Paris Is No Silicon Valley—Yet

The missing piece is finally falling into place: the development of a startup "working class" of smart techies and ambitious entrepreneurs

by Sarah Lacy

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My trip to Paris last week did not go smoothly. For starters, I could never quite adjust to the time change. Then my bank froze my debit card for several days because I didn't inform them I was leaving the country. The low point: an e-mail from my cat-sitters with the subject line, "Major plumbing crisis—please read!"

I was in Paris for the Le Web Conference, which also had its share of logistical snafus. Among them, speakers that didn't show up on time and on-stage demos that didn't work. Only slightly harder than goading Valley hoi polloi to hop another plane for another conference is persuading European companies to fork over big euros to sponsor the event or convincing Parisian entrepreneurs to spend thousands to attend. No, holding a Silicon Valley-esque event in Paris isn't easy.

Plenty of Notables in Attendance

But for all the hiccups, Le Web was a big success, with a lot of high-level discussion of the implications of the new Web. Nearly 2,000 people attended the conference, and speakers included rock-star Europeans like Janus Friis, co-founder of Kazaa, Skype (EBAY), and Joost, and Philippe Starck, one of the world's most celebrated designers.

Valley celebrities in attendance included Evan Williams, who founded Twitter and Blogger, which was snapped up by Google (GOOG); Kevin Rose, founder of Digg, Revision3, and Pownce; and the ever-opinionated Sequoia Capital entrepreneur-in-residence and Mahalo founder Jason Calacanis. Om Malik of GigaOm and Michael Arrington of TechCrunch made it over as well. It was as if an A-list Valley Web 2.0 party had simply been airlifted.

Little Trickles Down

There's a reason for the turnout. Something very exciting is happening with the Web in Europe. Finally. For years, Europe's Internet scene has been lackluster in comparison with global innovation hot spots like Israel, China, and India—not to mention Silicon Valley. In part, that stems from a cultural stigma attached to failure.

It doesn't help that stock options don't have the same allure in Europe as they do elsewhere. Employees don't care as much for them, and entrepreneurs and investors won't part with them. Silicon Valley companies typically set aside 20% of the stock pool for employees, compared with about 5% in Europe.

As a result, successful founders amass a fortune, but little wealth trickles down. There are few legends of the accidental millionaire—you know, the administrative assistant who joined the next great tech company at the right time and never had to work again (Google masseuse Bonnie Brown comes to mind). Many people don't feel the risk is worth taking. The startup is just another job.

That's a hard cycle to break, but there are signs of cultural change. The enthusiasm was palpable at Le Web. The business case for starting a Web company on the other side of the Atlantic is far more compelling, thanks to such forces as the increasing Internet penetration, the strength of the euro, and the formation of an economic entity rivaling the U.S. And just as in the U.S., entrepreneurs need less money to test out a good idea and require fewer employees to take that big initial risk.

Angel Investors

An even bigger catalyst: the entrepreneurs and investors who are forcing cultural change. They are doing their part—consciously or not—to build a Silicon Valley-style European startup "working class" so essential to any real hot spot for innovation.

Niklas Zennstrom and Friis are the two most obvious. Between KaZaa, Skype, and now Joost, they've proven that transformative, lucrative Web companies can come out of Europe. The pair have gone on to be prominent angel investors in Europe, seeding the next generation just like Marc Andreessen, Reid Hoffman, and Peter Thiel have done with the Web in Silicon Valley.