Berlin Conference

The Digital Catch-Up Race

  • Why it matters

    Why it matters

    The two countries want to find ways to help European digital companies become more competitive internationally.

  • Facts

    Facts

    • The Berlin conference is the second event of its kind, after last year’s conference which was held in Paris.
    • The conference was initiated by the German and French economics ministers.
    • Europe lags far behind the United States in the number of digital unicorns (companies valued at more than $1 billion) headquartered there.
    •  
  • Audio

    Audio

  • Pdf
factory-berlin-startups_factory-works-gmbh
Factory Berlin, a startup hub in the German capital. Source: Factory Works GmbH

When the German economics minister, Sigmar Gabriel, and his French counterpart Michel Sapin meet today in Berlin, California will be on their minds.

Not because the two men need a break in the sun, even if they do. But because Europe’s two-biggest economies need to find a way to help the continent catch up to Silicon Valley in digital Technology.

The second-annual German-French Digital Conference is a high-priority event, and both German Chancellor Angela Merkel and French President François Hollande are attending.

Helping Europe’s digital companies become more competitive internationally. Under better conditions, perhaps Europe could also produce a digital company on par with Google or Facebook.

“We must act as a digital European unit,” the experts wrote in their report, which Handelsblatt has obtained. “Germany and France must assume their leading role and responsibility in defining a long-term vision in Europe.”

At the first conference in Paris, the Young Digital Economy advisory panel in the German economics ministry, and its French counterpart, the National Council for Digital Affairs presented an “Action Plan for Innovation.”

At this year’s conference, the experts are making six recommendations. The European response to global digital markets cannot be an inconsistent digital infrastructure and diverging legal and financial frameworks, the authors wrote.

“We will have no choice but to think and act together and in ways that are big enough. We need to appear as a digital European unit,” they wrote.

“We need to appear as a digital European unit.”

Digital Advisers,, French and German Governments

 

Mr. Gabriel initiated the conference last year with his then-French counterpart Emmanuel Macron to undertake joint efforts to accelerate the digital transformation of Europe’s economy.

Europe’s digital economy still lags others, especially the United States. Across the Atlantic, there are 90 digital unicorns, or companies valued at more than $1 billion (€940 million), compared to only 16 in Europe.

For venture capitalists, the most valuable of the European companies is Swedish music streaming service Spotify, at $8.5 billion, followed by Berlin food delivery service Delivery Hero ($3.1 billion) and Berlin home-cooked meal provider Hello Fresh ($2.9 billion).

But these companies are worth only a fraction of the competition in the United States. America’s top unicorns are Uber, valued at $68 billion, and Airbnb, at $30 billion.

“European startups have to contend with the American competition,” said Tobias Kollmann, chairman of the Young Digital Economy advisory panel. “But this isn’t possible if the young companies still have to comply with 28 different sets of rules within Europe. That’s why the digital domestic market in and for Europe is not an option but a requirement for the digital economy.”

This demand is likely to be met with open ears by attendees of the digital conference today. Last year, Ms. Merkel and Mr. Hollande stressed how important the issue was to them.

Initial steps have already been taken toward a uniform, digital single market in Europe. The European Directive for More Harmonious Rules in Data Privacy, approved last year, was a milestone.

14 p8 Fewer Startups-01

 

However, critics say that the rules are not binding, and contain many clauses that can be liberally interpreted each member E.U. country.

This creates the risk again of everyone going their own way. In addition, differing tax rates and domestic laws on patent protection, for example, are problematic, as the European Start-up Monitor shows.

For this survey, in which Mr. Kollmann was also involved, 2,515 European startups were questioned. The KMPG management consulting firm and Telefónica sponsored the study.

The advisory panels are pushing for uniform European rules, especially on the issue of non-personal data, such as the data that arises during communication between machines. This type of information is becoming more and more important, especially as industrial processes become more digital.

One issue, for example, revolves around who should be allowed to use the data generated by driverless cars: the software developer, the automaker or the person who uses the car?

The advisory panels fear that some companies could lose out if regulation is left up to the companies themselves.

“This is why we need clear rules defining the use of data, for manufacturers of data-producing machines, for the startups building on those machines, with their online platforms, and for the users of the machines,” Mr. Kollmann said.

Lawmakers need to prevent situations where makers of machines — not E.U. taxpayers — own the data collected by technology.

But many companies are unlikely to share this view, saying the issue of who owns data and wo gets access should be left up to companies.

Harmonization of taxes is also a high priority for the advisory panels. However, Great Britain’s upcoming withdrawal from the European Union is likely to lead to more pronounced tax competition.

To help ensure that the situation for European startups improves, the advisory panels propose creating central advice centers for companies with expansion plans. “The European single market can be developed more quickly for digital startups through the core markets, Germany and France,” the experts concluded.

 

Dana Heide covers digital policy from Berlin for Handelsblatt. To contact her: d.heide@vhb.de 

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!