Europe may not yet have a Silicon Valley of its own but it is spawning innovative high-tech companies. Among them:

FRANCE'S NETGEM
www.netgem.com
NetGem is betting that channel surfers want to become Web surfers. Founded in 1996 by Frenchmen Joseph Haddad and Olivier Guillaumin after the sale of their previous company Aleph 2 to Lotus, the firm produces a box that sits on top of your TV and turns it into a Web browser. The two figured that the best way to get mass-market use of the Internet was with a standard television set and a simple telephone line to connect users to the Web. They developed NetBox, which allows you to browse Web pages on your existing television using a simple remote control, and kept the price to $350.

NetGem has already sold more than 50,000 NetBox units in Europe. Its clients include phone companies such as KPN of Holland, Finland's Sonera and Spain's Telefonica, as well as a variety of companies looking to offer interactive services to the general public. The company reported a profit of $2.6 million in 1998 on a turnover of $16.5 million, and it expects the market to explode this year when interactive television services are introduced throughout Europe.

While Haddad and Guillaumin continue to retain full control over the company, two of France's principal high-tech venture firms, CDC Innovation and Galileo Partners, have injected capital funding. An initial public offering is planned for later this year.

NORWAY'S OPERA
www.operasoftware.com
Can a couple of phone company engineers in Norway come out of nowhere to take on Microsoft and Netscape, the giants of the Internet browsing business? "We have no illusions about what we're up against," says Jon Stephenson von Tetzchner, founder and CEO of tiny Opera Software, of Oslo, Norway, which makes an alternative browser. But then again Opera's main attraction is its size--or lack of it. A smaller browser means a saving in memory and with bells and whistles kept to a minimum, offers a boost in download speed. Opera's browser takes less than two megabytes of RAM, while competitors need as much as seven. Independent trials show Opera is up to twice as fast at getting pages onto the screen as Microsoft's Explorer and five times faster than Netscape's Navigator.

This smaller browser is a good fit with emerging Internet access appliances, such as mobile phones that receive e-mail, surf the Internet and pay for transactions. Opera is already working on versions of the browser that will run on an operating system being developed by Symbian, an alliance formed by Finland's Nokia, Sweden's Ericsson, Motorola of the U.S. and British handheld computer maker Psion to make a new generation of Internet access devices.

Today Opera has a staff of 16, a multicultural mix of employees from the U.S., Germany, Iceland, Asia and Africa. Revenues have rocketed from around $155,000 in 1996 to $1 million in 1998, the same year the company, which is funded by the founder, reported its first profit. Von Tetzchner expects to announce some significant deals with phone companies and Internet service providers (ISP) who feel squeezed by Microsoft and abandoned by Netscape now that it has been swallowed by America Online. "I don't have a contract with Microsoft and I can't compete with AOL," explains Michaela Merz, managing director of Callisto Germany.net, Germany's number three ISP and main Opera customer. "I want to be free and take what is best for the users. Opera is good for the users." Because it can't afford to give away the browser, Opera sells it, on a single floppy disk or downloadable from its website, for a license fee of $35.

While Opera may still lack the critical mass to supplant the competition any time soon, it is attracting a variety of customers in North America, Europe and Australia. Opera's browser has appeal for companies building Internet access devices, known as thin clients because they don't have a hard disk drive built in. Den-O-Tech, a Canadian entertainment systems developer, has signed an agreement to integrate Opera in its line of devices which enable airline passengers to play games and surf the Web from their seats. Den-O-Tech also plans to include Opera in set-top boxes and Web TVs. "Opera is a perfect fit for these smaller systems," says Den-O-Tech CEO Danny Blouin. He says other browsers are too large and clumsy to adapt to smaller platforms. "We can't cut them (Microsoft Explorer and Netscape Navigator) down to fit the platform so it's better to adapt Opera," says Blouin.

GERMANY'S I-D GRUPPE
www.idgruppe.com
The U.S. and Europe have for years been trying to find common ground on the touchy topic of data privacy. At issue is how much information companies can collect about consumers. Like so many clever startups, German software developer I-D Gruppe is exploiting a gap by dreaming up an imaginative compromise. The firm's Cycosmos platform enables Web users to create a digital alter ego known as an avatar. Consumers can endow it with personal characteristics, hobbies and preferences. The company enters all the data on every avatar--except its true identity--into a database and provides each of the community residents with a "human search engine," a software agent that searches for other avatars with the same interests and matches them online. "It's a community-building system," says Bernd Kolb, 36, the company's founder and CEO. "The platform tells you who out there shares your interests and allows you to pick your friends."

Cycosmos also allows advertisers to better target their customers. A partnership between I-D Gruppe and DoubleClick, for example, hits individual avatars with banner advertising that is pre-selected to fit the stored preferences. But because the true identity of the avatar is known only to I-D Gruppe, says Kolb, consumer needs "are catered to completely by companies who know what he wants but not who he is."

I-D Gruppe, which started as a classic advertising agency in 1994, is today one of the largest multimedia agencies in Europe. Other products include E-Cyas--a male avatar who works as a guide in Cycosmos and has become a virtual pop star, attracting love letters from girls across Germany. His single, due out this year, is called Are You Real? After just three months Cycosmos has almost 900,000 avatar residents. GeoCities, a U.S. company with a similar approach, has needed years to build up just over 1.3 million in its cyberspace neighborhoods. Kolb, Germany's "Entrepreneur of the Year" in 1998, plans to take the company public this year. (http://www.idgruppe.com/)

SWEDEN'S GLOCALNET
www.glocalnet.com
Every major phone company in the world is racing to convert its network to Internet Protocol (IP) technology, the operating system of the future for the transport of voice and data services. Sweden's Glocalnet expects to be among the first to make it to the finish line. This month, the Swedish startup launched a nationwide IP-based telephony service accessible via a four-digit carrier selection code. In addition to enhanced capabilities, the company undercuts the cost of the public switched telephone network by between 20% and 70%. The company has extended its network to eight other European countries and is searching for partners to promote the service locally. It is already in partnership with owners of IP networks in Japan, the U.S. and South America and in a year "we plan to terminate all over the world using IP," says Glocalnet chief executive officer Stefan Krook. The company is likely to make an initial public offering in 2000.

With reporting by PEGGY SALZ-TRAUTMAN