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Tech Industry

Like it or not, every start-up is global

Ask 15 people where the best place on a planet to start a company is, and 14 are likely to respond: Silicon Valley. Despite this, entrepreneurism is gaining steam elsewhere, both across the United States and throughout the rest of the world.

And I think to myself, what a wonderful world.
--Louis Armstrong

Ask 15 people where the best place on a planet to start a company is, and 14 are likely to respond: Silicon Valley.

Despite this, entrepreneurism is gaining steam elsewhere, both across the United States and throughout the rest of the world. Historically, this has been limited to tech outposts in Israel or India, but today venture-back start-ups with overseas headquarters are popping up all over Europe and Asia. Entrepreneurism is inviting infrastructure--venture capitalists, attorneys, recruiters--that will help make the global start-up a permanent fixture instead of a temporary phenomenon. Ironically, it is the start-ups in good ol' Silicon Valley that noticed this first, and they are the ones that will first experience the challenge of being a true global start-up.

According to International Data Corp., this is the year that the number of Internet users outside of the United States will surpass the number inside the country. As you might expect, the gap is expected to widen.

Online usage is dramatically rising in Europe, with 66 million people expected to go online this year, a 40 percent increase from 1999. In most of the Nordic countries, Internet penetration nears 30 percent of the population, which is comparable with that in the United States. In addition, many experts believe that the United States actually lags behind both Europe and Asia when it comes to wireless Internet access and usage.

Besides signs of increased Internet usage, there also have been several softer signs that reaffirm the evolution of a fertile start-up environment in Europe. Capital availability has increased at all stages along the company life cycle. Liquidity opportunities have increased with the success of tech-focused stock exchanges such as Germany's Neuer Markt, and within 12 months many expect the arrival of a Pan-European Nasdaq-like exchange.

As capital increases, service firms such as recruiters and attorneys are dedicating more resources to early-stage companies overseas.

Lastly and most importantly, Europeans have a new respect for entrepreneurship--an important step in a culture that once favored job security well ahead of risk-taking.

Far away on the other side of the planet, California-based start-ups have slowly become aware of the rising overseas activity. The first signs were subtle. Shortly after launching a Web site and issuing a press release about their recent round of venture financing, unsuspecting young entrepreneurs may notice that the foreign versions of their URLs (".uk," ".jp," and so on) have been registered by cybersquatters. Someone on the other side of the globe is paying attention to start-up financing news in Silicon Valley.

Of course, we shouldn't be surprised. In addition to offering all of this opportunity, the Internet also offers instant information to anyone on the planet. Publications devoted to the Internet economy have become an arbitrageur's tool for new-age global opportunists.

While URL squatting is bothersome, it is a paltry problem compared with a more aggressive form of imitation, which I will call "global cloning." Several Silicon Valley start-ups have been shocked to find that overseas companies have launched mirror-image versions of their Web sites targeted at the local community. One notable site is likely Germany's Alando, a version of eBay's popular auction site (eBay acquired Alando in June 1999). This is only the tip of the iceberg, however.

One company I work with encountered not one, not two, but three venture-backed German start-ups "borrowing" the look and feel of the original. Unfortunately, look and feel was not all that was borrowed. As HTML files can be copied directly off a start-up's servers, these new sites frequently include exact copies of source from the originator.

Though cloning innocent start-ups may or may not be ethical, it is happening, and I wouldn't count on any international organization stopping the practice anytime soon. In fact, I have heard rumors that European venture capitalists encouraging cloning as the modus operandi.

This presents an interesting problem for the global start-up. Strong marketing and PR are standard elements of a successful launch and can attract employees, financiers and business partners. But these same announcements attract unwanted imitation activity overseas. U.S.-based start-ups traditionally wait until they reach a certain level of stability before expanding overseas. With a fertile international start-up market, however, companies are in a quandary.