Building the Next Facebook a Tough Task in Europe PARIS - The coffee machine spits out doses of espresso. Young men in shorts and loafers line up on a leatherette sofa, balancing Macs or iPads on their knees, discussing bands or business plans. Some speak French, others English. The lighting is subtle, the ideas sound bright. In a start-up incubator tucked away in an upper floor of an office building in Neuilly-sur-Seine, a suburb of Paris, several dozen entrepreneurs dream of building the next Google, Facebook or Zynga. It might look like Silicon Valley, but one thing is missing: the money. In the United States, promising Internet start-ups can expect venture capitalists to come calling at an early stage. Fat checks often follow quickly. In Europe, many entrepreneurs have to wait longer; to get their businesses up and running, they sometimes have to rely on unorthodox sources of funding, including France's generous welfare benefits. "The most important business angel in France is probably the unemployment office," said Stéphane Allard, founder of a social media marketing company called Wise Metrics, his tongue only partly in cheek. As Europe wrestles with the euro crisis and struggles to recover from a deep economic slump, it desperately needs technology start-ups to spur employment and generate growth, because big companies are more likely to be shedding jobs. Policy makers from France to Finland, from London to Luxembourg, gaze enviously across the Atlantic, where the dynamism of the U.S. high-technology sector provides hope for the future, despite the current economic woes. The initial public offering of Facebook, a company conceived in a Harvard University dormitory, provides a timely reminder. "Capitalizing on the innovation space will be key to Europe's future economic growth, and this is fueled by small companies," said Matthias Ummenhofer, head of venture capital at the European Investment Fund, which invests public and private money in small companies across Europe. The European Commission has made high-technology innovation a cornerstone of its economic policy-making. It was supposed to underpin the so-called Lisbon Strategy of 2000-2010; now it forms the backbone of the Europe 2020 agenda. So far the results have been mixed. A recent report by Boston Consulting Group showed that the Internet accounted for 4.7 percent of U.S. gross domestic product in 2010, compared with 3.8 percent for the 27 countries of the European Union. While the Nordic region, the Netherlands and Britain generally performed well, southern European countries lagged considerably behind the average. And the benefits of the Internet continue to accrue disproportionately to American companies like Facebook, Apple, Amazon, eBay and Google, which often have more dominant positions in Europe than they do in the United States. Europe has generated a handful of globally successful technology start-ups: Rovio, creator of the phenomenally successful "Angry Birds" game for mobile phones; Spotify, the streaming music service; and Soundcloud, a music storage and sharing site. Over the past year or so, start-up activity has heated up in Berlin, which has joined London as a European capital of digital innovation. But most European Internet ventures struggle to break out of national markets. Going global usually means selling out to an Internet giant from the United States, Japan or elsewhere - still the preferred end game for European start-ups, including promising ones like TweetDeck, LastFM and PriceMinister. Why has Europe not managed to create a Facebook or a Google? The reasons are complicated, according to entrepreneurs, investors and analysts. Some say European start-ups have been too focused on copying Silicon Valley ideas. Others say Europe lacks the necessary entrepreneurial get-go. Still others say the fragmentation of European markets, with dozens of languages and legal systems, stymies even the most energetic. Researchers at Bruegel, a think tank based in Brussels, have identified one overriding problem: a shortage of financing, especially private capital, for the risky business of starting and growing high-technology companies. "A deficient V.C. market may thus hamper the development of young, highly innovative companies into world-leaders," they wrote in a recent study, referring to venture capital.