, which we marketed via Facebook. In a few weeks he had sold over £125 worth of Pocket Monsters from Germany to California to El Salvador and London. He had, at the age of 6, become an entrepreneur.
(NB: I did, recently, get to pitch PocketMonsters to Robin Klein. Alas, we are still waiting for a term sheet…)
I use these personal anecdotes to illustrate a point I have made several times: Entrepreneurship will not thrive in Europe until it passes the “Mom test” — namely does the average Mom (or Dad) in London, Lisbon or Berlin want their son or daughter to be an entrepreneur, and can the Mom turn to her friends with pride, point an an icon on a phone and say “my child built that!”
As Joanna Shields (or more correctly, Baroness Shields) recently put it, we as parents, governments and institutions must accept that change and creation are the new norm and “We need to ensure that we focus our resources not on protecting the past from the future, but protecting the future from the past. This isn’t simply about learning to code. It’s about learning new skills. New ways of thinking. New ways of learning.”
This leads to my final point about what is needed to help lift the negative stigma around failure and that centers on policy. In certain countries of Europe, the types of companies that entrepreneurs establish carry with them direct personal liability for the founders. In other words, not only is the risk of failure a social stigma but also a financial burden. Failure is not the badge of honour that it is in the Valley, but a albatross with long-term impact.
Sweden is a country that I admire and respect for both its entrepreneurial culture (and success) and for the policies that support risk taking. The close-knit nature of the entrepreneurial ecosystem, the number of aspirational role models and the support for entrepreneurship passing the “mom test” all seem to be there. It has extremely high tax rates but in return they receive a safety net that allows one to fail with less fear. Its entrepreneurs have broad ambitions and cultural (and investor) support to try and achieve those ambitions.
If we think about the history of the “Old Continent” and the innovations and achievements it crafted in the past, none of those, from the steam engine to the British Empire, to the creation of money to the discovery of graphene, were not fraught with risk and potential failure. We were once a continent of risk takers. The momentum in entrepreneurial hubs across the region seems to glimpse at a new dawn in Europe in which ambition is encouraged, failure is once again accepted and success is rewarded.
To end with the words of Winston Churchill:
“Success is not final, failure is not fatal: it is the courage to continue that counts.” — Winston Churchill
Christian Hernandez is the co-founder and Managing Partner of White Star Capital, an early-stage Venture Capital fund backing exceptional entrepreneurs with global ambitions on both sides of the Atlantic.