FinancialGuy Writes!

Until 5th June 2013 there was only one place in the world to launch your tech start-up if you wanted the best possible chance of success: Silicon Valley. There are genius coders, tech venture capital funds and mentors everywhere and it is the role model for geographic “clusters” the world over.

Then on June 6th Edward Snowden arrived on the global news scene and everything changed. At first Americans shrugged their shoulders because only people outside of the US were being spied upon. The other 97% of the world’s population was slightly less impressed. As the days passed we learned that people inside the US were being spied on as well. Further revelations revealed parts of the scale of operations in the UK and France too.

In the last couple of days it has become clear that there are other battles going on behind the scenes. The announcement that Lavabit is to close and that the owner cannot explain why speaks volumes.

Suddenly, Silicon Valley isn’t such a great place to have your start-up (or any tech firm for that matter).

The potential impact is truly huge and it presents an amazing opportunity to the European tech scene to transfer much of that wealth and those jobs across the Atlantic.

As the Information Technology and Innovation Foundation (ITIF) suggests there will be large amounts of business lost from the American cloud companies. (For a brief overview, please read this).

The techtonic plates of the tech industry are starting to shift beneath our feet.

Can Europe benefit?
For longer than anyone can remember, people that count in the EU and Brussels have been moaning about the lack of a culture of innovation in Europe and that all the best start-ups are in the US or soon move to the US.

The question is what will the EU make of this opportunity? The types of cloud services that businesses and individuals want and need are now pretty clear. Many of them are suddenly “for the taking” with the potential for one cloud market for Americans and one for the rest of the world. Which will be bigger and more valuable…? Firms like salesforce.com are NASDAQ listed and valued at US$25bn or so, meaning that there is suddenly a lot up for grabs.

As Commissioner Kroes said recently, “If European cloud customers cannot trust the United States government, then maybe they won’t trust U.S. cloud providers either. If I am right, there are multibillion-euro consequences for American companies. If I were an American cloud provider, I would be quite frustrated with my government right now“.

The real question then, is whether the EU wants that business to travel across the Atlantic or not. The stakes for individual entrepreneurs are going to be pretty high if they plan to create services that deliberately thwart access to the CIA and NSA. Becoming a start-up entrepreneur is already considered to be somewhat similar to a suicide mission – without fearing government black bag actions as well.

To quote Commission Kroes again, “Concerns about cloud security can easily push European policy-makers into putting security guarantees ahead of open markets, with consequences for American companies. Cloud has a lot of potential. But potential doesn’t count for much in an atmosphere of distrust“.

If the next Silicon Valley is going to be located somewhere in the EU, it seems that further safeguards to the data privacy of users and the safety of the entrepreneurs enabling it will be needed. What will the EU do and how quickly can the do it?

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