In the two years that Rockstart Accelerator - a private bootcamp for tech firms - has been going, it says the 20 startups it has backed have raised 15m euros ($19m) and created nearly 150 permanent jobs.
“It’s cool to be in a startup there,” said Cralan Deutsch, a 44-year-old founder whose Rockstart-backed company has been ticking over for a decade but joined the incubator for a revamp and access to new contacts. “It used to be, I go to a party and I tell the girls I’m in a startup and they walk away – that’s changing now.”
It’s an increasingly familiar story in Europe, where hundreds of entrepreneurs have set up incubators that are adapting the Silicon Valley model to fast-track new companies.
For Europe’s politicians, the trend represents an economic bright spot, bringing life to disused office space, new jobs, and reflected geek chic. One EU-funded study from March, by database Seed-DB, estimated startups have created 3,500-4,500 jobs in Europe.
Few, if any, of these firms will ever be Google or Facebook. Some will make money replicating successful ideas. Most will go nowhere, neither growing nor failing but limping along. But every year 100-200 in Europe are bought by rivals or much bigger firms.
The value of those deals is often not disclosed, but where it has been, the average purchase prices have jumped, suggesting that the type of ecosystem found in California’s Silicon Valley may finally be taking off in parts of Europe.
The $2.5bn that Mojang, the Swedish game developer behind Minecraft, collected from Microsoft earlier this week is far from typical. But in the first eight months of 2014, more than 100 European venture-backed firms were sold to others in the industry.
The average value of each deal where a price was given - $420m - is 80% higher than the 10-year average of $233m, according to Thomson Reuters data.
Prices are volatile, and the number of deals is still far short of the United States, but prices have been higher for European firms. In the United States the average value so far this year, at $398m, is about 70% up on the 10-year average.
The data is partial and no clear trends are discernible. Even so, incubators like Rockstart – there are around 100 of them in Europe, according to website tech.eu – certainly help feed the market. Funded variously by private wealth, government support and multinationals, they consolidate teams of talent and plug young businesses into investment and expertise.
As incubators seed more ventures, they build an environment where businesses can buy others, innovate and grow. That’s needed. Tech talent is in short supply. The European Commission has said almost half a million tech vacancies may come up next year.
“We’re not breeding startups to be bought,” said Rockstart founder Oscar Kneppers. “We do see a growing interest in corporates in getting access to startups.”
Bootcamps are no panacea. They may start things, but economists say Europe needs more firms to then grow bigger independently, instead of just becoming acquisitions. A recent report by the Economist Intelligence Unit for Barclays Bank warned that the UK - far and away Europe’s most successful startup hub – risked becoming “a national start-up incubator supplying foreign multinationals.”
“The potential downsides relate to the negotiating ability of the startups to get a good deal with the multinationals,” said Mike Wright, professor of entrepreneurship at Imperial College, London, who contributed to the report. “It could be that the startups basically get screwed because the terms of the deal are very much in the multinationals’ favor.”
Seed and venture capital has financed young tech firms for decades. Bootcamps like Rockstart offer added support, replicating a model that started in 2005 with Silicon Valley firm Y Combinator, whose 700 alumni include Dropbox, Reddit and Airbnb.
In Europe, big names include TechStars London and Startupbootcamp. Incubators have also been funded directly by multinationals such as Telefonica of Spain, Deutsche Telecom and Barclays. A few cultivate a celebrity vibe. Kneppers, a magazine publisher who flunked journalism school in the mid-1980s, calls startups “the rock bands of business.”
Each Rockstart incubator program is essentially an investment fund which devotes 20,000 to 25,000 euros in cash to each startup and takes an eight percent stake in each. This is split 25:75 between the accelerator and its investors. It has had applications from 56 countries: firms compete for places. None of its potential returns have yet been realized but on paper, it says the return on investment on its two initial funds is about 185%.
It shares its canalside home in a 400-year-old former merchant bank with an advertising agency. A poster marks the young companies’ shared space with the mantra, “I have not failed.” It’s a recurring theme in many bootcamps. When things go wrong, accept it, change your approach, and learn.
The young entrepreneurs - many bearded and in headphones - tap away quietly at laptops. An Italian snoozes in a beanbag after lunch. A whiteboard carries graffiti mocking different founders or their companies’ names.
The founders are a motley bunch. Deutsch, the 44-year-old now impressing women at parties, grew up in 1980s Silicon Valley, studied anthropology, and keeps a diary of his failures. Another entrepreneur wants to teach children to code through an app called Bomberbot – a play on an old Atari game, not combat drones. A third has a PhD in neuroscience and is building an e-learning business around the theory that seven minutes is the optimal attention-span.
The businesses focus on a simple mantra: Find a problem, propose a solution. Each team – Rockstart does not take on individuals - has a wall poster with neon post-it notes in boxes, some reading “high-level concept” or “unfair advantage.” Another piece of jargon reflects the defining moment of many a startup’s career: “pivot.” That’s what startups do when things go wrong.
Teams get a total of six months, including a trip to Silicon Valley, at the shared office. “In 10 weeks I’m getting 10 years’ worth of exposure,” Deutsch said. “If I wanted to raise 50k tomorrow I’d ask a mentor and they’d arrange an interview.”
Roughly every six months there is a “Demo Day” where each cohort gets to pitch their businesses live. Venture capital investments in Europe are weak - running at $7.6bn last year, less than half their 2000 peak of around $20bn– and Rockstart, like many other bootcamps, hooks up with multinationals, including giants such as Microsoft.
