Web 2.0 Startups Find Europe Fertile Ground

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Their track records are impressive. Andrej Nabergoj, for instance, the CEO of Slovenia-based NEO, has co-founded four Internet companies. MyThings CEO Benny Arbel has founded two startups and served as associate vice-president of Comverse (CMVT). And Marc Rougier, CEO of Goojet, a Toulouse-based company targeting the mobile Internet, was founder and CEO of Meiosys, a U.S.-based company which was acquired by IBM (IBM) in 2005.

Even some of the funding is coming from serial entrepreneurs. Martin Varsavsky, the Madrid-based founder of several companies, including Jazztel and FON, is among Wikeo's initial backers. Munich-based Amiando has raised money from several European entrepreneurs, including Stefan Glanzer, CEO at Britain's Last.fm, which was bought by CBS (CBS) in May for $280 million.

But it's not just Europeans pumping money into Old World Web 2.0 startups. A growing number of U.S. firms are crossing the pond to make investments and sometimes even to set up shop. Wikio, for instance, nabbed $5.88 million earlier this year from Menlo Park (Calif.)-based Lightspeed Venture Partners, among other firms. Refresh Mobile tapped Accel Partners, a Silicon Valley veteran that has an office in London.

Mulitlingual Bridge to Global Markets

Behind the growing interest in European startups among Silicon Valley firms is the realization that they can offer a faster route to global markets. Indeed, says Philippe Collombel, a general partner in the Paris office of Partech International and an investor in five of the companies presented in Montreux, serving local communities in local languages can be a big business.

Consider the fortunes of Dailymotion, a French video-sharing portal that competes with YouTube. Headquartered in Paris, it has racked up more that 15 billion page views since June, 2006, and in November was ranked among the top 30 most-visited sites in the world by tracker Alexa. Dailymotion was multinational and multilingual from Day One—and YouTube is now playing catch-up among non-English speakers.

Another reason for the profusion of Web 2.0 startups in Europe is the continent's relatively high broadband uptake. "It is not totally by chance that Dailymotion was born in France," which is one of the world's largest consumers of Internet-based TV and VoIP phone services, says Partech's Collombel. At the same time, traditional disadvantages of Europe, including a paucity of venture capital, have eased. And besides, says Collombel, "Web 2.0 is much more about smart people than about having a lot of capital. You can get something with a lot of traction for just a few million euros of investment."

To be sure, a number of Web 2.0 companies in Europe, as in America, may prove to be more interesting ideas than they are viable businesses. But the dozens of entrepreneurs chasing Web 2.0 dreams in the Old World are convinced that there's big money to be made with the right positioning, the right backing, and the right business models.

For a slide show of Europe's top Web 2.0 startups, click here.

Schenker is a BusinessWeek correspondent in Paris.