Hi, it’s Nicolas from The Family. Today, I’m discussing public controversies and how much they matter when it comes to building successful tech companies in Europe.
Willy Braun (co-founder of Daphni, now with exe.vc), Vincent Touati-Tomas (who handles marketing at Northzone in London), and I recently launched Capital Call, “the European VC digest, straight to your inbox”. Let me explain why I thought it was important and why I committed to making it happen 👇
1/ In the latest edition of his (excellent) newsletter The Ruffian, Ian Leslie says he’s surprised that #BlackLivesMatter has become a global movement. It’s not that racism doesn’t exist outside the US, of course. It’s rather that the cultural and historical context of racism differs vastly from one country to another—with the US being a clear outlier given its legacy of slavery, segregation, suppression of civil and voting rights, and the latest turn of electing an openly racist politician (Trump) to the presidency. Plus, did we Europeans really have to wait for the US to realize that we, too, have a racism problem, and launch a movement?
The US has long been the world’s foremost cultural exporter, of course, but many assumed such influence was on the decline, along with its geopolitical power. Recent events suggest otherwise. One of the most striking things about the response to Floyd has been how people across different countries have adopted American slogans, rituals, and terminology. Even in France.
I love America but I’m mildly uncomfortable with this wholesale import. Can’t we have our own debate on our own terms? As David Goodhart argues here...the situations of American and British blacks are very different, and when I look at America’s dysfunctional civic culture, I do not think, “Yeah, we Europeans could really do with some of that”.
2/ But the US-centric global conversation doesn’t surprise me, and in the end I’d note that the tech world is not very different from the political world.
When it comes to tech entrepreneurship, discussions are initiated and then dominated by the US. The most compelling ideas are articulated in the US. The best analyses are conducted in the US. The most successful tech companies are built in the US. And every tech trend that starts in the US sooner or later has an impact here in Europe, if not at the global level—because that’s the direction in which everything circulates: always from the US to Europe, very rarely the other way around.
3/ Here are two of my theses about how to make progress in building tech companies:
One way is to count on each generation of founders to do a bit better than the previous one, with the old paving the way for the young at each step. In the US, Fairchild Semiconductor paved the way for Intel, which in turn paved the way for Apple, which in turn paved the way for Netscape, and so on. It’s overly simplified, but it sums up the history of Silicon Valley rather neatly.
Another way is to stir public controversies. People voicing ideas and having disagreements in public contributes to increasing the velocity of public debate. Through various feedback loops, it makes it possible to draw faster conclusions from the many experiments that people are conducting in real time. You end up with the whole group iterating at a higher frequency and making progress quickly. All in all, it inspires more would-be entrepreneurs to take action.
4/ Here’s an additional thesis: it’s not about choosing one (‘waiting for the next generation’) or the other (‘stirring up more public controversies’). Rather, it’s more about them complementing each other.
Silicon Valley wouldn’t be what it is today if it weren’t for this dynamic:
There was once a “Schmidt-Thiel Smackdown” about the future of technology; a public discussion between Paul Graham and Tim O’Reilly on inequalities; or the same Tim O’Reilly reacting to and criticizing Reid Hoffman’s model of “blitzscaling”.
In addition, there have been numerous controversies around unicorns, the broad discussion about “progress studies” launched by Patrick Collison and Tyler Cowen, many heated discussions triggered by Social Capital’s Chamath Palihapitiya, and Alex Danco’s idea that “Debt Is Coming”.
There were also numerous intra-Silicon Valley (and much welcome) controversies about privacy, women in tech, immigration, Trump, taxes, and regulations. Theranos itself was the source of many passionate debates about what it takes to succeed at entrepreneurship.
And I’m not even counting the more specialized controversies around tech itself: Mac vs PC, open source vs proprietary, crypto... Many ventures have been launched in the heat of such polarizing discussions, and friendships have been destroyed over the resulting disagreements.
Silicon Valley’s unrivaled ability to stir controversies and to digest them into progress is what makes it able to react at a higher frequency when compared to the rest of the world. I’d also highlight a recent memory, in which we tech people, even in Europe, were aware of the major threat posed by COVID-19 before everyone else thanks to Balaji S. Srinivasan and his clashing with Vox’s Shirin Ghaffary about the “no-handshake” policy that had already been enacted in the Bay Area at the end of January.
5/ You could reply that here in Europe there are too many people who engage in controversies instead of building companies, and I agree! I myself am amazed at how many techno-skeptics my country of France harbors 🇫🇷, and lament how few successful tech companies it has been able to build.
It hasn’t helped that some US-based intellectuals have joined the chorus of criticizing ‘Big Tech’ recently. They’ve all been embraced as heroes by the French press, to the tune of, “Look: Even Americans are criticizing tech now; we told you it was all evil, and we’ve been proven right. This has to stop.”
Well, remember that we’re in Europe: it can’t stop because it hasn’t even started! This is the counter argument I always make (mostly in vain):
You’re mistaken. All those US-based thinkers criticizing tech (people like Evgeny Morozov, Shoshana Zuboff, Tristan Harris) have some influence, but only at the margins. They’re a mild antidote to the excess that Silicon Valley’s incredible success has begotten, not the driving force.
That’s because the controversies they contribute to are digested by Silicon Valley and ultimately make it stronger. And so controversies are useful when it comes to building tech companies, but only to the extent that they’re contributing to accelerating the process. If you have the controversies without the building, you’re only falling behind—and fast.
Ultimately, it’s Philippe Aghion’s idea of an “Inverted-U Relationship”. In Philippe’s work on competition and innovation, an increase in competitive pressure destroys certain companies but it makes others stronger because it inspires them to innovate more. Likewise with controversies: they make strong ecosystems stronger, but make weak ecosystems lag even further behind.
Even worse: all this criticism of Big Tech is happening in Europe just as the tech scene here is finally taking off, with cities such as London, Paris, and Amsterdam emerging as major hubs, and a first generation of successful tech companies taking up global positions.
But since the process of re-developing Europe in the Entrepreneurial Age has begun, why aren’t we using controversies to accelerate the growth of the pan-European ecosystem, just as happens in Silicon Valley? There are four reasons.
6/ First: the European fragmentation when it comes to language. If you want more controversies, you need a common language. Yet it’s absolutely not the case in Europe. Here’s what I wrote a few months ago in What Language Should Startups Speak?
[No one] mentions the simple fact that tech entrepreneurship is difficult here because we Europeans speak 24 different languages (and contrary to what you may think, very few among us speak more than one language). If you reflect on the consequences when it comes to hiring, expanding, and marketing (not to mention pitching venture capitalists), you realize why it’s so hard to build a successful tech company with a truly pan-European footprint.
Like building, controversies need to happen in one language, which should obviously be English. But because controversies happen mostly in written form, you need participants able to write flawless English. And that only happens with native speakers (or if, like us at The Family, you have an editor like our excellent Kyle Hall 😘).
Those who invest in European tech lack a common platform where their ideas collide. Too often, a detour via the US is needed for interesting ideas to be shared and new voices to emerge. European investors are guests in the Silicon Valley salon, where conversations are necessarily centered on the US, when in fact they could have (and need) their own forum to discuss Europe.
I’m all the more eager to point this out because it’s a game I participate in myself: we European tech people are all sucking up to the thought leaders in Silicon Valley. But that comes with adverse effects:
Many of the global voices in tech don’t talk about Europe—not because they don’t have anything to say (although some of them will admit they don’t know a ton about the space), but because nobody asks them about it.
As a result, Europe is absent from the global tech conversation, even though the EU single market is larger than the US, European purchasing power is among the highest in the world, infrastructures and connectivity here are great (in relative terms), and Europe represents a significant fraction of the P&L at many US tech companies.
This triggers a negative feedback loop. Since Europe is absent from the global tech conversation, Europeans can only get involved so long as they agree to not talk about their home market, but rather offer ideas that are relevant in a US-centric context. Like Ian Leslie pointed out regarding racism, we Europeans can’t have our own debates on our own terms.
8/ A third problem is the way European tech is covered in global media. As a regular reader of The Financial Times, Bloomberg, Fortune, and The Economist, all four excellent outlets with outstanding journalists, I understand the dilemma here:
Those who cover European tech in general are usually based in London and they have a hard time spending time on the continent and understanding what’s actually happening on the ground. There’s a chance Brexit will only increase the gap between the two sides of the Channel and make coverage of European tech from London even less relevant.
In addition, you have journalists covering specific countries (notably France, Germany, and Italy). But those journalists have to distribute their time between COVID-19, politics, the local society, the economy in general, and tech. So a piece of local tech news needs to be really big for it to attract the attention of the excellent outlet’s local correspondent.
Thus European tech slips into a void and those otherwise excellent outlets fail to contribute to the stirring up of public controversies.
Here’s one light of hope, however: There have been some initiatives recently that are trying to fill that gap, most notably the FT-backed Sifted (where I’m a columnist), Reflexive (although they seem to have stopped in the midst of the pandemic, which is sad 😢) and individual initiatives such as Gonz Sanchez’s Seedtable, Dragos Novac’s Sunday CET, and my European Straits (to which you should definitely subscribe to receive more updates) 👇
9/ Finally, the fourth problem is that Europeans themselves are not willing to contribute!
To be frank, I don’t expect founders and operators to spend too much time producing content that’s relevant for the pan-European ecosystem. We at The Family work with entrepreneurs on a daily basis, and we usually tell them to focus on their product and their users instead of joining the virtual salons and participating in the conversation about how to make the ecosystem better. Content marketing creates value for startups, but it should be centered on what the startup is doing, not the environment in which it’s (hopefully) growing.
On the other hand, I very much think it’s the role of investors to take up their pens and share ideas related to their investment thesis and the ecosystem in general. I wrote about the importance of producing content as an investor many times, including in this 11 Notes on Berkshire Hathaway (see Note #8). Yet where are European investors when it comes to participating in public controversies at the pan-European level? With a few notable exceptions, they are nowhere to be found—even for those for whom English is their native language.
10/ And so this is why Willy, Vincent and I recently launched Capital Call. We applaud the fact that a small number of European tech investors are accelerating the pace in voicing their ideas, explaining their investment theses, sharing best practices with founders. But we regret that most of those who write and publish often don’t know (or ignore) each other. The result is that we have a few monologues on separate tracks rather than a vibrant European-wide conversation. And that needs to change if we don’t want Europe to lag further and further behind.
Here’s what Capital Call is all about:
Revealing. There are already European investors voicing their ideas in public, without necessarily waiting for journalists to interview them. They write on Medium (or Substack 😉), they contribute threads on Twitter, they have conversations with other ecosystem players in podcasts. But we need more outlets curating that content and making it visible!
Colliding. It’s not enough to have European investors voicing ideas. You also need them to clash with one another (an exercise I myself have participated in in the past, and I’m willing to give it another go). That kind of confrontation provides depth to the conversation and makes it possible for us Europeans to have it on our own terms!
Enlightening. What European investors have to say might not clear the bar if you compare it with the best of the best in Silicon Valley. But it’s still quite interesting, and the more people read their thoughts, the more those investors who participate in the conversation will be incentivized to do better, coming up with better articulated and more inspiring ideas!
🤓 Many people have written over the past years and decades about the importance of stirring conversations and controversies so as to strengthen a community. Here are some of the writers I’ll be featuring in the list of curated links to be sent on Friday 👇
Matt Clifford, Co-Founder & CEO of Entrepreneur First, who frequently discusses these topics in his excellent newsletter Thoughts in Between.
Packy McKormick, writer of the Not Boring newsletter, has been writing recently about the phenomenon of a “whole cultural scene” to foster progress.
Carlota Perez, occasionally a tech critic indeed, but also an economist who has positioned the conversation at the pan-European level in her work on Beyond the technological revolution.
Balaji S. Srinivasan, a pioneer when it comes to understanding why public controversies in Silicon Valley convert into radical innovation.
👉🏻 To discover their articles and many others related to today’s edition, become a paying subscriber! The package will be sent to subscribers only with the forthcoming Friday Reads edition 🤗
From European Startups as an Asset Class (February 2020):
We now have several media covering European tech with a pan-European perspective. There are veterans (Tech.eu), and more recent entrants like the Financial Times-backed Sifted (where I’m a columnist), Reflexive (which, for now, sends a daily newsletter called Close of Business), and Politico Europe. (Wired UK could be part of that group, but sadly it’s focused on one European country only.) It’s important that European founders read about themselves and their peers with a European perspective rather than a US one (which always comes with mental and cultural distortions as well as understaffing on the ground).
And in case you missed it:
Climate: Startups to the Rescue?—for subscribers only.
Who's Disrupting Whom at the Global Level?—for subscribers only.
What's Happening in India?—for everyone.
Transatlantic Consolidation—for subscribers only.
Private Equity and Tech: Time to Bridge the Gap—for subscribers only.
Can Private Equity Firms Make Money in Tech? (Round 1)—for subscribers only.
The Great Fragmentation—for everyone.
Facebook at a Crossroads—for subscribers only.
From Normandy, France 🇫🇷