The Future Is Here: So Is Silicon Valley

QuBit Digital, a start-up focusing on analyzing big data for business, was founded by four ex-Google employees who funded the new company by selling their own Google options and investing their life savings in the London-based venture. It is no anomaly.

Just as the so-called Paypal mafia in Silicon Valley ended up defining the next wave of innovation, a swelling group of Xooglers, as ex-Google employees are known, are leaving the mother ship to either launch or join start-ups or to start funds in Europe.

The upshot? Silicon Valley is not just coming to Europe. It is permeating it.

The bonding started tentatively, with annual conferences, such as Le Web in Paris organized by Loic and Geraldine Le Meur and “Silicon Valley Comes to the UK,” run by UK serial entrepreneur and angel investor Sherry Coutu and LinkedIn’s Reid Hoffman.  Speed dating over dinners and coffee breaks sometimes led to consummation. Deals started getting done, with Silicon Valley stars like Hoffmann and big-name Valley funds like Sequoia making a few investments here.

Still, the Valley continued to look down on Europe, convinced that it remained the tech sector’s center of gravity.  But times and mindsets are changing: “Europe is definitely back,” says Le Meur, who famously left France to move to the Valley. “I have been very impressed by the new success stories such as Badoo, Spotify, Angry Birds, Cut the Rope, and Deezer which aren’t copycats but really original companies that are taking over the world.”

Indeed. Deezer is scheduled to announce at Le Web that it will roll out its music service on Facebook’s platform in 130 countries (see story page 11). Russian search engine Yandex had an IPO on Nasdaq this year — the biggest in the Internet sector since Google’s —besting Valley stars like LinkedIn and Groupon. The Russian company, which has a valuation of $6.4 billion, continues to beat Google in its home market and is now taking on the U.S. search giant abroad. Wonga, another European Internet star that is ripe for an IPO, is also expanding internationally.

And for all the talk of the mobile Web being developed in the Valley, it is interesting to note that the two most popular smart phone applications to date — Angry Birds and Cut the Rope — were developed in Europe. So was Badoo, one of the world’s fastest-growing new social networks. The business model of France’s Vente-privee is being copied the world over. The third- and fourth-largest social gaming companies on Facebook are Germany’s Wooga and the U.K.’s And three kids from Belgrade have created a company called Nordeus that makes a social game that enables people to run their own football clubs, play with their friends and compete against the world. Its flagship game, Top Eleven, came out of nowhere this summer to become the most-played sports game on the Web after overtaking EA SPORTS FIFA Superstars.

So when it comes to social, mobile, local — the themes at Le Web 2011 — maybe Silicon Valley hasn’t cornered the market after all.

In addition to having a bigger group of billion-dollar babies, Europe’s homegrown talent pool has grown larger, populated by serial entrepreneurs who are on  their third, fourth or even fifth ventures. What’s more, start-ups in Europe are increasingly attracting talent from big Silicon Valley companies like Google, adding business acumen and much-needed corporate connections to the companies’ DNA. Examples include Xoogler Jessica Powell, now chief marketing officer at Badoo; Dan Crow, chief technology officer at Songkick; and Diana Maldavsky, chief financial officer at Russia’s ZeptoLab, the mobile gaming company that developed Cut The Rope.

“People that have experience — within a growth firm — an innovation firm — can export that talent to start-ups and that creates a legacy that will create a new generation of firms,” says Anil Hansjee, who until recently wasin charge of corporate development for Google in EMEA. “With the Xooglers there is an additional layer, the time in the U.S. or within a U.S. company is extra beneficial to Europe because they bring with them a ‘just do it’ attitude — a risk-taking attitude  — and Europe is starting to change because of that cross-pollination.”

A successful ecosystem requires corporate connections, says Hansjee. That’s where the Xooglers come in, including Hansjee, who left Google to start his own fund in Europe.

“We are still lacking corporate connections in Europe,” says Hansjee. “What has been happening over the last one or two years is that Googlers across the company have left to start companies or funds both in the Valley and in Europe. It is a crucial next stage for market dynamics.”

Hansjee’s new fund will look at how to bring European corporations closer to the European start-up community and connect U.S. corporates curious about what is going on in Europe.

Xoogler Saskia Aalders is tackling another opportunity: helping to connect Western capital to under-the-radar Russian Internet companies. Rob Kniaz, another Xoogler, is exploring raising an early-stage fund in Europe, along with angel investor Hussein Kanji, to help businesses scale.

“Rob and I believe that London is a great place to be since the technology world has fundamentally changed in the last few years, but there is still a shortage of capital and know-how to scale businesses, relative to Silicon Valley,” says Kanji. “Being based here in Europe is our chance to bridge this gap.” Other Google alums who expressed interest in being involved in a fund with Kniaz and Kanjiinclude Joseph O’Sullivan, the architect behind gmail, and Gerard Aigner, employee number 59 at Google, who moved to London recently.

If anyone applauds these recent developments it is Sherry Coutu, who has worked tirelessly to bring Silicon Valley to Europe. She and Hoffman originally teamed on their non-profit conference because she says they believe “there are not enough strong relationships between good people here and good people there.”

As part of their most recent conference, held in November, Coutu and Hoffman organized an evening at the BT Tower in London to get serial entrepreneurs from both sides of Atlantic to do business. Coutu made a point of reminding everyone that they should do deals over dinner.

Some did. Even those that didn’t couldn’t help being impressed by the UK’s budding entrepreneurs. The speakers from Silicon Valley were introduced to students from across the UK who participated in appathons. (The winners were invited to 10 Downing Street to mingle with the technorati and receive prizes from Prime Minister David Cameron). And during the conference participants heard pitches from some very young entrepreneurs, including three 14-year-old girls who had started their own gaming company. It’s starting to look like Silicon Valley may no longer need to come to Europe: in many ways it is already here.



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