Why Europe Trails The U.S. In The Digital Investment Stakes

America has a healthier market for digital investment deals than Europe because of its structural advantages and a more prominent culture of tech capitalism, according to a panel of online investors.

Speaking at the Noah conference in London — an event organised by former Lehman Brothers executive director Marco Jo Rodzynek — Skype and Spotify investor Klaus Hommels declared: “What really keeps me awake at night is that we structurally f%*@ed it up.

“Whenever we have to grow a company in Europe it goes through Google (NSDQ: GOOG), it goes through Facebook… whenever we want to sell something everybody’s looking to be bought by a US company.”

Switzerland-based Hommels (pictured) laments that Europe lacks the potential for both big-money IPOs and everyday early stage funding: “If you compare it to the US, angel investment is merely altruism.”

If a Euro company is successful, he says, then it will inevitably be exported to the U.S. via a partnership or acquisition. And something that’s affecting both sides of the Atlantic is that the media houses that have traditionally made big acquisitions are a now a “structural disaster… So the problem is, who’s going to buy all the shit that’s in our portfolios?”

That’s a cynical view from someone that has met such success through his investments, but his fellow panelists largely agreed…

— Xing.com founder Lars Hinrichs — who last week sold 25.1 percent of the company to Burda — says that, on the roadshow to build support for the site’s IPO in 2006, the difference in attitude between U.S. and European investors was clear: “(In the States) people quickly got the business model and it was amazing — the quality of the questions was 10 times better than anything in Europe.” Whereas back in Europe, Parisian investors were more likely to ask “what is internet?”, says Hinrich.

— Simon Guild, chairman of German in-browser games developer Bigpoint and a former MTV exec: “American companies are better at marketing — I saw a presentation that was fantastic but the company went bust the next day.”

— Jonathan Meeks, partner at US-based PE firm TA Associates: “In the U.S., there’s a remarkable number of angels investors, who are also VCs in a way. Whereas, in Europe you can get a little more lead time to build your business and get better infrastructure.” He accepts that some businesses like Spotify may grow quickly, but maintains it has had more time to build it would in the U.S.: “In the US it’s more about getting in the hype flow”.