Web 2.0 Startups Find Europe Fertile Ground

Serial entrepreneurs, lots of broadband, and multilingual style blend to raise a bumper crop of search engines, video sites and other Net companies

by Jennifer L. Schenker

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Europe may not have the equivalent of a Silicon Valley—a single geographical location where money and connections come together to spawn Internet giants like Google (GOOG) and Facebook. But the decentralized nature of European innovation and entrepreneurialism isn't proving an impediment when it comes to social networking and other so-called Web 2.0 services. The continent is veritably overflowing with Web 2.0 startups—many begun by experienced "serial entrepreneurs" who have built one or more companies before, sometimes in the U.S., and are back in the game again.

Consider the story of Pierre Chappaz¸ founder of Paris-based online shopping comparison site Kelkoo, which was sold to Yahoo! (YHOO) in 2004 for more than $700 million. Chappaz went on to become president of Yahoo! Europe and co-CEO of France's NetVibes, a startup that lets users personalize their Web home pages. NetVibes' tools already have been used by more than 10 million people. Now Chappaz has a new venture, called Wikio, that's a Europe-based blog and media search engine intended to compete with the likes of Digg, Topix, and Technorati.

Showcase for Startups

Who needs another rival to Digg? Chappaz says Wikio's ace card will be a broader range of topics and availability from the get-go in five languages—English, French, German, Italian, and Spanish. That could give it more global appeal than its U.S. competitors. And Wikio not only aims to be the No. 1 European information portal but also is targeting the U.S.

The ambitious dreams of Wikio are typical of the 25 Web 2.0 startups that were chosen recently to show their wares at a Nov. 15 conference in Montreux, Switzerland. Sponsored by the European Tech Tour Assn., the event brought together venture capitalists and a select group of small companies chosen from 420 applicants.

The quality of the finalists, who were chosen by a panel of investors, reflects the increasing sophistication of European tech entrepreneurialism. "More and more companies with innovative business models are coming from Europe," says Sven Lingjaerde, head of the European Tech Tour Assn. and a venture capitalist with Geneva-based Endeavour Vision.

Increased Investment

Investors are following the opportunity with more financing. According to British research firm Library House, in the first three quarters of 2007 just over $1 billion was invested by venture capital firms into European Web 2.0 companies, representing 17% of European venture capital investment. That's up from 11% of investments a year earlier. The second quarter of this year was particularly strong, with Web 2.0 companies attracting $451.68 million.

Industry observers say the increased investment is a sign that many of Silicon Valley's strengths are finally taking root in Europe, even if all of the entrepreneurs, key universities, and venture capitalists are not all in one physical location. For example, serial entrepreneurs, a Silicon Valley staple which was until recently absent from the European landscape, run many of the companies that were presented at the opulent Belle Époque hotel on Lake Geneva where the conference took place.