Plus I don't think location really matters that much; startups don't need an environment with thousands of hip enterpreneurs, all it takes is a small team with a good idea.
London actually has no "startup scene", the dirty little secret is there is no silicon in Silicon Roundabout. Lots of ad brokers, social media strategists, hairdressers and bakers with Twitter accounts, but no actual tech is developed there.
That is a lie that the Register likes. There is actually lots if real tech. Perhaps less actual silicon than Cambridge but lots of tech. Some decent exits in real techn prove it.
Lack of investors. Simple as that. Companies that run on deficit for 5-10 years can not survive in Europe. Facebook, twitter, etc. Wouldn't be able to survive in Europe, simple as that.
I hate the word unicorn too, but it's shorter than private market companies with a valuation of more than $1 billion :)
With regards to lack of investors I don't think it's as simple as that. If it was only a matter of investments then surely US investors or Asian investors could just come in with the money. There is something that makes European VCs risk averse and keep american investors out of Europe IMO.
First, thanks for ghostnote. It's an awesome app, worth every penny.
> I hate the word unicorn too, but it's shorter than private market companies with a valuation of more than $1 billion :)
Ah, is 1 billion the limit for the 'unicorn' definition? In what amount of time? :-) We have 7-year old companies, with 50+ employees posing around as startups everywhere these days. It's not related, but you know... Everyone is playing with words here :-P
> With regards to lack of investors I don't think it's as simple as that.
Of course you don't, otherwise you wouldn't have written a blog post... You could tweet! But, unfortunately, as most social phenomena is not that complex :-)
The reason we can't have a "unicorn" in Europe is that no one is going to support a company that it's expenses outsize it's turn-over even if this is because of extremely high growth rate.
If you're lucky enough, you might land some millions from some startup event. But even they, ask to see growth (in terms of users) and (hehe) immediate ROI.
In startup Istanbul 2014 the no1 startup which received investment was the only company who didn't actually need it... It was already generating way more than it could burn. So it was a very easy bet.
Unicorn just pokes my brain the wrong way, like bad kerning. On the other hand, it does describe how rare these things are, which I feel does make it an accurate term- it also explains how companies like this are essentially legends.
It's an annoying term, but it works (unfortunately)
I like the term because it implies some of the valuations might be mythical...
One of the differences is European investors tend to think on the basis that if it walks like a horse, neighs like a horse and only actually does the same job as a horse ....
It is a disliked term, because it's a buzzword, which get really hyped up in the beginning until everyone can't hear it anymore. If you still use it after the initial hupe, it makes you sound like a tool. That's the thing with buzzwords ^^
"If it was only a matter of investments then surely US investors or Asian investors could just come in with the money" - grand-parent is saying they don't, you're saying they could.
I dunno, because if it was as simple as that, then those American VCs would be investing all over the US already. As is, most of them are just staying in their little bubble.
Not all but there are indeed a disproportionate # of ex-financiers vs the composition of Valley firms. I did this analysis a while ago and it was pretty striking when graphed. The only consistency was MBAs in VC roles across the board.
> Because investors in Europe are a bunch of pathetic spineless banker types.
Or investors in Europe have enough opportunities to generate more than the typical return on investment of VC? The average VC ROI is really low, it gets outperformed even by passive index funds IIRC.
Edit: Found the source.
"Yet 2013 annual industry performance data from Cambridge Associates shows that venture capital continues to underperform the S&P 500, NASDAQ and Russell 2000."
The average is meaningless. Venture capital follows the power law. The top 5-10 firms in the U.S. will realise 95%+ of the returns for the entire industry. The Benchmarks, Sequoias, A16Z, etc.
The top companies only want to go with the top investors and vice versa. I wish they'd publish data. I'd love to see Benchmarks ROI on their recent fund, it's likely going to be the best performing fund of all time.
Actually More permissive & lax gun laws -> More police militarization to preserve the competitive advantage -> More govt spending local or federal -> Less spending on other sectors such as health and education
BTW I'm centrist on the issue of gun ownership & carrying but I just wanted to point out the flaw in your deduction.
> Actually More permissive & lax gun laws -> More police militarization to preserve the competitive advantage
Are you sure your arrow there means causation?
Explain like I'm five, why do you think the police feels it needs to compete with law-abiding gun-carrying citizens?
I've never heard of this silly idea before, but maybe I'm silly and you have a great argument for that.
If you had said "the more guns in criminals' hands, the more police militarization to preserve advantage" then I'd agree with you but I'd ask to see how you know the number of guns in criminals' hands.
0.001% of law-abiding gun holders are a problem for the police. 100% of criminals are a problem for the police, whether they're carrying guns, knives, or a closed fist.
I mean, one could claim it hampers gun innovation. Not sure the laws about that though- I wonder if they have laws that allow the creation of guns that would normally be illegal..
Yes, I'm so upset that the government funded all the initial development of the Internet, crushing things like Compuserve and AOL and AT&T's videotex offering. Who knows where we could be today if only those had been allowed to flower. (Well, I know the planet would be 3 inches deep in AOL promotional mailers. But besides that.)
One example of successful state investment doesn't really say anything about what the ideal level of overall state economic intervention is. Research spending like DARPA isn't even representative of how Western governments regulate and tax.
We will never know the opposite wont we? It is not that state is not capable of investment on innovation. They are just terrible at it. There are many rebuttals on the issue of "government is necessary for innovation". Here is one of them: https://www.youtube.com/watch?v=tbR4cjA-Few
first thought: not enough horns to go around and add to the horses.
second thought: europe=continent. US = country.
third thought: what good does this question do us?
Since you bring it up: the US is a $18-trillion economy. Europe is a $19-trillion economy, of which about $18 trillion is from states in the EU. In that respect, it's the only comparison that makes sense. (Well, maybe that and something like the UK and Germany vs California and Texas, roughly $3T vs $2T each).
I would think that the (mandatory) benefits required for companies in Europe (or even outside the US) raise the bar for startups. More $$ is required, more paperwork to ensure compliance, ... On the good side, this might/should act as a filter. On the bad side, money flows along the path of least resistance.
I guess this is an argument for accepting remote work. There are lots of talented people in places where they like living. How (new) companies deal with this will determine how the talent pool is used. As everybody argues there's insufficient talent, by definition there's insufficient talent wherever you are.
In Paris a few years back I met an entrepreneur whose business was in California. He liked living in Paris, and really wanted more of his team there, but the regulations around hiring employees were a big issue for him. If I recall rightly, it wasn't so much the paperwork or the benefits, but the extra burdens around firing. So he was hiring all his new people in CA.
Here in California, most employment is at will, meaning that either party can end the relationship immediately. I can quit without notice; I can be fired without notice. (In practice, notice is generally given, but that's custom, not a legal right. One can also write an employment contract with other terms.) But from what he said, it was very difficult to get rid of underperforming employees, and also hard to reduce staffing levels if the business needed fewer people.
To contrast with what you said, it’s very common in french contracts to be able to fire an employee in the first 8 month of her employment. This isn’t really « at-will » employment but it’s pretty close, especially for Europe.
Ok you have a valid point but since the article is full of kind of wishy washy questions I didn't feel guilty about adding some more into the mix.
The title 'Why is Europe Failing to Create More Unicorns?' has an implicit bias in it. The question is saying that Europeans should create more of these massive new companies.
10 smaller companies might be better than 1 big company. 100 companies worth $10 million dollars each might provide the same number of jobs and the same services to the economy.
Maybe?
Admittedly if you listen to European entrepreneurs you can't come away and believe that everything is rosy for new businesses.
Thats not what I am saying at all though. In fact I am very open in the essay to the question as to whether it's even something you would want.
But the fact is that they have an effect on the world outside the US. Perhaps you are fine with that, I would love to see some more Europeans get into the game if nothing else to boost morality and have more people try and create companies.
I guess I can always keep rewriting it in every paragraph, but I tried to be up front because I knew some would interpret it like that. This is why I wrote:
Before you read on: This is a complex issue and I don’t claim to have the answers. In fact it’s going to ask more questions than it answers and I wasn’t even sure I wanted to publish it. It’s not even obvious why chasing unicorns is such a good idea.
In the beginning and:
Unicorns might not be what Europe want and we might all agree it’s an unsustainable model.
in the end.
Not sure how much more I could have done before someone started complaining that i was repeating myself :)
>10 smaller companies might be better than 1 big company. 100 companies worth $10 million dollars each might provide the same number of jobs and the same services to the economy.
I'm not sure what point you're trying to make.
It's beneficial that Airbnb is so big because I can plan a cross-continent vacation using one website instead of searching for each city's/country's version of it (which may have poor customer service or be ran by scammers).
It's beneficial that Uber is so big because I can use one app to summon a car anywhere around the world instead of having to install a new app in every city/state/country.
Just because 10 companies could provide the same amount of service and jobs doesn't mean that it's beneficial to customers.
The question the OP is addressing is about growth limits in Europe, not about the moral value of large companies.
EDIT: I am not arguing for monopolies. Multiple companies with service around the world can and do compete.
If the ten companies interoperated, you could plan a cross-continent vacation using one website instead of searching for each city's/country's version of it. (And then you wouldn't be vulnerable to Airbnb, for example, demanding access to your Google Docs metadata in order to allow you to continue using their service.) You're making the argument that people used to make about how it would be impractical to have multiple long-distance phone companies or multiple long-distance computer networking companies.
This is nothing like the phone lines -- the FCC isn't going to come in and force them to play nice, and these companies are not going to do it out of the goodness of their hearts.
The big players will just starve out the little ones. AirBNB isn't infrastructure, it's a service. Without a complete socialist re-imagining of society, that will never happen.
The FCC isn't forcing Level3 or Global Exchange or AOL to "play nice" either. You're apparently arguing from a complete ignorance of history, and consequently your prescribed remedy is likely to make the situation worse instead of better.
The internet evolved over the phone lines, where providers were legally banned from blocking traffic. They were made to play nice. The fact we still have a free internet is the result of that legacy.
While I agree that common carrier obligations helped the internet significantly, your picture of history is still mostly wrong, and the particle of truth in it is drastically oversimplified. The internet didn't evolve over phone lines. Phone-line providers weren't legally banned from blocking traffic, and in fact did legally block data traffic over phone lines for decades. Common carrier obligations didn't exist in most of the countries where we have a free internet, and have never been relevant to most of the participants in the internet: not to AlohaNet, not to ARPANet, not to Mindvox, not to Netcom, not to UUNET, not to AOL, not to Level3, not to Global Crossing, certainly not to JANET, not to NSFNet, and not to The Little Garden.
Rather, the internet was created by an academic-military coalition that had sufficient political power to overcome the phone companies' and regulators' opposition to data networking.
It's plain that you weren't on com-priv then, you aren't on NANOG or equivalent now, and you haven't read the history.
While it is true that scale brings certain advantages, larger companies are not an unalloyed good. For instance:
- larger companies can leverage near-monopoly status to prevent meaningful competition, increase rates, etc. (e.g. Verizon/AT&T/Comcast)
- larger companies can collude to drive the price of labor down. (e.g. tech anti-poaching pact.)
- one large company, by being "more efficient", may in fact employ fewer people than your ten smaller companies combined, especially if they are able to invest in large-scale automation initiatives.
- larger companies have a wider view of your activity, making them a single point of failure for personal privacy. (e.g. national security letters, NSA datacenter tapping.)
To paraphrase the parent comment: just because one company can unite the services of ten doesn't mean that it's beneficial.
A large company doesn't equate to a monopoly. Multiple giant companies can duke it out (and they do). I'm arguing against the idea that small companies are objectively better.
I would certainly prefer a large mobile provider with service around the world (of which there are many) than a small provider operating out of my city. I would prefer a large ride-sharing app (of which there are at least two) with coverage in most major cities instead of installing 10 different local apps for the same purpose.
I'm not arguing that big companies are better, but I am arguing there are certain benefits to large companies that operate around the world (as long as there's competition).
Thank you very much for actually trying to understand what I was getting at.
It's a thorny subject because it very quickly can turn into a political or ideological discussion. I was trying to avoid as much as possible because I think it needs some debate no matter what the conclusion might be.
Thank you. The knee-jerk belief that small business is always better is profoundly un-historical.
Most of the greatest inventions of the past 100 years have come from large businesses that had the man-power and capital to invest in significant R&D departments.
Like I said below; AMD and Intel have a duopoly on x86 processors and have for ages. Intel's profit margins waver between 1/4 and 1/3 of revenue. Simultaneously, processors get better and cheaper every single year.
> Most of the greatest inventions of the past 100 years have come from large businesses that had the man-power and capital to invest in significant R&D departments.
Your narrative leaves out the huge sums of public dollars that underpinned those innovations.
Exactly, R&D requires capital. Capital comes from profits. Overly competitive markets destroys profits, destroying capital. Thus too much competition destroys R&D.
Look at the airlines. There doesn't need to be this much competition in the airline industry (https://en.wikipedia.org/wiki/List_of_airlines). They've had too many players for far too long, and it's caused them to compete to the bottom.
Sure, flights are "cheap", but not as cheap as they would be if these companies could afford to upgrade their infrastructure, invest in more modernization efforts, and so on. In fact, the average airline makes about 1% return, or $100 in profit for every $10,000 they spend. That's not a recipe for a healthy business, or a healthy industry.
By comparison, AMD and Intel have a duopoly on x86 processors and have for ages. Intel's profit margins waver between 1/4 and 1/3 of revenue. Simultaneously, processors get better and cheaper every single year.
Not true at all. Indeed, it's the little companies that often can be "disruptive" (I hate that word; why is disruption necessarily good?). Indeed, large companies are in practice often invested in ways that prevent them from pursuing profitable business that smaller business can. Their business model can prevent them from pursuing profitable business because it would involve biting the hand that feeds them. Large companies become entrenched in a certain set of ties and a certain status quo. The last thing they want is to disrupt. It's very much a question of trade offs.
Aside from that, your phrase "drives society forward". I always here this phrase thrown around in these discussions, but I have yet to receive a coherent explanation of what that means, or what this great lord of Progress consists of. I think one ought to remember what the aim is. Change is not the same as "better", chaos is also change (the article says we fear change at its core, which I think is stupid; we fear loss of something which change can entail; some are addicted to change for its own sake out of from psychological illness). There is the social dimension to consider, the psychological, the spiritual, the environmental, etc. The empty profit seeking and vacuous worship of tech or whatever is desolate.
Are: eBay, Amazon, Google, Facebook, Uber, Priceline, Expedia, SpaceX, Tesla, PayPal, FirstSolar, GoPro, Salesforce, Workday, FireEye, Splunk, Netflix, Yahoo, Twitter, DropBox, Palantir, Pandora, etc. good for the US?
They were all the equivalent of small unicorns once. So the question is: as opposed to what? All of those companies existing somewhere else, and most of the benefits going to other nations instead (jobs, taxes, investment, innovation)?
German law makes the "out of the garage + Angel investor" start-up culture impossible. The only possible way is to make money AND start out with a huge amount of cash. I can't speak for other Euro countries.
Berlin seems to be bursting with startup culture, between all the co-working locations & Soundcloud & 6Wunderkinder acquisition. Are the German startups focusing more on profit & bootstrapping approaches rather than Angel funding then?
What part? Is the incorporation of a company complicated\bureacratic? I know here in Czech Rep you pretty much need to have a local Czech speaker setup\registered\licensed with a certain status before you can create a new company. Or is there some capital requirements ("you must have €x,000 in the company accts to operate"), or lawyers fees that make it either tough\impossible for the early "ramen" stage?
In Germany, only very few legal types of incorporation allow the owners to be free of risk. Usually they require a high amount of money to start such a limited (so, in case of bankruptcy, all debt can be paid).
There is now a mini-GmbH, essentially a type of Ltd. that can only handle a limited (pun not intended) amount of assets, but does not require you to have enough assets to pay back the debts.
Then there are GbR, etc, a lot of nice incorporation types, but these, while effective for a normal company, are not useful for a silicon-valley type of company, as the silicon valley relies on an investment bubble - and a GbR and similar place the liability completely with the owners of the company.
Then there are consumer cooperatives and so on, but while these, again, are useful for the normal economy, you can’t use them to make profit by scamming people (as they are effectively profit-less).
Unsurprisingly, Soundcloud is actually incorporated in the UK. They might be a "German" company, but they seem to not find German business law sufficient or favorable.
That is really only true for some Banks if they're registered\based in the City of London (i.e. not where SoundCloud are), but "the Bahamas of Europe" moniker is probably more applicable to Liechtenstein, Switzerland, Jersey\Guernsey or even Ireland.
If you want to be a cynic: German law is optimized for protecting the public from investment scams.
If you don't want to be a cynic: German law is optimized for protecting the public from investment scams---which makes it hard for startups that aren't investment scams but become victims of false positive identification by german law as possible investment scams.
He mentions the multiple languages. I don't understand why Europeans stick to their local languages when they all know English anyway. Are they trying to keep foreigners out? Surely they realize there's a huge social cost of having your own minority language. This problem exists in China too but most people recognize the need to learn the standard Mandarin so they're largely bilingual. Dialect at home and Mandarin talking to everyone else even if it comes with a funny accent.
Anecdotal of course but for what's it's worth on the basis of around twenty cross-Europe trips by car I would say very few speak English. We live in bubbles and tend to believe they're shared by all.
And thus, the percentage of talent that european companies are able to see and reach is only a part of the whole talent available. Bad for both parts. Yes, is another big problem also.
"I don't understand why Europeans stick to their local languages when they all know English anyway. Are they trying to keep foreigners out?" So many things wrong with this sentence.
I agree with you, but your comment doesn't add information. It would be better to reply with one or more of the things that are wrong with that sentence. Then we all learn something.
Almost all European countries have high level proficiency in English:
http://www.ef.pl/epi/
The challenge is that still a lot of things are distributed (you are vastly more likely to read your national news, shop at national ecommerce shop, shipping rates are much higher if you do that oversees, etc.).
The languages are also a problem for Europeans, because it's a big threshold for finding a job outside your own country. For example The Netherlands is very small, but German or French are to hard to speak. It's Dutch or you'll have to move to an English speaking country. Most Dutch people speak English, so there is that.
I speak English very well. I have spoken it in professional environments for so long that, in a regular conversation, even accent barely reveals that I'm a non-native speaker anymore. However, my own native language is part of my cultural heritage, a heritage that I deeply appreciate, which is very dear to me and which cannot be adequately rendered in English any more than The Canterbury Tales can be adequately rendered in my own language.
We stick to our local languages because they're part of who we are. Europe would probably have a little more money if we stopped doing that, but it would be a lot poorer.
A big difference in China is that the writing system is the same regardless of spoken language, so that works pretty well for the Internet. I think you also overestimate how many and how well people speak Mandarin in China. According to the Internet only about half of people in China can speak Mandarin:
http://news.xinhuanet.com/english/2007-03/07/content_5812838...
Once again, state in the US != country in the EU, and Europe != China. Those are not "local" languages (or "minority" languages), they are "national" languages, no matter how ridiculously small you may think those nations are. There are "regional" (or "local") languages too, but they are rarely used in a professional environment, and thus more akin to dialects in China. This has strong cultural implications.
English (or rather, some sort of English-like pidgin dialect) is the lingua franca in most or even all IT companies at least in Germany and I would guess also Scandinavia. It is true though that a lot of subtleties are lost if you don't communicate in your native language. Also the downvotes for you are completely justified. Languages and dialects are a cultural treasure, not a disadvantage.
> huge social cost of having your own minority language.
Scandinavians are some of the most successful societies, despite of small languages. Languages have cultural baggage to them; every time I hear English, I see high inequality, poor worker rights, obsession with money, yet excellence in science and higher education. No one wants to abandon their own and assume English identity.
and I thought that Europeans were bit more insular than their US peers but wait till you see an ethnocentric/lingocentric American voices their opinions on the English language and its perceived supreme status over other languages of the globe.
No wonder Jeb Bush is taking a lot of flack for speaking Spanish in public when you got crowd like this.
Lets start that since that since the Cromwell times Britain has not been a part of Europe by its own choosing. The whole balance of power. Even today UK is a different beast than all the rest of Europe.
Also one of the huge benefits of post WWII order was the creation of homogeneous national countries. Which explains the abnormally long peace period. So nationalism and national identity are extremely strong in europe.
If Scotland were to secede, I have no doubts Scotland would join the EU and the UK would leave.
England does not see itself as part of Europe. If anything, England sees Europe as an extension of France. And England hates France with a vengeance. Geography and history aside, the UK is not a European country at heart.
It's worth mentioning that Italians also exhibit diglossia as well not only the Chinese. They speak in dialect at home or with friends and family within the community but in the official Italian in public.
We Arabic speakers also enjoy or suffer , it depends on your perspective, from this phenomenon as we mostly speak in dialect all the time but in formal contexts esp. in writing, we use the Modern Standard Arabic instead. However, writing in dialect or MSA derived languages is becoming more acceptable in literature and the press at least where I come from, that's Egypt.
^ This is the most american thing I've seen all day, and earlier I saw a Chevy with an eagle and the US Flag painted all over it with a rifle on the inside.
(not uncommon in North Carolina)
I'm with you. I speak Romanian but it's totally worthless compared to English. It's a shame that European countries (especially poor ones) don't switch to English immersion schooling to give their students a chance in life.
I also speak Romanian and I am NOT with you. You're free to emigrate if you don't appreciate your country or cultural heritage, this way you'll do yourself and to the rest of us a great service!
> I don't understand why Europeans stick to their local languages when they all know English anyway.
Because the local language is a majority language where it is the local language, and, globally, every language is a minority language (and English isn't even the biggest minority -- its #2, far behind Mandarin, for total speakers, and #3, behind Spanish which is far behind Mandarin, for native speakers.)
Europe historically had a problem where powerful nobility owned massive portions of the economy outright. Competition? Maybe with an army.
Today, it's a lot better than it was, but in many places the powerful noblility have been replaced by other powerful interests and some industries still operate like they have the God-given right to supply automobile tires to the French people and all good men must express solidarity to expel these upstart invaders... :(
Over regulation is not really a thing – the US has under regulation, especially in regards to data safety.
Over regulation is what the US does with taxis. Which is why in Germany companies that do essentially the same as Uber (but legal[1]) already existed before Uber was even founded.
What I see the "issue" is that as soon as some size is reached, we don't really care about expanding further. Why take a risk when you already have a pretty nice market?
[1] In Germany, where UberPop is currently banned, you can start a taxi company if your drivers are insured with commercial insurance. To make profit, your drivers need to have a 55€ license as taxi driver. Simple as that. UberPop is only banned because they did not want to insure the drivers (the license is less of an issue).
> UberPop is only banned because they did not want to insure the drivers.
Do you have a source for this? Uber insures its UberX drivers in both Canada and the U.S. so I don't see why they would be opposed in Germany. There must be something else.
Yes there is, the fare is regulated - no matter the demand, the area of the source or destination, or how drunk the passenger is.
Uber does heavy demand-based price adjusting, and well, fuck that. Better have the assurance of always paying 20€ for my trip home, than the variability of an Uber with 10-50€.
You know when booking the trip what the cost is, it's not a mystery.
> the fare is regulated - no matter the demand, the area of the source or destination
Does Germany not have supply problems caused by this policy?
I know it's impossible to get a cab in Toronto on New Year's, whether you're coming home from a party or your wife is going into labour. I'd personally rather know for sure there is a ride available if I need it than be stranded by the side of the road because nobody is allowed to take my money.
Well, that’s not necessarily true. Uber can offer chauffeur services at any price, but as soon as they pick people off of the streets, it becomes a taxi service, which has the maximum fare limitation. Well, at least according to what I could find about the rules and regulations in Kiel.
I agree with that. And I would add: over regulation "imposed" by the old unicorns this article mentions. They don't want new, disruptive players enter their well stablished monopolies / oligopolies. In EU they have lots of administration levels they can lobby and it's easy to increase barriers to entry. I can assure this is absolutely true in Spain.
This is very variable across Europe (of course that could be an issue on its own). The Heritage Foundation's Economic Freedom indexes consistently place some European countries higher than the US (e.g. Switzerland and Denmark rank higher overall). In many areas, many European countries have less regulation than the United States.
I've posted this before, but since I think it's relevant here:
People seem to forget that Europe is not a country. Europe does not have a single uniting language. What happens, is that every country starts their own smaller versions and they stay mostly within that country. If they want to move to another country, there's often already a major player there, and they might not have the means to kick them out.
I think the reason that silicon valley is so powerful, is that the initial market is 325 million people who all speak the same language. Once you get the US market, you have the size, name and means to easily start conquering European countries. It's always about scale...
I commented before reading the article, as I was having trouble loading it.
I've managed to read it and I see you did mention it. You other points do add some interesting ideas that I haven't considered before. Especially #3 is interesting.
successful examples that started in europe soon moved to the us to take off. qliktech/qlikview as a swedish example. intercom being spread across ireland and SF. etc.
the one market that could rival the US will be china. it is harmful to non-chinese investors though, but once they open it up a huge, homogenic market will pop up. wechat, baidu, alibaba already show what is possible there. apple and uber coming in with mature(rer) businesses. wonder when we'll see a mixed-background startup emerge in china.
as someone from austria that moved to the bay area - you must be bonkers to try ramping up a startup in most of europe. if your desire/plan is unicorn-scale of course.
So what, other than language, prevents somebody from starting only European-wide initiatives and reaping the benefits of the entire European market?
I don't mean to sound like I'm minimizing the language issue, but it is surmountable.
To contradict my devil's advocate question above:
My guess and observation is that the ROI on certain localizations isn't good enough to justify the work needed to make a pan-European go at something. So people pick markets where the ROI will be good: England, Germany, France....maybe Italy, and then it all stops there. Neighboring countries with high ROI demographics usually have speakers of those major languages as a second language and can get by well enough with those offerings. And nobody really targets minor dialects for big offerings.
Well there are also different laws and different cultures to work around. The differences between the laws between states in the U.S. and between countries in Europe are probably orders of magnitude different. Trying to understand all those differences would probably be a lot of overhead that could crush a startup trying to tackle the broader market from the get go.
But it's not only language, there are real legal, logistical and cultural differences between countries. You negotiate for content rights in the US, and you have them in the US.
Also, by the time you've gotten enough traction in your country, there's a me-too (or a dozen) in your other markets.
Look, you're a start up, you're running lean, you're cranking out a MVP - are you really going to invest an extra 40% into trying to get into 3 other markets before you're able to get your head above water?
Currently I have a business where I import used computer and network components from US and sell them in the Norwegian market. (I can import pallets of equipment for less than what the total cost is for local shipping in Norway).
While I do make some money on it, the market in Norway is so small that its just a few sales every week. But it's fun, and I'm learning a lot so I still think its worth it.
I would love to sell to the rest of Europe, but I can't solve the logistic problem of transportation of heavy packages. It's hard enough inside Norway.
Doing business in Europe is hard, you have currency issues, language issues, culture differences and then you have all the bureaucracy. All the paperwork, for every minor detail.. :(
And that’s why Germany has it so easy: DHL makes shipping out of Germany or to Germany insanely cheap, DB Schenker ships per rail even from Norway whole containers cheaply, etc.
Germany has here the advantage of a low valued currency, extremely well done infrastructure, good interconnection, and easy access to other markets. Same with BeNeLux, France and Italy. In some regards, even Spain.
Most unicorns get so big from network effects so I suspect they play a similar role to language. The social connected graph is a lot less connected across Europe than across the U.S.
Imagine starting a Facebook in Germany versus the U.S. Spreading from state to state is easy because there is a large amount of media and social overlap. If you have a successful startup in California its much easier to spread to Texas, New York, Florida, and Illinois than to spread from Germany to England, France, Italy, and Russia.
About a quarter of the world speaks reasonably fluent English, so SV's initial market is even bigger than that.
Having access to a similarly large initial market is also part of the reason China has a rapidly expanding and flourishing startup environment and culture.
China's largest businesses are extremely state-connected, and it's hard to imagine any successful business in China not being deeply connected to the government. I basically consider those entities as extensions of the Chinese state.
I don't know if China would look the same if they allowed western companies to just swoop in to extend monopolies.
This is irrelevant to the fact that a very large market and testing ground exists today among the Chinese-speaking and Chinese-cultural population, both inside and outside China.
Most successful startups in post-2000 China are largely privately owned. While they are indeed subject to regulatory constraints, needing to work together with the government is largely a constraint to survive, not a reason for success. Their successes have very little to do with the government and much more to do with the market, rising economy, and better infrastructure (e.g. education, venture capital, incubators, startup "hotspot" cities, etc.) for startups to build upon, as well as the sudden explosion of a middle class that can afford the various things these new startups are offering.
I'd say a large part can be attributed to the fact that China and USA both have similar market sizes and both countries are each reasonably homogeneous in culture compared to, say, Europe.
So you're saying that Google could come in and compete? If you're a foreign business in China, even if you are a Taiwanese business, if you don't have proper government relations, you'll find that business applications take so much longer.
And that you have little hope with Chinese law before a Chinese judge and a favored Chinese company. It is a hostile atmosphere to even Chinese-speaking countries -- if you are not connected to the government.
I'm saying it's very hard to discuss market forces from "free" market principles when the most successful companies in China shall be deeply connected to government. You wouldn't say Gazprom is a product of the Russian economic environment. Nor is Alibaba and Baidu.
@threatofrain You are correct in that without proper local connections your foreign business will die in China. I'm not disputing that.
My point is completely orthogonal; I'm simply saying that regardless of how business is done in either USA or China, each has its own massive market testing ground that speaks a single language, each has its own reasonably homogeneous culture and each has its own reasonably homogeneous set of consumer problems.
This is very different from, say, Italy and Sweden which are different on so many cultural levels. I'm simply supporting the point that Europe should not be treated as one market.
If you're saying that initial market size and uniformity is a big factor behind Silicon Valley-esque places (a large gathering of investor money and tech workers), then I agree with that point.
I think that protectionism disallows existing giants from carving up large slices of a market. Having to compete against the tactics of big giants is a capricious barrier to market, and probably not a good nurturer of innovation.
Had many countries severely gimped or barred Google / Microsoft from entering their country, while funding internal alternatives, the world might look very different.
Europe had a crippling diversity deficit and so the US easily took the lead in tech, but under the guise of the so-called "refugee crisis" Europe is now executing a cunning Blitzkrieg assault on America's former advantage. D is for diversity, E is for EUgle!
Addendum: Note that I honestly think that it is basically true: Europe's capitalists will not only profit from the refugee crisis, but they will do so for precisely the same reasons US capitalists profited from diversity. I'm deeply sorry I can't discuss mechanism on this forum; it takes too much hard boiled cynicism to fully grok. Yet I'm serious: The refugee immigration will ultimately boost Europe's tech competitiveness.
"The refugee immigration will ultimately boost Europe's tech competitiveness"
I don't think so. Most of the immigrants are uneducated people, with no willingnes of finding a job. They want to go to Germany because that's the country with highest benefits for unemployed. How would we benefit from THAT ?
Here's a thought: these people went through hell in order to get out of the misery they lived in. That's not exactly what I have in mind when I think of underachievers with no work ethos.
Here's the thought: if they really went through hell they would appreciate stay in any decent EU country. But most of them really wasn't in danger when they decided to travel to Europe. In fact, such a travel, as organized by people smuggling gangs costs about $10k so it's obvious that they were pretty wealthy before they decided to come here. Also, most of them openly admit that they are here for economic reasons, not running from war. Please, get some info before posting such stupid comments.
Also, if this was really about finding safe haven from war, there are rich, muslim countries like Saudi Arabia or Turkey, which are much closer and would be much better place for them anyway, due to similar cultural background, but for some reason they prefer EU with it's social benefits.
I'm deeply concerned about your view of humans. This kind of misanthropy has been used to justify the death of millions throughout all the past century.
You're not even consistent. First you portray refugees as lazy welfare hogs, now you say they are wealthy because they can afford the smuggling gangs. If they are so wealthy, what makes you think they only want to come to Europe to collect unemployment benefits?
Someone applying for asylum in Germany can be stuck in limbo for years before being rejected and deported. This happens fairly frequently. Throughout that waiting period they're not allowed to work and are stuck in refugee camps that are getting less and less hospitable as the number of refugees grows (simply because the communal governments asked to take care of them don't have any money and often only learn how many they have to accommodate when the buses arrive). Refugees don't have an easy time.
If you think all of the "Muslim world" is one big cozy community you haven't been paying attention. The "Muslim world" is about as united as Ireland during the Troubles. The civil war in Syria is fought between a totalitarian dictator and Islamic extremists. Saudi Arabia is an Islamic fundamentalist dictatorship. This is the last place you want to go if you don't agree with either side in the conflict. Yet Saudi Arabia has accepted thousands of Syrians into the country (although they don't treat them as refugees, which is what led to the claim that they don't take any Syrian refugees).
And Turkey? Tons of refugees are going to Turkey. And many of them have hopes of being able to return to their home country when the war is over. To quote Wikipedia: "As of April 2015, there are 2,138,999 estimated Syrian refugees in Turkey." -- that's an order of magnitude more than any EU country (and Turkey isn't that big of a country nor that wealthy).
Heck, many places outside of Europe have granted actual residency permits to Syrians. That means they're not even treating them as refugees but as perfectly ordinary legal immigrants -- a far cry from the temporary shelter and perpetual "Duldung" (i.e. promise not to get deported yet) they would get in Germany.
You're pretending the EU countries are the only places accepting Syrian refugees. That simply isn't true. The reasons we hear more about refugees coming to the EU than those being accepted in other places is simple:
1. Most of Europe shares a common border (Schengen), so "our borders" span more than just our own country.
2. There are a ton of countries in Europe, so each country accepting a lot of refugees adds up to a very big number.
3. We live in Europe (or in the US: you're closely related to Europe) so we pay more attention to what's going on here.
Stop listening to AfD/NPD/BNP bar-room clichés and pay attention to what's actually happening outside the Western World.
"The third reason I hear is that the US market is bigger and therefore it’s easier to get traction. Yet there are 503 million Europeans living inside the EU vs. 319 million US living in the US"
Stopped reading after this line. So to this guy, a market is a geographic definition. Well, we're not in the 19th century anymore. We're not defined by hills and roads and river access.
IT startups identify markets from culture and language first and foremost. And you obviously won't market a product the same way in germany, france, or greece. It's the biggest issue with euro so far: same currency, 25 different cultures.
It's indeed difficult to explain how diverse the countries are in Europe, you have the same kind of cultural differences that you have in the whole United States in just a single European country from one side to the other, it's pretty dense.
Yes, yet i would hope that someone that tries to address the fundamental flaws in parts of Europe economy has at least a minimal knowledge of that fact.
To make such a fundamental mistake in an analysis, one has to have never had even one single business relation with two different european countries.
Unicorns? Ha! It's hard to survive, let alone be successful. No investors, convoluted laws, high taxes and complete lack of startup mentality.
I'm a cofounder of an italian startup, and the road is on an unbearably steep slope. The bureaucracy is insane, the cost of running a small business is daunting. Other companies refuse to work with you because in their eyes you're a scrub (I heard so many times bullshit like "I don't know if you'll be alive in a year or two, so I can't adopt your technology").
You can't hire someone else because you simply can't afford it, and the best people go to the USA anyway. It's immensely frustrating, the only thing that keeps us going is passion, but passion won't pay the bills. Before talking about unicorns we should talk about creating an healthier business environment.
>I'm a cofounder of an italian startup, and the road is on an unbearably steep
Pardon the question, but I have read that organized crime is making a strong resurgence in Italy. Does this factor into your startup or affect it in any way?
> I heard so many times bullshit like "I don't know if you'll be alive in a year or two, so I can't adopt your technology"
I'm not sure why you think this is bullshit. Most startups fail. It seems like good sense to be wary of taking a dependency on another business that might not be around in the near future instead of an alternative that has already proven itself in the market.
Yeah, the problem is that with this line of reasoning a startup is destined to fail. If I don't get clients, I can't keep my business open. That's what irks me. How can I prove myself in the market if I don't get a chance?
If a potential buyer makes that excuse, sell them a expensive long term support contract and offer to put your Intellectual Property (code)in some form of escrow such that the buyers will have access to your code should you fail to support your product in 2 years.
Or become a IBM /HP/MS technology partner and sell through them.
You know, i am from russia and thought the same way. At some point of our startup journey i met some US startups. I know that they have no customers, but instead of writing noting about customers, they create solid page that describes in details how they help people. And this is game changer - you will never think that this is bullshit and company is weak.
Would you considered moving to another EU country? The opportunities are different, but the bureaucracy definitely more friendly in the UK for example.
>I heard so many times bullshit like "I don't know if you'll be alive in a year or two, so I can't adopt your technology")
That's a completely valid reason to not take your business, and it's a problem that US startups face just as much. Personally I don't touch products from startups with a ten foot pole unless the benefit is overwhelmingly massive (very rare) or it's designed as a one time purchase with little necessary long term support.
If you're selling to businesses then longevity is going to be a top concern no matter where you go. Whatever benefit they get over your mainstream competitor is likely not worth it compared to the risk of incurring the cost of switching technologies twice in a short amount of time.
People sometimes fails to realise that sometimes little things stand in the way of big things.
A small startup has no momentum and little power.
The smallest obstacle can block progress.
Having to file endless forms and being unable to take on staff due to restrictive hiring regulations can stop a small company dead, unless they cheat at the regulations.
Most people don't understand that, and just say 'why can't they just submit the forms?'.
Sure, some companies have enough momentum and funding they roll right over those things. Those were always going to succeed.
What people don't see is all the promising ideas that stop dead at little blockages, and either die or go elsewhere. Maybe 1/10th of startups are destined for success, no matter what. Maybe 8/10ths are destined for failure, no matter what. The remaining 1/10th is a fragile new thing, and needs help to get rolling. Killing that 1/10th through bad regulation is enough.
Many people talk about the SV advantage being the networks of people and the can-do attitude towards building things. Just that little bit more fertile ground for startups has a big flow-on effect.
I confirm. The "autoentrepreneur" status in France is quite paperless, but there are still about 12 applications to lodge.
I'd also like to say that the cost of earning money is higher here. €10k takes one year to save for a very good employee. There are so many taxes when you earn something... I've once calculated that adding 10€ in my LTD sales provides me 3.20€ for personal spendings. So it's just much harder to reach a Unicorn valuation when it takes that much to gather money.
on the legal argument - remember that is easier for a wealthy US citizen to break the law internationally and even at home than say a German trying to break the law in Germany.
get a local conviction on your personal record and you're toast.
But, why are more unicorns a good thing? Yes, there are less VCs willing to throw money at 'SOCIAL APP n', but most startups will tend to have something more concrete.
Plus, assuming unicorns are 'natural forces of free market' is ignorance and hurts the economy in the long-term. These 'natural monopolies' use/abuse a financial system created by government. In a free market(no government intervention), they'd never be able to raise as much money and takeover as much market cap as they currently do.
Less monopolies is not a signal of a interventionist economy. Quite the opposite.
>These are of course mostly older companies and not part of the Unicorn category, but at the end of the day that’s just semantics.
No, it's not just semantics. Look at the history of Siemens or any other of these old European companies. There's one aspect that is present all their history and that's government involvement. One could even say that their first venture capitalist that gave them a chance was the government. They all pretty much started out by getting contracts for building infrastructure or military hardware.
You bring on a good point, but thats not what I meant with that so sorry if that was imprecise.
My point is that in the historical context most large companies made it big with or without government help both in the EU and in the US.
So whats changed and thats what I am trying to explore and one of my conclusions is that it might have to do with how Europe is implementing laws. Keep in mind that the EU still have many government supported companies so if thats all it takes then there might be more.
But it's a complex issue which is why I wrote it because I was hoping for discussion like these and points like yours to surface. So thanks.
1. In my experience, Europeans are less dominated by the "newer is better" desire to constantly get the latest gadget/technology. I wonder if others agree.
2. European money appears to be more dominated by old money / aristocracy and that these people like to invest within that network. Engineers are less likely to be part of the aristocracy and are treated more like commodities than the enabling superstar athletes they are (at least the kind that make unicorns). I know quite a few engineers that make over $200k in SV but only one who makes over 100k GBP.
As far as gadget goes, "newer is better" is a dominant factor in Europe too. The problem lays in the enterprise world. One time a client told me "you call this Visual Basic application old, but it's not. It's consolidated". Can't argue with that logic.
As for the second point, you're right on the money. I can't count the amount of engineers that make less than 25/30k€ here.
It's 2015 and I'm happy I finally have clients that let me set the baseline of Internet Explorer support to IE 8. Not long ago I still had to support IE 6.
I have no idea how American start ups can get away with demanding users live on the bleeding edge but apparently cultures can be very different.
It's not a single country. There's different ideas, ideologies and beliefs all around. Conservative Dutch versus conservative Italian is quite different.
> 2. European money appears to be more dominated by old money / aristocracy and that these people like to invest within that network. Engineers are less likely to be part of the aristocracy and are treated more like commodities than the enabling superstar athletes they are (at least the kind that make unicorns). I know quite a few engineers that make over $200k in SV but only one who makes over 100k GBP.
At least here in the Netherlands that seems to be pretty common. Generally, investors are more conservative, and rarely take major risk. Salaries are also just slightly above working for a consultancy, but not always.
Here in Germany a lot of the public debate is still about "new media". The Internet largely gets thrown in a single bin with telco and TV. The most well-known startups are in e-commerce.
Since there's much evidence we're not the only ones here who cringe at this use of "unicorns", we replaced it with "successful startups" in the title. If anyone thinks of a better substitution, we can change it again. (Edit: we changed it again.)
But OP makes an interesting case for it in https://news.ycombinator.com/item?id=10220546 : this is more specific than "successful startups". Perhaps we should coin a new term in HN. Something with cosmic rays in it might be appropriate.
If you develop a culture of risk-averse comfort that you feel needs legal barriers to protect, you can't be surprised that you have a population addicted to risk-averse comfort.
Not sure that the premise of this article is even correct.
I can think of a lot of successful European startups -- Minecraft, Spotify, Skype, DeepMind, the list goes on... -- and just as many startups led by Europeans that have succeeded in America (Lending Club, etc.).
But if Europe has trouble supporting "unicorns", there are probably a couple reasons: 1) Gaps in the funding ladder. 2) Talent flight. 3) A preference for regulation. 4) Countries, like France, that combine technological conservativism with social rigidity.
Why is this downvoted? It is exceptionally valid. Starting a company in France subjects you to almost punitive labor laws, horrible taxes and regulation about almost very aspect of your business. Even doing something as simple as buying a rental property and leasing it out in France is loaded with difficulty. For example, an eviction can take years. Leases are standard for three years with the tenant being able to exit the lease with one month notice with no penalty. Capital gains taxes discourage the free movement of capital. If I want to sell a building and invest the proceeds, I am hit with an insane tax which provides a huge disincentive to moving capital from fixed assets to potentially more risky but higher return startup investments. France shuts down during August. I was in mid deal with some equity investors in July and pretty much the entire process was suspended until now. The French are also in love with paper. To get business class internet in a residence requires me actually registering and forming a French company. In the U.S., I can call any provider and with days have whatever services I want without having to "prove" I have a business 'need.' I certainly can't speak for all of the EU, but France is high on the list as a difficult place to get anything done quickly. In the UK, even opening a business bank account for a non-UK resident with a UK registered company is literally impossible. They are so paranoid over money laundering that essentially the banking industry is not accessible to anyone who wants to do business in the UK but isn't a resident. The regulatory environment in the EU is harsh. Investors are not necessarily risk adverse but they do have to be much more deliberate because every transaction is regulated and thus incurs a cost or a tax. For example, to buy any property in France, you have to pay a Notaire 8% of the purchase price just to legalize the sale. This is exclusive of normal agent commissions and closing costs. Imagine adding 8% to every asset sale on top of VAT of 20%. You're looking at a transaction cost of 28% to just pay the government! There is no such thing as a 1031 exchange either. Taxes and regulation is the surest way to crush innovation.
Combining that with the violence-filled reaction to Uber, the hysterical response to AirBnB and the obsession with physical paper and it's no wonder that France is a horrible startup environment. Also, let's not forget the billion+ dollar exit for Daily Motion that was blocked by the French government. If if you were to build a unicorn you wouldn't be able to do anything with it except maybe cut it up and cook it in a sous vide: provided it wasn't imported from Spain or Poland in which case the farmers would drive tractors into Paris and set piles of shit on fire in protest.
I am not making a judgement on is European Socialism a good thing or not; I am merely stating reasons that it is difficult to expect high returns in such an environment.
It is downvoted because most European unicorns happen to be from the second highest taxed country in the world. Which accidentally also shut down in the summer.
Complaining about bureaucracy sounds like a more believable theory considering that the Swedish one is pretty streamlined all things considered, but that is a totally separate issue than the sheer amount of taxes paid.
> If if you were to build a unicorn you wouldn't be able to do anything with it except maybe cut it up and cook it in a sous vide: provided it wasn't imported from Spain or Poland in which case the farmers would drive tractors into Paris and set piles of shit on fire in protest.
Yep, also Outfit7 is definitely a good example how even in smaller countries one can achieve great success, I believe that founder became the richest man in Slovenia due to the success of his apps.
It's quite weird that Europe can be considered a bad place to succeed. Slovenia is a cheaper country than US, talent pool is still large enough, a startup in European countries like Serbia, Slovenia, Croatia and similar can last way longer and employ more people for the same millions that US startups burn through incredibly fast. Not to mention the expensive standards of living in silicon valley.
The article also doesn't mention an obvious bias, that is, if a startup starts in Europe, there are a lot of incentives for that startup to move to the U.S. early in its life cycle.
In that scenario, the startups who become successful (and who originated elsewhere) all get counted as U.S. successes. This would vastly undercount both the total number of startups elsewhere as well as the number of successful startups.
This is entirely correct and I know several founders who did so, but thats not really the point I am trying to make (which admittedly I didn't make well)
The question that still stands is why they are moving the the US.
Because the network effect of Silicon Valley is profound.
Investors are looking to fund companies with global reach that will break down communication barriers, render national boundaries meaningless and bring us all close together. . . as long as they are located in California.
Yes and so the question is why does Europe not have anything like that. It does have some places liked London, Berlin and Stockholm but they are all missing a few things.
You're looking at a power law. Just like Cities in a country follow a power distribution of population (I just doubled checked that rule for UK and they indeed follow an almost perfect power distribution) so "Start up" areas will also follow a power distribution - but due to the extreme mobility of start-up founders and capital that will be applied globally not nationally.
Silicon Valley being the pre-eminent location for start-ups is a positive feedback loop which puts it at the extreme tip of the power distribution.
Those lists are often incomplete sadly because the actual underlying data on startups is much worse here in Europe. For whatever reason people don't submit data to places like Crunchbase and the media channels here are far less consistent covering things, particularly outside the English-speaking domain.
My partner has been compiling his own list here. Feel free to edit.
https://docs.google.com/spreadsheets/u/1/d/1cWhizlf_KU7KOsw8...
There is no Delaware. Taxes are paid regardless of whether the company hits $1M revenue or not, salary taxes are high, health/social insurance is mandatory and paid for the most part by the employer, there is a minimal salary, extensive bureaucracy and you can't sign away most of your rights if necessary for company survival. Moreover, some countries impose rules which make starting up with little to no money impossible (Germany).
You could incorporate offshore but good luck getting a local bank account or even an offshore one. To do anything in France you have to be incorporated in France and pay French taxes.
"and you can't sign away most of your rights if necessary for company survival. "
I don't believe for a second that someone signing away their rights is necessary for company survival. Maybe you as a company leader need to do a better job so you don't come to that point, and if you have, then maybe you aren't fit to run a company.
This doesn't have anything to do with my preferences; frankly I am disgusted by it, but it's a common practice in the US to sign away the rights if you want to get funded by many VCs. So those VCs obviously prefer US as they can't (if "necessary") do the same shady moves in Europe (yet).
What rights do I sign away when I bring in VC as investors? I've never seen this as "common practice" here in the states so I'm genuinely baffled. The most aggressive thing I've seen them is to demand a part in future rounds via prorata rights.
> some countries impose rules which make starting up with little to no money impossible
You mean the € 25k required to found a German LLC (GmbH)? As of a few years ago it's possible to found one with a single euro as long as you use a certain fixed percentage of the profits to built the company's capital (the company remains "UG (haftungsbeschränkt)" until you accumulate the € 25k, then you can transform it into a "proper" GmbH).
The paperwork involved (including notary and lawyer/accountant fees) still mean you should have about € 2k disposable before you incorporate, though -- not to mention the ~ € 500 you may accidentally pay scammers if you're not careful.
That said, Facebook and similar startups couldn't have started in Germany simply because of German privacy laws. At least once a week I hear of a new US product or start up that simply wouldn't pass basic privacy checks in Germany.
337 comments
[ 4.4 ms ] story [ 281 ms ] threadLondon is the centre of finance in Europe. It utterly dominates.
ps. I hate the word 'unicorn'.
With regards to lack of investors I don't think it's as simple as that. If it was only a matter of investments then surely US investors or Asian investors could just come in with the money. There is something that makes European VCs risk averse and keep american investors out of Europe IMO.
> I hate the word unicorn too, but it's shorter than private market companies with a valuation of more than $1 billion :)
Ah, is 1 billion the limit for the 'unicorn' definition? In what amount of time? :-) We have 7-year old companies, with 50+ employees posing around as startups everywhere these days. It's not related, but you know... Everyone is playing with words here :-P
> With regards to lack of investors I don't think it's as simple as that.
Of course you don't, otherwise you wouldn't have written a blog post... You could tweet! But, unfortunately, as most social phenomena is not that complex :-)
The reason we can't have a "unicorn" in Europe is that no one is going to support a company that it's expenses outsize it's turn-over even if this is because of extremely high growth rate.
If you're lucky enough, you might land some millions from some startup event. But even they, ask to see growth (in terms of users) and (hehe) immediate ROI.
In startup Istanbul 2014 the no1 startup which received investment was the only company who didn't actually need it... It was already generating way more than it could burn. So it was a very easy bet.
Small-cap companies is shorter than that too and it actually means something. Don't give excuses for using stupid terminology.
It's an annoying term, but it works (unfortunately)
One of the differences is European investors tend to think on the basis that if it walks like a horse, neighs like a horse and only actually does the same job as a horse ....
You're both right.
Apparently US investors don't even like going out of Silicon Valley, why would they go all the way to Europe?
Or investors in Europe have enough opportunities to generate more than the typical return on investment of VC? The average VC ROI is really low, it gets outperformed even by passive index funds IIRC.
Edit: Found the source.
"Yet 2013 annual industry performance data from Cambridge Associates shows that venture capital continues to underperform the S&P 500, NASDAQ and Russell 2000."
https://hbr.org/2014/08/venture-capitalists-get-paid-well-to...
The top companies only want to go with the top investors and vice versa. I wish they'd publish data. I'd love to see Benchmarks ROI on their recent fund, it's likely going to be the best performing fund of all time.
Try opening a company in, say, France. (This was a cruel joke. Please don't, for the sake of your sanity).
BTW I'm centrist on the issue of gun ownership & carrying but I just wanted to point out the flaw in your deduction.
Are you sure your arrow there means causation?
Explain like I'm five, why do you think the police feels it needs to compete with law-abiding gun-carrying citizens?
I've never heard of this silly idea before, but maybe I'm silly and you have a great argument for that.
If you had said "the more guns in criminals' hands, the more police militarization to preserve advantage" then I'd agree with you but I'd ask to see how you know the number of guns in criminals' hands.
0.001% of law-abiding gun holders are a problem for the police. 100% of criminals are a problem for the police, whether they're carrying guns, knives, or a closed fist.
Not sure what afsina's point is though.
No gubbermint funding and directing innovation then, no digital computer in your pocket now.
Mirror: https://archive.is/qBEfh
I guess this is an argument for accepting remote work. There are lots of talented people in places where they like living. How (new) companies deal with this will determine how the talent pool is used. As everybody argues there's insufficient talent, by definition there's insufficient talent wherever you are.
Here in California, most employment is at will, meaning that either party can end the relationship immediately. I can quit without notice; I can be fired without notice. (In practice, notice is generally given, but that's custom, not a legal right. One can also write an employment contract with other terms.) But from what he said, it was very difficult to get rid of underperforming employees, and also hard to reduce staffing levels if the business needed fewer people.
Is there anything you can add to the discussion of substance? Or, perhaps, is this drive-by FUD all you have in the content holster?
The title 'Why is Europe Failing to Create More Unicorns?' has an implicit bias in it. The question is saying that Europeans should create more of these massive new companies.
10 smaller companies might be better than 1 big company. 100 companies worth $10 million dollars each might provide the same number of jobs and the same services to the economy.
Maybe?
Admittedly if you listen to European entrepreneurs you can't come away and believe that everything is rosy for new businesses.
But the fact is that they have an effect on the world outside the US. Perhaps you are fine with that, I would love to see some more Europeans get into the game if nothing else to boost morality and have more people try and create companies.
If a proportion of those europeans who could run startups hold back from following certain business models then you will get fewer startups overall.
Before you read on: This is a complex issue and I don’t claim to have the answers. In fact it’s going to ask more questions than it answers and I wasn’t even sure I wanted to publish it. It’s not even obvious why chasing unicorns is such a good idea.
In the beginning and:
Unicorns might not be what Europe want and we might all agree it’s an unsustainable model.
in the end.
Not sure how much more I could have done before someone started complaining that i was repeating myself :)
I'm not sure what point you're trying to make.
It's beneficial that Airbnb is so big because I can plan a cross-continent vacation using one website instead of searching for each city's/country's version of it (which may have poor customer service or be ran by scammers).
It's beneficial that Uber is so big because I can use one app to summon a car anywhere around the world instead of having to install a new app in every city/state/country.
Just because 10 companies could provide the same amount of service and jobs doesn't mean that it's beneficial to customers.
The question the OP is addressing is about growth limits in Europe, not about the moral value of large companies.
EDIT: I am not arguing for monopolies. Multiple companies with service around the world can and do compete.
The big players will just starve out the little ones. AirBNB isn't infrastructure, it's a service. Without a complete socialist re-imagining of society, that will never happen.
Rather, the internet was created by an academic-military coalition that had sufficient political power to overcome the phone companies' and regulators' opposition to data networking.
It's plain that you weren't on com-priv then, you aren't on NANOG or equivalent now, and you haven't read the history.
It's not easy. Why and how would they interoperate? What stops any one of them to grow and expand to other countries?
- larger companies can leverage near-monopoly status to prevent meaningful competition, increase rates, etc. (e.g. Verizon/AT&T/Comcast)
- larger companies can collude to drive the price of labor down. (e.g. tech anti-poaching pact.)
- one large company, by being "more efficient", may in fact employ fewer people than your ten smaller companies combined, especially if they are able to invest in large-scale automation initiatives.
- larger companies have a wider view of your activity, making them a single point of failure for personal privacy. (e.g. national security letters, NSA datacenter tapping.)
To paraphrase the parent comment: just because one company can unite the services of ten doesn't mean that it's beneficial.
I would certainly prefer a large mobile provider with service around the world (of which there are many) than a small provider operating out of my city. I would prefer a large ride-sharing app (of which there are at least two) with coverage in most major cities instead of installing 10 different local apps for the same purpose.
I'm not arguing that big companies are better, but I am arguing there are certain benefits to large companies that operate around the world (as long as there's competition).
It's a thorny subject because it very quickly can turn into a political or ideological discussion. I was trying to avoid as much as possible because I think it needs some debate no matter what the conclusion might be.
Most of the greatest inventions of the past 100 years have come from large businesses that had the man-power and capital to invest in significant R&D departments.
Like I said below; AMD and Intel have a duopoly on x86 processors and have for ages. Intel's profit margins waver between 1/4 and 1/3 of revenue. Simultaneously, processors get better and cheaper every single year.
Your narrative leaves out the huge sums of public dollars that underpinned those innovations.
Look at the airlines. There doesn't need to be this much competition in the airline industry (https://en.wikipedia.org/wiki/List_of_airlines). They've had too many players for far too long, and it's caused them to compete to the bottom.
Sure, flights are "cheap", but not as cheap as they would be if these companies could afford to upgrade their infrastructure, invest in more modernization efforts, and so on. In fact, the average airline makes about 1% return, or $100 in profit for every $10,000 they spend. That's not a recipe for a healthy business, or a healthy industry.
By comparison, AMD and Intel have a duopoly on x86 processors and have for ages. Intel's profit margins waver between 1/4 and 1/3 of revenue. Simultaneously, processors get better and cheaper every single year.
Aside from that, your phrase "drives society forward". I always here this phrase thrown around in these discussions, but I have yet to receive a coherent explanation of what that means, or what this great lord of Progress consists of. I think one ought to remember what the aim is. Change is not the same as "better", chaos is also change (the article says we fear change at its core, which I think is stupid; we fear loss of something which change can entail; some are addicted to change for its own sake out of from psychological illness). There is the social dimension to consider, the psychological, the spiritual, the environmental, etc. The empty profit seeking and vacuous worship of tech or whatever is desolate.
Are: eBay, Amazon, Google, Facebook, Uber, Priceline, Expedia, SpaceX, Tesla, PayPal, FirstSolar, GoPro, Salesforce, Workday, FireEye, Splunk, Netflix, Yahoo, Twitter, DropBox, Palantir, Pandora, etc. good for the US?
They were all the equivalent of small unicorns once. So the question is: as opposed to what? All of those companies existing somewhere else, and most of the benefits going to other nations instead (jobs, taxes, investment, innovation)?
There is now a mini-GmbH, essentially a type of Ltd. that can only handle a limited (pun not intended) amount of assets, but does not require you to have enough assets to pay back the debts.
Then there are GbR, etc, a lot of nice incorporation types, but these, while effective for a normal company, are not useful for a silicon-valley type of company, as the silicon valley relies on an investment bubble - and a GbR and similar place the liability completely with the owners of the company.
Then there are consumer cooperatives and so on, but while these, again, are useful for the normal economy, you can’t use them to make profit by scamming people (as they are effectively profit-less).
If you don't want to be a cynic: German law is optimized for protecting the public from investment scams---which makes it hard for startups that aren't investment scams but become victims of false positive identification by german law as possible investment scams.
Not all of us speak English.
For a splendid example, see https://news.ycombinator.com/item?id=10220679.
The challenge is that still a lot of things are distributed (you are vastly more likely to read your national news, shop at national ecommerce shop, shipping rates are much higher if you do that oversees, etc.).
We stick to our local languages because they're part of who we are. Europe would probably have a little more money if we stopped doing that, but it would be a lot poorer.
(A language is a dialect with an army and a navy)
https://en.wikipedia.org/wiki/A_language_is_a_dialect_with_a...
Scandinavians are some of the most successful societies, despite of small languages. Languages have cultural baggage to them; every time I hear English, I see high inequality, poor worker rights, obsession with money, yet excellence in science and higher education. No one wants to abandon their own and assume English identity.
No wonder Jeb Bush is taking a lot of flack for speaking Spanish in public when you got crowd like this.
Also one of the huge benefits of post WWII order was the creation of homogeneous national countries. Which explains the abnormally long peace period. So nationalism and national identity are extremely strong in europe.
England does not see itself as part of Europe. If anything, England sees Europe as an extension of France. And England hates France with a vengeance. Geography and history aside, the UK is not a European country at heart.
We Arabic speakers also enjoy or suffer , it depends on your perspective, from this phenomenon as we mostly speak in dialect all the time but in formal contexts esp. in writing, we use the Modern Standard Arabic instead. However, writing in dialect or MSA derived languages is becoming more acceptable in literature and the press at least where I come from, that's Egypt.
Călătorie sprâncenată, frățâne!
Because they don't all know English and even if they did, why the fuck should they?
Because the local language is a majority language where it is the local language, and, globally, every language is a minority language (and English isn't even the biggest minority -- its #2, far behind Mandarin, for total speakers, and #3, behind Spanish which is far behind Mandarin, for native speakers.)
Today, it's a lot better than it was, but in many places the powerful noblility have been replaced by other powerful interests and some industries still operate like they have the God-given right to supply automobile tires to the French people and all good men must express solidarity to expel these upstart invaders... :(
Over regulation is what the US does with taxis. Which is why in Germany companies that do essentially the same as Uber (but legal[1]) already existed before Uber was even founded.
What I see the "issue" is that as soon as some size is reached, we don't really care about expanding further. Why take a risk when you already have a pretty nice market?
[1] In Germany, where UberPop is currently banned, you can start a taxi company if your drivers are insured with commercial insurance. To make profit, your drivers need to have a 55€ license as taxi driver. Simple as that. UberPop is only banned because they did not want to insure the drivers (the license is less of an issue).
Do you have a source for this? Uber insures its UberX drivers in both Canada and the U.S. so I don't see why they would be opposed in Germany. There must be something else.
Uber does heavy demand-based price adjusting, and well, fuck that. Better have the assurance of always paying 20€ for my trip home, than the variability of an Uber with 10-50€.
You know when booking the trip what the cost is, it's not a mystery.
> the fare is regulated - no matter the demand, the area of the source or destination
Does Germany not have supply problems caused by this policy?
I know it's impossible to get a cab in Toronto on New Year's, whether you're coming home from a party or your wife is going into labour. I'd personally rather know for sure there is a ride available if I need it than be stranded by the side of the road because nobody is allowed to take my money.
People seem to forget that Europe is not a country. Europe does not have a single uniting language. What happens, is that every country starts their own smaller versions and they stay mostly within that country. If they want to move to another country, there's often already a major player there, and they might not have the means to kick them out.
I think the reason that silicon valley is so powerful, is that the initial market is 325 million people who all speak the same language. Once you get the US market, you have the size, name and means to easily start conquering European countries. It's always about scale...
I've managed to read it and I see you did mention it. You other points do add some interesting ideas that I haven't considered before. Especially #3 is interesting.
successful examples that started in europe soon moved to the us to take off. qliktech/qlikview as a swedish example. intercom being spread across ireland and SF. etc.
the one market that could rival the US will be china. it is harmful to non-chinese investors though, but once they open it up a huge, homogenic market will pop up. wechat, baidu, alibaba already show what is possible there. apple and uber coming in with mature(rer) businesses. wonder when we'll see a mixed-background startup emerge in china.
as someone from austria that moved to the bay area - you must be bonkers to try ramping up a startup in most of europe. if your desire/plan is unicorn-scale of course.
I don't mean to sound like I'm minimizing the language issue, but it is surmountable.
To contradict my devil's advocate question above:
My guess and observation is that the ROI on certain localizations isn't good enough to justify the work needed to make a pan-European go at something. So people pick markets where the ROI will be good: England, Germany, France....maybe Italy, and then it all stops there. Neighboring countries with high ROI demographics usually have speakers of those major languages as a second language and can get by well enough with those offerings. And nobody really targets minor dialects for big offerings.
Also, by the time you've gotten enough traction in your country, there's a me-too (or a dozen) in your other markets.
Look, you're a start up, you're running lean, you're cranking out a MVP - are you really going to invest an extra 40% into trying to get into 3 other markets before you're able to get your head above water?
Currently I have a business where I import used computer and network components from US and sell them in the Norwegian market. (I can import pallets of equipment for less than what the total cost is for local shipping in Norway).
While I do make some money on it, the market in Norway is so small that its just a few sales every week. But it's fun, and I'm learning a lot so I still think its worth it.
I would love to sell to the rest of Europe, but I can't solve the logistic problem of transportation of heavy packages. It's hard enough inside Norway.
Doing business in Europe is hard, you have currency issues, language issues, culture differences and then you have all the bureaucracy. All the paperwork, for every minor detail.. :(
Germany has here the advantage of a low valued currency, extremely well done infrastructure, good interconnection, and easy access to other markets. Same with BeNeLux, France and Italy. In some regards, even Spain.
Imagine starting a Facebook in Germany versus the U.S. Spreading from state to state is easy because there is a large amount of media and social overlap. If you have a successful startup in California its much easier to spread to Texas, New York, Florida, and Illinois than to spread from Germany to England, France, Italy, and Russia.
Having access to a similarly large initial market is also part of the reason China has a rapidly expanding and flourishing startup environment and culture.
I don't know if China would look the same if they allowed western companies to just swoop in to extend monopolies.
Most successful startups in post-2000 China are largely privately owned. While they are indeed subject to regulatory constraints, needing to work together with the government is largely a constraint to survive, not a reason for success. Their successes have very little to do with the government and much more to do with the market, rising economy, and better infrastructure (e.g. education, venture capital, incubators, startup "hotspot" cities, etc.) for startups to build upon, as well as the sudden explosion of a middle class that can afford the various things these new startups are offering.
I'd say a large part can be attributed to the fact that China and USA both have similar market sizes and both countries are each reasonably homogeneous in culture compared to, say, Europe.
And that you have little hope with Chinese law before a Chinese judge and a favored Chinese company. It is a hostile atmosphere to even Chinese-speaking countries -- if you are not connected to the government.
I'm saying it's very hard to discuss market forces from "free" market principles when the most successful companies in China shall be deeply connected to government. You wouldn't say Gazprom is a product of the Russian economic environment. Nor is Alibaba and Baidu.
My point is completely orthogonal; I'm simply saying that regardless of how business is done in either USA or China, each has its own massive market testing ground that speaks a single language, each has its own reasonably homogeneous culture and each has its own reasonably homogeneous set of consumer problems.
This is very different from, say, Italy and Sweden which are different on so many cultural levels. I'm simply supporting the point that Europe should not be treated as one market.
I think that protectionism disallows existing giants from carving up large slices of a market. Having to compete against the tactics of big giants is a capricious barrier to market, and probably not a good nurturer of innovation.
Had many countries severely gimped or barred Google / Microsoft from entering their country, while funding internal alternatives, the world might look very different.
I don't think so. Most of the immigrants are uneducated people, with no willingnes of finding a job. They want to go to Germany because that's the country with highest benefits for unemployed. How would we benefit from THAT ?
Also, if this was really about finding safe haven from war, there are rich, muslim countries like Saudi Arabia or Turkey, which are much closer and would be much better place for them anyway, due to similar cultural background, but for some reason they prefer EU with it's social benefits.
You're not even consistent. First you portray refugees as lazy welfare hogs, now you say they are wealthy because they can afford the smuggling gangs. If they are so wealthy, what makes you think they only want to come to Europe to collect unemployment benefits?
Someone applying for asylum in Germany can be stuck in limbo for years before being rejected and deported. This happens fairly frequently. Throughout that waiting period they're not allowed to work and are stuck in refugee camps that are getting less and less hospitable as the number of refugees grows (simply because the communal governments asked to take care of them don't have any money and often only learn how many they have to accommodate when the buses arrive). Refugees don't have an easy time.
If you think all of the "Muslim world" is one big cozy community you haven't been paying attention. The "Muslim world" is about as united as Ireland during the Troubles. The civil war in Syria is fought between a totalitarian dictator and Islamic extremists. Saudi Arabia is an Islamic fundamentalist dictatorship. This is the last place you want to go if you don't agree with either side in the conflict. Yet Saudi Arabia has accepted thousands of Syrians into the country (although they don't treat them as refugees, which is what led to the claim that they don't take any Syrian refugees).
And Turkey? Tons of refugees are going to Turkey. And many of them have hopes of being able to return to their home country when the war is over. To quote Wikipedia: "As of April 2015, there are 2,138,999 estimated Syrian refugees in Turkey." -- that's an order of magnitude more than any EU country (and Turkey isn't that big of a country nor that wealthy).
Heck, many places outside of Europe have granted actual residency permits to Syrians. That means they're not even treating them as refugees but as perfectly ordinary legal immigrants -- a far cry from the temporary shelter and perpetual "Duldung" (i.e. promise not to get deported yet) they would get in Germany.
You're pretending the EU countries are the only places accepting Syrian refugees. That simply isn't true. The reasons we hear more about refugees coming to the EU than those being accepted in other places is simple:
1. Most of Europe shares a common border (Schengen), so "our borders" span more than just our own country.
2. There are a ton of countries in Europe, so each country accepting a lot of refugees adds up to a very big number.
3. We live in Europe (or in the US: you're closely related to Europe) so we pay more attention to what's going on here.
Stop listening to AfD/NPD/BNP bar-room clichés and pay attention to what's actually happening outside the Western World.
Some reading material:
http://www.cbc.ca/news/world/for-many-syrian-refugees-fleein...
http://www.irishtimes.com/opinion/lebanon-struggles-to-shelt...
https://en.wikipedia.org/wiki/Refugees_of_the_Syrian_Civil_W...
Stopped reading after this line. So to this guy, a market is a geographic definition. Well, we're not in the 19th century anymore. We're not defined by hills and roads and river access.
IT startups identify markets from culture and language first and foremost. And you obviously won't market a product the same way in germany, france, or greece. It's the biggest issue with euro so far: same currency, 25 different cultures.
To make such a fundamental mistake in an analysis, one has to have never had even one single business relation with two different european countries.
Pardon the question, but I have read that organized crime is making a strong resurgence in Italy. Does this factor into your startup or affect it in any way?
I'm not sure why you think this is bullshit. Most startups fail. It seems like good sense to be wary of taking a dependency on another business that might not be around in the near future instead of an alternative that has already proven itself in the market.
Or become a IBM /HP/MS technology partner and sell through them.
Goodluck !
That's a completely valid reason to not take your business, and it's a problem that US startups face just as much. Personally I don't touch products from startups with a ten foot pole unless the benefit is overwhelmingly massive (very rare) or it's designed as a one time purchase with little necessary long term support.
If you're selling to businesses then longevity is going to be a top concern no matter where you go. Whatever benefit they get over your mainstream competitor is likely not worth it compared to the risk of incurring the cost of switching technologies twice in a short amount of time.
A small startup has no momentum and little power.
The smallest obstacle can block progress.
Having to file endless forms and being unable to take on staff due to restrictive hiring regulations can stop a small company dead, unless they cheat at the regulations.
Most people don't understand that, and just say 'why can't they just submit the forms?'.
Sure, some companies have enough momentum and funding they roll right over those things. Those were always going to succeed.
What people don't see is all the promising ideas that stop dead at little blockages, and either die or go elsewhere. Maybe 1/10th of startups are destined for success, no matter what. Maybe 8/10ths are destined for failure, no matter what. The remaining 1/10th is a fragile new thing, and needs help to get rolling. Killing that 1/10th through bad regulation is enough.
Many people talk about the SV advantage being the networks of people and the can-do attitude towards building things. Just that little bit more fertile ground for startups has a big flow-on effect.
I'd also like to say that the cost of earning money is higher here. €10k takes one year to save for a very good employee. There are so many taxes when you earn something... I've once calculated that adding 10€ in my LTD sales provides me 3.20€ for personal spendings. So it's just much harder to reach a Unicorn valuation when it takes that much to gather money.
get a local conviction on your personal record and you're toast.
But, why are more unicorns a good thing? Yes, there are less VCs willing to throw money at 'SOCIAL APP n', but most startups will tend to have something more concrete.
Plus, assuming unicorns are 'natural forces of free market' is ignorance and hurts the economy in the long-term. These 'natural monopolies' use/abuse a financial system created by government. In a free market(no government intervention), they'd never be able to raise as much money and takeover as much market cap as they currently do.
Less monopolies is not a signal of a interventionist economy. Quite the opposite.
No, it's not just semantics. Look at the history of Siemens or any other of these old European companies. There's one aspect that is present all their history and that's government involvement. One could even say that their first venture capitalist that gave them a chance was the government. They all pretty much started out by getting contracts for building infrastructure or military hardware.
My point is that in the historical context most large companies made it big with or without government help both in the EU and in the US.
So whats changed and thats what I am trying to explore and one of my conclusions is that it might have to do with how Europe is implementing laws. Keep in mind that the EU still have many government supported companies so if thats all it takes then there might be more.
But it's a complex issue which is why I wrote it because I was hoping for discussion like these and points like yours to surface. So thanks.
1. In my experience, Europeans are less dominated by the "newer is better" desire to constantly get the latest gadget/technology. I wonder if others agree.
2. European money appears to be more dominated by old money / aristocracy and that these people like to invest within that network. Engineers are less likely to be part of the aristocracy and are treated more like commodities than the enabling superstar athletes they are (at least the kind that make unicorns). I know quite a few engineers that make over $200k in SV but only one who makes over 100k GBP.
I have no idea how American start ups can get away with demanding users live on the bleeding edge but apparently cultures can be very different.
Most of the startups have private customers, not corporate!
> 2. European money appears to be more dominated by old money / aristocracy and that these people like to invest within that network. Engineers are less likely to be part of the aristocracy and are treated more like commodities than the enabling superstar athletes they are (at least the kind that make unicorns). I know quite a few engineers that make over $200k in SV but only one who makes over 100k GBP.
At least here in the Netherlands that seems to be pretty common. Generally, investors are more conservative, and rarely take major risk. Salaries are also just slightly above working for a consultancy, but not always.
Good luck founding GitHub in 2008 Germany.
It also carries a subtextual reminder of just how rare $1B startups are. No substitution does this.
It's just jargon with a useful subtext. There's absolutely no need whatsoever to cringe, and even less to censor the word from titles.
I can think of a lot of successful European startups -- Minecraft, Spotify, Skype, DeepMind, the list goes on... -- and just as many startups led by Europeans that have succeeded in America (Lending Club, etc.).
But if Europe has trouble supporting "unicorns", there are probably a couple reasons: 1) Gaps in the funding ladder. 2) Talent flight. 3) A preference for regulation. 4) Countries, like France, that combine technological conservativism with social rigidity.
Combining that with the violence-filled reaction to Uber, the hysterical response to AirBnB and the obsession with physical paper and it's no wonder that France is a horrible startup environment. Also, let's not forget the billion+ dollar exit for Daily Motion that was blocked by the French government. If if you were to build a unicorn you wouldn't be able to do anything with it except maybe cut it up and cook it in a sous vide: provided it wasn't imported from Spain or Poland in which case the farmers would drive tractors into Paris and set piles of shit on fire in protest.
I am not making a judgement on is European Socialism a good thing or not; I am merely stating reasons that it is difficult to expect high returns in such an environment.
Complaining about bureaucracy sounds like a more believable theory considering that the Swedish one is pretty streamlined all things considered, but that is a totally separate issue than the sheer amount of taxes paid.
I died.
It's quite weird that Europe can be considered a bad place to succeed. Slovenia is a cheaper country than US, talent pool is still large enough, a startup in European countries like Serbia, Slovenia, Croatia and similar can last way longer and employ more people for the same millions that US startups burn through incredibly fast. Not to mention the expensive standards of living in silicon valley.
In that scenario, the startups who become successful (and who originated elsewhere) all get counted as U.S. successes. This would vastly undercount both the total number of startups elsewhere as well as the number of successful startups.
The question that still stands is why they are moving the the US.
Investors are looking to fund companies with global reach that will break down communication barriers, render national boundaries meaningless and bring us all close together. . . as long as they are located in California.
This is what I am trying to explore.
Silicon Valley being the pre-eminent location for start-ups is a positive feedback loop which puts it at the extreme tip of the power distribution.
I both mention that there are European startups and that there are popular european startup founders in the US.
Not sure how much more clear I could make it.
https://techberlin.com/articles/16-biggest-exits-so-far/
I don't believe for a second that someone signing away their rights is necessary for company survival. Maybe you as a company leader need to do a better job so you don't come to that point, and if you have, then maybe you aren't fit to run a company.
You mean the € 25k required to found a German LLC (GmbH)? As of a few years ago it's possible to found one with a single euro as long as you use a certain fixed percentage of the profits to built the company's capital (the company remains "UG (haftungsbeschränkt)" until you accumulate the € 25k, then you can transform it into a "proper" GmbH).
The paperwork involved (including notary and lawyer/accountant fees) still mean you should have about € 2k disposable before you incorporate, though -- not to mention the ~ € 500 you may accidentally pay scammers if you're not careful.
That said, Facebook and similar startups couldn't have started in Germany simply because of German privacy laws. At least once a week I hear of a new US product or start up that simply wouldn't pass basic privacy checks in Germany.