«The true strength of European startups is digital nomading»

An interview with Roberto Bonanzinga of Balderton Capital who explains what the true potential of European startups is and why it is best to start creating a system

Roberto Bonanzinga is a Venture Partner at Balderton Capital, one of Europe’s main investment funds. Based in London for seven years now, after having lived and worked in Silicon Valley, he is probably the ideal person to talk to about the specifics of the startup ecosystem on our continent and the role that innovative Italian entrepreneurship can play in this context. And this is exactly what we did during an hour-long conversation via Skype, from which I have extracted the most significant aspects.

There is a lot of talk about startups even in the Old Country, but cases of truly stratospheric success, the “unicorns” as some call them, are very few. What is missing in Europe in order to be truly competitive with the United States?
Accepting the fact of being a multi-centric system, and sustaining digital nomads. What is happening at the moment is that local ecosystems are emerging, the most important ones around Berlin, London, Helsinki, and Stockholm, thanks, above all, to some companies that have created successful environments around themselves. On the other hand, I don’t think any of these systems are powerful enough to be able to say that the next Facebook will be created here, which is what we need to be aiming at if we don’t want to continue to create only satellite companies that, then, if all goes well, end up being acquired by American companies. Apart from this, it must also be taken into account that these systems are very different from a cultural point of view, for geographic traits, for digital development; while the Bay Area exists, there is no Europe, there are the Europes. What is the solution? Making entrepreneurs more aware of what the characteristics of each ecosystem are, in order to better understand what the most appropriate solutions to their problems are. Here, it really depends on what type of business a company does. For those who make games, for example, Helsinki is a good place to be in because there is an ecosystem that has already been developed and it can help businesses grow. If you have to hire 3,000 people over the next three years you can do it: it would be much more complicated, though not impossible, to do it in Barcelona, Madrid, or Rome. This is the creation of a new category of entrepreneurship, those who are called digital nomads, those who move to areas where there is more fertile terrain, though moving is not always necessarily a must. The Swedes who created Sound Cloud, for example, were wise to move to Berlin because it is the capital of electronic music. But for a reality like Italian Yoox, which wanted to become a reference point between the digital and fashion worlds, it was a good idea to stay in Italy where many stylists have their headquarters.

What can EU states do to facilitate this type of “migration” and European innovation in general?
At this point it is a definite fact that the theme of technological entrepreneurship has gotten onto government agendas, even in Italy. For me, the fact that one of the best European entrepreneurs, Paolo Barberis, was taken on as an innovation advisor for Renzi is a truly positive sign. On the other hand, it is necessary to create the conditions that facilitate the entrepreneurial movement. From this point of view, it is very interesting to look at what is happening in Estonia in terms of digital citizenship and, in a larger sense, as a space for digital experimentation. Today, an Estonian entrepreneur can register his company in ten minutes; in five more minutes he has a bank account. For a startup that I am following in London, it took four months to open a bank account. In America, there is the state of Delaware, where 90% of startups register because the registration process is easy and tax rates are very low. Estonia could become the Delaware of Europe.
Digital Nomads

You don’t think, however, that with this idea of digital nomadism EU states could be worried about seeing their own companies escape, possibly even to grow but without bringing any positive benefits to the territory?
We must liberate ourselves of the concept of protecting our own backyards, whether they are in Italy, England, or elsewhere. Entrepreneurs must be able to go where the best place to build a company is. And the authorities should be happy about this. In the end, the problem is not that of ensuring local dwarfism, like the financial company that makes three million in Milan, but rather to sustain the Italian entrepreneur who creates a three billion dollar company where it is best suited for him. Then, if there is great success, it falls on the territory where it occurred. I emphasize that this is not just an Italian problem. If you meet authorities at TechCity they will tell you about the strategic importance of their zone without considering that, for some startups, staying in London might not be the best thing considering the costs of the city, which can render a company non competitive in the startup phase.
And what does Italy look like from the outside, is it in bad shape?
Without a doubt things have improved over the past few years. But I think that there is an incredible level of hype. Privilege is given to appearance rather than substance. I’ll give you some examples: it is amazing to me what little visibility, for example, that Yoox has gotten for what it has accomplished worldwide (editor’s note: it is one of the companies that Balderton has invested in). Another emblematic case is that of Volagratis. Fabio Cannavale is definitely one of the most important entrepreneurs in the European technological sector, but very little is said about him as well. He was given so little attention that, at a certain point, he went to Switzerland to get listed on the stock exchange.
But there is a lot of talk about startups… Conventions are organized, associations are created for those interested in the sector…
I come from a line that has much more to do with doing rather than with talking. And I am a bit standoffish to some things that are happening. There are other things, though, that I like. I have already mentioned the positive fact that in Italy an entrepreneur has been chosen as advisor for development and entrepreneurship. There are also some other examples that I like very much, like that of H-Farm. Donadon has a very interesting vision of innovation and the role that Italy could have in Europe. Also, the fact that new venture capital funds have been created and that existing ones have been reinforced. But what counts in the end are the success stories: everything counts, but if young Italians are to be inspired to launch a startup, rather than looking for work in a bank, then more examples like that of Fabio Cannavale are necessary. There are other things that are moving as well, that are promising: I don’t want to make a list, because it wouldn’t be fair, but there are some interesting initiatives, like Vivocha, ContactLab, and MusixMatch. If I had more time, I would prefer to help these promising things to become success stories, rather than sit around a table talking about startups.
From a digital competency point of view, which do you think are those that we need most in Europe?
I think that we have excellent skills as engineers, even in Italy there are some very high level ones. Even at a business model level we have interesting skills. The biggest gap that we have when compared to realities like the United States, is in the product design area. It would be great to see Italy invest more. There are some interesting things that are happening, from the Digital Academy to Polihub.
I fear, though, that in this regard Italy has already missed the train. We had a unique chance to transfer our competencies in material design to digital design, but erroneous political and academic decisions made twenty years ago were maintained and this step was not considered noble enough. This is the reason why we were not capable of transferring Italian excellence in the world of design into digital. Today, there is great product design in digital; it is made in Sweden, Holland, or the United States. Probably, if we had been a class, even academic, with a bit more foresight, we could have become the hotbed for product design. Who knows whether we still have time.

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