Europe needs an investment culture similar to the Capitalist American culture. Without that there is no hope for anyone. There need to be investors and technical people in one hub that feed off each other, network with each other, and empower each other.
How many American startups are a result of a pissed off employee working at a successful company going off and creating the same thing his or her employer did but better? And this cycle feeding on itself.
Or university students with an idea getting all the financial, technical, and managerial support necessary to create the next big thing.
You have to understand the process and then try to replicate the process. And each component of the process is as important as the other. You need the whole pie. Not a piece for it to succeed.
You can seed this with massive capital expenditure, tens of billions basically poured into private coffers of Caplists, but the process has to be very similar for it to actually work.
> How many American startups are a result of a pissed off employee working at a successful company going off and creating the same thing his or her employer did but better?
Some numbers might make your point more convincing.
“The combined value of the top three internet companies in the Americas – so, basically, in America – is around $0.75tn (£0.5tn). In Asia, it’s around $0.5tn. In Africa, it’s $50bn. And in Europe, it’s just $25bn.”
In Europe, we have wealth redistribution. A few companies with so much concentrated financial power is not healthy.
Europe has plenty of big companies - Total, Volkswagen, ING, Daimler, Fiat, Siemens, Tesco, BMW, HSBC, Nestle. The problem is that it's very difficult to make new ones. "Mergers aside, the youngest firm in the CAC 40, [France's] main stock index, was founded in 1967."
Sorry to burst your bubble but "In Europe we have X" is more often than not a "myth", Europe is much more closer to the US it in's overall outlook than most European would think.
And as far as educated professionals go then Europe is actually considerably poorer than the US, so unless you're a low skilled worker I would not take so much pride in that.
Europe has far more stagnant wealth than America does in fact.
Europe's dynasties do not tend to give away their wealth, instead they pass it down through families for generations. Most of Europe's largest companies and fortunes are controlled through family dynasties. American billionaires always dominate the list of most philanthropic.[1] It's also why Europe sees such a low rate of turn-over among their billionaires, and why such a high proportion of their billionaires are derived inherited wealth. [2]
I think so, if vast wealth passes down through generations and occupies such a large portion of the ultra rich. Stagnant in this regard refers to wealth that is inherited.
How about if Europe's entrenched old money prevents new money from arising, and is part of the problem? Money comes with obvious vast influence on politics. What if that old money acts to protect itself at the expense of economic dynamism and new wealth creation? I think it's a reasonable conclusion that that does in fact occur. Is bunched up old money inherently more conservative? I'd argue yes.
The parent comment implies that wealth is more redistributed in Europe. That is plainly not true, given the extreme inheritance levels of their billionaires and lower rates of philanthropy.
The wealth is also not inherently bound to the operations. You can give away your billions without sinking a business. Berkshire Hathaway isn't going to collapse when Buffett dies or gives his remaining wealth away (Burlington Northern railroad isn't going to tip over when he gives away his last shares, just as BMW wouldn't if the Quandt family ended their dynasty, ditto Walmart with the second generation of Walton heirs). Just as Microsoft isn't collapsing as Gates exits his formerly huge percentage share of ownership (he has gone from ~60% ownership to now ~3% since the IPO, obviously it has not seriously harmed Microsoft). There is a large, important question at the center of this that can be best illustrated by a rhetorical: is Howard Buffett (Warren's oldest son) the best qualified to run Berkshire Hathaway? What are the odds the Quandt family is best suited to steer BMW for the next hundred years? Or that Inditex should be run by the Ortega family forever, or that the Slim family should control such a large swath of telecom in Mexico for the next century? I think that kind of economic dominance by families is more often detrimental (loss of dynamism, too much wealth acquired without earning it) than beneficial, much as a cartel or monopoly ends up being.
Not if inherited wealth is in fact more stagnate in terms of the results it produces in an economy, because that wealth is acquired without earning it (with the heir very likely lacking the early formative experience, knowledge, talent, or drive required to create it), including if it acts as a large drag on new wealth and business formation.
The stagnation is derived from people inheriting the wealth who do not possess the creation ability or skill level of the originator/s. Put in starker terms: incompetent, low ambition, low skill, low accomplishment heirs that rest on the wealth. I'd argue that's far more often the outcome than not, and I believe we have the proof of that in the history of who starts companies, who creates the most successful companies, and who creates the next tiers of innovative breakthrough companies - and who does not.
Scrappy entrepreneurs like Elon Musk and Steve Jobs do, not the Nth generation of extreme dynastic wealth like the Quandt or Walton families.
“The combined value of the top three internet companies in the Americas – so, basically, in America – is around $0.75tn (£0.5tn). In Asia, it’s around $0.5tn. In Africa, it’s $50bn. And in Europe, it’s just $25bn.”
In Europe, we have wealth redistribution. A few companies with so much concentrated financial power is not healthy.
Personally (as someone from Europe), I'd say the general reasons we don't have an equivalent tp Google or Silicon Valley or any of that sort of thing are more that:
1. European laws are too restrictive. It's especially notable with stuff like the hilariously stupid online tax laws the area has (having to apply different tax rates based on the location of the user rather than the business makes it hugely more complex than it has to be) or the right to be forgotten, but it just feels we're too restrictive here in general.
2. Culture. People in the US seem more ambitious and more willing to risk everyone for the small chance of becoming a millionaire/billionaire at the end of it. People in European countries on the other hand seem to be encouraged to avoid risk and avoid anything that might lead to less job security in the short term. Probably because failure in the US is seen as a minor bump in the road, whereas failure in Europe is seen as the worst possible thing imaginable.
3. Money. Not just in the form of venture capital (though that's a huge reason), but also because US startups tend to pay their employees more, whereas their European equivalents stick to the average local wages. Hence the best programmers, designers and other such people usually either find employment in a more stable company (read, one where there's a work/life balance) or move to the US to work in Silicon Valley.
If we want a 'European Google' or European startups in general, we need to become less risk averse, more willing to reward the types of people needed to work in those companies and less obsessed about regulations.
Oh, and fix the issues certain areas have with internet connection speeds. The fact that a lot of areas in large cities like London can't get fibre internet and the likes is not helping our tech businesses compete with their US counterparts.
Also: Different languages to cater to right from day 1, better job security so less of a drive to be independent, education tends to prepare for a job rather than for running a company or being a founder.
"People in European countries on the other hand seem to be encouraged to avoid risk and avoid anything that might lead to less job security in the short term.
Hence the best programmers, designers and other such people usually either find employment in a more stable company (read, one where there's a work/life balance) or move to the US to work in Silicon Valley."
> If we want a 'European Google' or European startups in general, we need to become less risk averse, more willing to reward the types of people needed to work in those companies and less obsessed about regulations.
I think we don't. Europe just isn't setup for breakaway successes in the way that the US is. And we wouldn't be able to stomach the societal cost even if we were to try.
Europe is built to enable a Mittelstand [1] though which also allows for lots of diversity and innovation and is why Germany is still an industrial powerhouse.
If Europe wants to compete it should do so on its own terms; except doing so is virtually impossible when companies can claim ownership of their users data because that inevitably leads to the massive centralized monopolies we're seeing now.
One thing Europe is good at though is pushing through laws which prevent companies from establishing harmful monopolies though and that is what Europe needs to do.
If in addition to "the right to be forgotten" Europe would push through "the right to own your data" and forced companies operating in the EU to return all user data (down to request logs used for analytics) to the user the dynamics of tech industry would change dramatically; and in a positive way for the user too.
That will take a while but I think, or hope, it will happen eventually and either way; it will have a much greater chance of success than trying to copy a model that is inherently at odds with a value system developed over dozens of centuries.
What's the betting that if Microsoft had originated in Europe, it would have been stopped in its tracks? For all its monopoly (draining somewhat now as the world moves on) it's created trillions of dollars of wealth across the world.
Has it? Aren't you making the mistake of comparing the status quo with a copy of it sans Microsoft? Let's say European laws prevented a Microsoft from appearing; computers would still be here, and companies and organizations using them would still need an OS to use them, so there probably would be an increase investment in alternatives.
Would the world be worse off? Maybe in some ways, but I doubt it'd be significantly so.
Microsoft held back computing for a decade or more. So many companies didn't start because they were afraid of being crushed by MSFT. Such a lack of diversity and experimentation. So many security problems.
Europe today might not be set up for economic dynamism, but that's not some consensus that has formed over "dozens of centuries", as you claim. Liberalism is not an American invention. The Industrial Revolution began in Britain. Adam Smith was a Scotsman. The individualist and capitalist Austrian School of economic thought was centered in Vienna. The Dutch invented public corporations. And Europe has had plenty of other influential philosophies since then, like Fascism and Communism in the last hundred years.
I agree with everything you say, apart from the general assumption in #1.
The examples you provide for European laws being too restrictive are correct imo, and there are more examples of laws that were, in my mind, the poor execution of a good idea (take the EU privacy directive that forces the opt-in for cookie tracking. This has in its execution by Google etc. generally become more of an annoyance than a privacy feature).
However, I think the decisions the European Court of Justice makes on these issues could be a chance for Europe. The 'right to be forgotten' and the recent safe harbor decision show--in my opinion--that the ECJ wants to establish a more privacy-focused jurisdiction in Europe. That could be a chance for, say a Google competitor that does not track you through AdWords but, instead, relies on a monthly subscription model (this might not be a very good idea, but you get my point). And when Angela Merkel says that 'too much privacy is bad for business', I disagree, because Europe cannot come to the table one decade late and copy what worked in the Bay Area.
If Europe establishes a reputation for a different sort of service that relies on strong encryption, user privacy and the absence of ad-support but rather subscription, I think the European startup world could thrive in serving a market that is currently emerging rather than one that has been there for the better part of a decade.
I don't think enough users care enough about privacy for there to be a massive market there. If not why didn't more people switch to DuckDuckGo or Diaspora?
"the poor execution of a good idea (take the EU privacy directive that forces the opt-in for cookie tracking. This has in its execution by Google etc. generally become more of an annoyance than a privacy feature)"
That's because Google rather have these annoying notices than make it easy to disable tracking. The EU did the right thing in leaving it up to the industry how to solve these problems, it's just that the industry doesn't want to.
> They can afford to take one year of to travel the world or just work on their own projects.
Can they?
> Why am I dealing with this crappy weather when I can move to somewhere where I'm paid 2-3x more and it's summer all year?
Because you don't risk bankruptcy by having a health issue, if you're single it's not a sausage fest, more laid back work (in SF it seems you're bound to stay longer times at the office), greater tourism choices (a short trip away) and probably still cheaper than rent in SF even if we're talking London
Why would you risk bankruptcy? Every company in Valley typically offers great health insurance. London rents are more expensive than San Fran in particular areas and buying property has become nearly impossible at any reasonable price.
> Because you don't risk bankruptcy by having a health issue, if you're single it's not a sausage fest, more laid back work (in SF it seems you're bound to stay longer times at the office), greater tourism choices (a short trip away) and probably still cheaper than rent in SF even if we're talking London
We have another reason right in this very answer: People in SV are willing to take more risk and sacrifice. Sure there are chances one may be bankrupted because of a health issue. Sure there are fewer entertainment choices. Living in SV may not be an ideal lifestyle for many but it has attracted a lot of adventurous mind from all over the world, who together conjure up trailblazing ventures.
Not only do I not think that is true, I think there's real danger that people conclude that more risk is better. SV is in many ways risk averse. The days when any kid could get a million dollars are over. Almost every success story seems to happen on a background of brand name colleges, companies, incubators or investors. What I think people mean when they talk about risk is really "hype". People move to SV to work in the tech industry because that is THE place to be. You don't have that in London, Berlin or even New York. The pure momentum of the industry simply overshadows any health care, housing, dating problems in the bay area.
> Not only do I not think that is true, I think there's real danger that people conclude that more risk is better
I don't think people in general consider more risk being better. Rather, higher reward often comes with higher risk. People aim for higher reward obviously have to accept the risk associated with it. It just so happens that, as you said, SV is the place to be for the tech industry.
> SV is in many ways risk averse. The days when any kid could get a million dollars are over. Almost every success story seems to happen on a background of brand name colleges, companies, incubators or investors.
I don't argue for or against the risk averse nature of SV. And of course, knowing the right people helps get your foot in the door everywhere. Undeniably though, for variety of reasons, there exists an ecosystem in SV that breeds the creation of hi tech businesses. If you want to make a name for yourself, being in SV makes a lot of sense. It isn't easy to replicate that elsewhere.
Just look at the list of car companies that set up shop in SV in the last few years:
Gender distribution is not particularly different in the European tech scene than in the US one. Quite a lot of companies (both in the startup and agency world) have no female employees.
Hours I'd assume wouldn't be so different in a real startup, since that sort of business kind of depends upon its employees not really doing anything else in the day.
And rent is definitely not cheaper, not if you want to live anywhere decent.
Still, you're right in terms of tourism choices, and it's a lot easier and more enjoyable to explore London on foot.
> Why am I dealing with this crappy weather when I can move to somewhere where I'm paid 2-3x more and it's summer all year?
Actually, London's weather isn't half bad compared to other places in Europe. At least there is no freezing cold, no real heat waves and less rain than in Paris, especially in the summer.
The problem is xenophobia. Hate of Europe is getting ever more vitriolic and irrational.
Reducing London to "all this crappy weather" is just nuts. It's one of the greatest cities in the world. A lot of people are motivated to live in London for reasons other than the weather!
"How many people do you know in Europe that can do that?"
I did that, after only a couple of years in the tech industry. Most of my friends could do that. I wrote a tutorial of sorts how to do things like this in a comment on HN a while ago, but removed it because people seemed to get upset (I could summaries if someone is interested).
You forget politics. Especially in Germany the hacker scene is very political and fairly well connected. If you're product is essentially spying on people and selling the results (Google, Facebook, ...), you limit the pool of employees, especially good employees, willing to work for you substantially.
I think what people tend to forget is that there is almost zero worker protection in the United States.
Most Europeans prefer a stable life with some luxuries instead of a lottery type life where you may get fired at any point.
A lot of people in Europe who say we should be like Silicon Valley only see the money these companies make but not what it took to get there and the toll it takes on the work force.
Software developers are well paid and can easily find a new job if fired. All those laws are made for unqualified and therefore easy to replace workers.
The spirit of Silicon Valley generally goes along the lines of "all or nothing".
Europe generally sees more value in a sane and balanced life style, where physical/mental health, family, stability, etc. play an important role and living itself is more important than what you will have achieved at the end of your life (in terms of money or material things).
I'd shorten the list to one significant difference that's somehow avoided - Europe consists of different countries, with different cultures, interests and languages. That's one of the beautiful things in Europe, but let's not pretend it doesn't exist. Forget laws, they can be written, changing culture, interests and financial situations is huge. There is no country called "Europe".
But to do business through all European union, there's way more added issues at the beginning then compared to Silicon Valley vs. US (similar culture, values, interests, language) or eastern countries (China, Korea, Russia and their markets).
On the anecdotal side most accelerators I've been to in London were filled with non-UK and non-EU founders, the majority would be from the US, Asia and the Middle East, the European founders would often be from Eastern Europe where people are I guess much more accustomed to having to "fight" for it.
I also agree about the employment part from both sides (legal and employee mentality) with the exception of highly competitive fields (big 4, high end law firms) you would rarely find many employees willing to work for 12-14 hours a day when need be.
Even in the accelerators unless it was a "beer and talk night" the place would pretty much start to clear out around 5, and by 7 there would be no one there. Similar accelerators in Eastern Europe or the Baltic states (as well as out side of the EU) would be quite often still quite full till 11pm and even later.
Employment laws in many countries also make it very hard for startups to actually develop, the UK (and to some extend eastern Europe) probably has it's the easiest (which is why I think that and the combination of access to financial institution is why accelerators like London) as small businesses are still exempt from things like mandatory pension.
However hiring employees in other European countries may incur heavy financial costs which include pension, healthcare, allot of paid vacation and other benefits, that combined with the cost of actually managing all the HR related stuff and the fact that in some countries firing employees on a permanent contract requires you to involve a court makes it very unattractive for startups.
I also agree about the fact that many employees simply do not want that life style, but this has also been some what solidified by employers, as you won't find many if any at employers at all willing to pay a kings ransom for extraordinary talent most roles will have a salary range set to them and while it's possible for some one to make 10% more than their colleague or even in some very rare cases 15-20% (which will usually include other responsibilities) you wont find people making 50% not to mention double what their colleagues do simply based on their apparent talent or what they've demanded during hiring / what was offered at that time.
I feel like I'm being contrarian, but I don't see how your points aren't overshadowed by other factors.
1. Russia, China, India and other markets that to some extent have "their own Google" are completely horrible in terms of running companies. Much more so than Europe. The US is no dream in terms of e.g. declaring taxes either. I think this has more to do with attitude than anything else. US companies simply hire someone to do this.
2. That would explain why people doesn't start companies, if Europe didn't already have many successful technology companies. It offers little explanation why those companies doesn't go on to become "Googles".
3. I do somewhat agree with this one. Because while the technology industry do pay good salaries in Europe startups usually doesn't even though they are in high cost markets. I'm not sure this is actually that different from the US though. There are huge incentives for "the best" programmers to work at Apple/Google/Facebook where they have higher salary and relative job security, especially if the want to keep up with the housing market.
I would say that that almost they entire reason why Europe doesn't "have a Google" is because we are part of the US market. All our contenders in the early days used to be domestic. Once we realized that we had to be global US companies bought those that were successful. Skype, for example, could have become a Google if it had been forced to stand on it's own or been acquired by a local company like Ericsson. Rather it was built to be sold and was to Microsoft.
"de facto platform, it’s hard to control and even harder to dislodge"
There is a Finnish service called irc-galleria.net. It's a service that was created to let irc users to share pictures of themselves to other irc users. It got really big in Finland. They even had big screen in center of Helsinki to show new pictures uploaded to the service. They had this paid feature which let you keep a list of friends in there. Everybody talked about irc-galleria stalking.
Then Facebook came. The major difference was that facebook let you make friends for free. Year later nobody remembers irc-galleria.
Dislodging a platform is easier than ever. It's enough to make better or cheaper product, then just get lucky. Previously you had to also take distribution and marketing into account and then get lucky.
Irc-galleria was many million euro behemoth in the context of Finland. Facebook at the time could not spend even 10k to tackle irc-galleria.
Tackling many billion-euro incumbent is probably harder than tackling many million-euro incumbent. But it's probably like twice as hard, not 1000 times harder. And it has happened in less favorable situations before. Look up Toyota.
I don't think these big platforms will ever be dislodged exactly, just made irrelevant. Photo sharing used to be difficult enough that it could act as the basis for an entire product category. Now it has been commoditized sufficiently that it can be just added to any product with relative ease. Maybe one day it will be possible to add Google style search technology to any product with ease. At that point the opportunity is to have specialist search as an add-on to other products.
I'm trying to imagine here what it would take to beat Google in it's own game.
The most frustrating searches I've had with google are always about some thing I have seen before, but can't find again.
It would be relatively easy to optimize for this if you can have some kind of bookmark app and search history available. So that search would prioritize stuff I have bookmarked or found previously. It would be probably be valuable for the search engine to know what products I have bookmarked. The catch here is that I'm not going to trust google with that data.
So essentially delicious with very powerful search as by product.
Well, a European Google would still have to abide by the patent minefield that search has become so it has very little chance of getting off the ground without a breakthrough in search engine technology outside of Google or Microsoft. Good luck with that, the head start is tremendous. And the likely outcome of such a thing happening would be an acquisition by... Google or Microsoft.
I think it's a fairly straightforward cultural difference. Americans take more risks and are more ambitious. This is true of both entrepreneurs and VC, although I'd say VC is the heart of the problem. Money goes into safer investments in Europe.
I can't speak for Dublin where Google is based, but in Cork you have Apple's European headquarters. As a developer/Apple user you wouldn't know it was there. There isn't an Apple store in the country and all products are shipped/repaired from the UK. Since our taxes are higher and our public services worse than the UK (I used to live there) we're probably not getting a huge amount of corporate tax from the US multi-nationals but we are getting jobs which makes the politicians look good. Saying that, there are a lot of Range Rovers around, so those directly involved with the multi-nationals are getting rich though it's not really trickling down.
I tried to cover this line of reasoning a bit in an other post in this thread.
No deep analysis from me, but very briefly looking at ROI of Google's shareholders one can see it flows to investors worldwide, not the US in particular.
Taxes then... very minimal, and are mostly redirected through a Dutch-Irish tax scheme anyway, EU probably profits more than the US.
Employment, 50k or so, that's significant for sure. But 40% is outside the US, and compare it say to Walmart which employs literally a couple million, and you'll find tech companies in general don't make large dents in employment figures.
As for actual services, there's barely any difference. A European benefits virtually the same from Google's products and services, albeit sometimes say the launch of the latest Nexus happens two weeks later in small European countries like the Netherlands.
Mostly I'd say the benefits are related to generating and disseminating your own culture, more political/legal influence in worldwide companies, drawing talent to your country etc. These benefits are significant, but I don't think Europe has anything to be alarmed about. Tech here is great, lots of solid companies with billion dollar valuations, solid infrastructure, but fewer unicorns. And that's no surprise with the EU being, deep down, a fragmented market where the biggest first-language market is German which stands at 18% of the EU population. It's not easy to roll out companies that grow to hundreds of millions of people in Europe, if the biggest language that people speak as a first language is only spoken by 18% of the union. European talent with great ideas that aim very large tend to go English first, and then move to the US at the earliest signs of solid traction. Everyone else stays, and that's how you get lots of solid companies like Supercell with a few billion dollars valuation that are relatively small compared to a Facebook. That's not a bad thing.
I think the language issues are overplayed; translating the software is not expensive, and it's usually not very difficult to hire someone who can read and write in English, German and/or French.
We are a <10 person startup, and yet we have customers that speak Portuguese, Spanish, French and English.
Partially disagree. Certain customers/industries require very little localisation. e.g. a startup that sells cloud services to tech companies, can probably do business with virtually any tech company in Europe in English just fine, but this is a niche. I'm not sure if your startup fits that picture, but e.g. an online takeaway service where you can order food from restaurants in your neighborhood, in English, just won't cut it in France. My parents filter anything not Dutch, despite their English being more than sufficient. Language is important here.
More importantly though, the reason I partially disagree is that language is just one thing. I'm using it as a proxy to show fragmentation in Europe, show differences in culture. Yes one can translate, but it's just one of various issues. Take Dublin for example, tons of tech companies are located there because of fiscal reasons, and you'll find sales teams for google, twitter, FB, Oracle etc etc... you have entire teams, localised. I've got friends working in the Dutch teams of these companies. They call Dutch customers, from Dublin, rerouted through a Dutch line so the customer sees a dutch phone number coming in. That's not because these companies love the diversity of these employees, but purely because that's how Europe still works, each country is unique and you can't interface with millions of regular people in their second/third language and expect to be successful. You don't call French people in English to do sales, in general. (of course, plenty of exceptions but they're still a minority). They've got these entire teams set up targetting countries individually because you usually can't do it any other way. Building these teams takes money, US companies can build US teams, decentralised somewhat, and reach a quarter billion people, then use that cashflow (or investment capital) to build European teams. European companies need to establish in a single market of 10-70m people, then use that cashflow or investment capital to do the same in other smaller EU markets. It's doable, which is why we see lots of successful companies worth a few billion. But scaling like that is slower, you have the odds to get acquired by a larger American (or Asian nowadays) venture earlier than scaling worldwide.
It's like you have a school with 1000 kids, and 20 schools with 100 kids, all quite different and requiring their own approach and investment. 5 businesses start selling candy in one of the small schools and one starts in the big school. It's not a surprising outcome the business in the biggest school will likely scale the fastest, having only to implement 1 approach and getting tons of market exposure, and then has cashflow to acquire or outcompete the rest.
Anyway language alone isn't everything, I was just using it as an example. Take something like lunch culture between the Netherlands, France and Spain. Completely different, running a startup in the lunch industry requires entirely different business approaches. The US has tons of internal diversity, but nothing quite like this.
The EU is awesome, it's very flawed but I love the idea of the union and it's benefited me greatly, so far. But when talking about the EU in this context, compared to China or the US, we really mustn't gloss over the fact these are tens of very different mostly small markets with only some standardised elements. (some EU import/export stuff, the euro, SEPA etc...) I think this diversity plays a major role in company's ability to scale. I can't count the number of successful startups in say France, that then failed to establish properly in say Germany. Some American companies can bruteforce success because they already have large business at scale in the US to finance an adventure in Europe.
It's mostly cultural. In the Netherlands, the majority of online payments are done during a system called "iDeal". A few hours' drive away, and that system is never heard of.
Different laws. Of course the EU exists to combat exactly that problem, but they haven't succeeded yet.
The problem your company tries to solve may not even be relevant in half the markets.
The Chinese government believes it's important to have a company that follows their rules. It doesn't necessarily follow that the people benefit from it.
Why are people looking for a second Google in Europe?
They should instead look in China, where there already is not only a second Google but also a second Facebook, Amazon, WhatsApp, Stripe, ...
So, why did the Chinese succeed where Europe failed? Here are my thoughts:
* Regulation: With its strict censorship and great firewall, the Chinese government effectively shut out most American IT companies from their market, giving local companies enough time to grow.
* Culture: Chinese culture is much more different from American than European culture is, hence it is also much more difficult to adapt an American IT service to the Chinese market than to the European.
* Market size: With 1.3 billion people, 900 million of which speak Mandarin the market size for any IT service is enormous, even taking into account that many people still do not have reliable Internet access or a lot of money to buy services / products online. Likewise, the market growth is much higher than in the US or Europe.
Personally I believe that the main competition for American IT companies will not come from Europe but from China. Right now, most Chinese IT startups only follow in the roots of their successful American idols, but with so many well-educated young entrepreneurs this should change soon, and I predict that we will see more and more disruptive Internet startups "made in China" very soon.
Does booking.com count? Founded in Europe in 1996, still entirely located in Europe, over $1 billion _yearly profit_, but acquired by an American company in 2005.
Also, I'd say the university system may have something to do with it. US unis work more like UK Sixth Form Colleges, where students study a variety of subjects and encounter people with different interests (whereas a UK university education is about one subject with a much smaller group of peers). As a result, the US system is arguably a lot better suited to networking and meeting people with an interest in starting a business.
How many tech company founders met at university? Now, how many studied the exact same things? I'd say a lot less of them.
One can wonder how valuable these companies really are. Yes, they're valuable to investors, but the investors of Facebook are not American, they're completely international. The return on investment on capital investment flows to investors worldwide, not just US investors because it's a US company.
So what else then... Taxes, here tech companies are notorious. Stories of FB paying a few thousand in total taxes in the UK, Apple leaving its cash abroad to avoid taxation, Google channeling its revenues through a royalty-scheme between Ireland and the Netherlands that goes virtually untaxed (Dutch Sandwich) etc... tax wise these companies contribute little to the place of their main business (e.g. the US for the above three companies).
Then, employment? Here too, tech companies are known for providing relatively little employment compared to the size of the business, versus other industries. To take an extreme example, walmart (a company which pulls the vast majority of its revenues from the US alone) has up til recently had more store locations, than FB has employees. FB doesn't even have 12k employees, Walmart has literally a couple million. The article mentions Whatsapp as an example, it just had 55 employees when it was sold for almost $20b Compare that with say Vente Privee, a French online retailer that has 2500 employees and close to $2b in revenue and a slightly higher valuation, that nobody talks about. Which would you rather have in your country, creating jobs? You may still (likely) say Whatsapp, but it wouldn't be an obvious answer. Instagram is similar, 18 employees, who cares whether they're in the US or not? It's a meaningless figure for employment alone. And again, ownership wise the billion dollar valued company is in the hands of international investors, and tax wise it's likely little to nothing.
So what's the contribution of these US companies to the US then? What is Europe really missing? It profits from all the international innovations (I happily use Google's services), while it taxes the above companies for doing business in the EU.
If tech was shitty in Europe, sure, all of this would be alarming. But we have great research (e.g. hadron collider), IT/ICT infrastructure is very solid, if I look at my own country we have digitised and modernised everything from insurance to banking to tax filings, at the supermarket I pay via NFC, as I do in a bus, metro, train or tram. I don't live in some outdated world without technology.
There are very obvious counterarguments to make... in particular political and cultural control and influence that large companies like Google have and the power that wields, that Europe thereby doesn't have, can be or become an issue. Reinventing our own industries the next few decades without inspiring tech companies, is trickier. Seeing talent trained at great European universities with great startup ideas fly to the US for various reasons, is an issue. I appreciate all of that, and yet I feel the importance of companies like FB's contributions to the US as opposed to the rest of the world, is overstated, and that we're not missing out all that much by not having a European FB, for example.
At the end of the day there are 3 superlarge markets, the US, Europe and China. Then a number of very large ones like India or Japan. But of those first three, the EU is merely a partial economic, political and legal union, with a wide range of languages, laws, cultures and systems. While the US and China certainly have internal diversity, it's nothing like the EU. It's why we have tons of companies with a few billion dollar valuations, that capture a substantial portion of the EU but far from all of it. The biggest first language market in the EU is German, and it stands at 18% of the EU as a first language, see what I mean? In the US or China, you can pretty much roll out tech products nationally in many cases, not without any friction, but in a way that's much more natural than in the E...
"Quaero was announced by Jacques Chirac and Gerhard Schröder during the French-German ministerial conference in April 2005. [...] Quaero was often described as a European competitor to Google [...]
The main source of disagreement was the format of the search engine, with German engineers favoring a text-based search engine and the French engineers favoring a multimedia search engine. Many German engineers also balked at what they thought was becoming too much of an anti-Google project, rather than a project driven by its own ideals."
The project failed to deliver. Though the Exalead web search engine survived and got bought by Dassault Systems (CATIA 3D CAD). Next time they should open source the public funded projects...
Biggest Internet companies are in advertising or catalog merchant business that started in late 90's or early 2000's. American Internet startups in these areas had immediate access to markets of 300 million people.
Homegrown American, Chinese or Japanese Internet company can have hundreds of millions in revenue before it even starts to think about localization and adjusting to other countries, cultures, languages, payment system and advertising biz.
Network effect rules in the Internet business and US based business had huge upper leg in this regard in early 2000s.
This is a very good point. European businesses basically have to 'sell internationally' right off the bat, whereas those in larger countries like the US and China can become successful in the domestic market before having to do business abroad. Hence a business from somewhere like the US will already have a large audience by the time it opens in European or Asian countries, whereas a European one doesn't get the same privilege.
Germany has 80 million people, the German-speaking market is 100 million people. The smaller countries are mostly used to everything being in English (Slovenia, Finland), so they don't care. France is 50 million people as well. If your business idea doesn't bootstrap with that market size, it won't work with a factor 6 more either.
Also recently, international payment can be considered a solved problem with iban/bic, PayPal and credit cards.
Which means you can get by just as well with English, French or German only, and some point down the line you add i18n for one or two other languages first, and then whatever there might be a demand for.
On the other side of the coin, next-day national shipping for 3,50€ to 5€ is the norm around here. Go try that in NA.
>The smaller countries are mostly used to everything being in English (Slovenia, Finland), so they don't care.
I live in Finland and I can tell you that you don't have full access to mass markets unless you handle the language, deliveries and local payment methods as well.
Case: https://www.varusteleka.fi/en It's very successful Finnish army/outdoors store that sells mostly trough net (probably biggest in the Europe). They have build loyal international customer base outside Finland mainly because they have a great customer service and they're very honest about the products it sells. No marketing bullshit, if they sell inferior products, they tell that the product sucks balls and sell it very cheap.
They have been gradually expanding their operations from Finland to Sweden, Estonia, Russia and other countries. Similar company started in Minnesota (same size as Finland) would be several times bigger by now.
Regarding the shipping price differential.. That shipping might be cheap, but the 20% VAT and the higher cost of taxes and social charges quickly destroy that competitive advantage. So that 5€ shipping really costs much much more than NA when the much higher costs of doing business are factored in.
> Biggest Internet companies are in advertising or catalog merchant business that started in late 90's or early 2000's
Not entirely true, they are not just in advertising or catalog merchant business: Uber, Airbnb, Facebook, LinkedIn, Twitter, Priceline.com, Netflix, Palintir, Salesforce, Workday, PayPal
LinkedIn for example is a $31 billion market cap business social network, that is still growing its sales 10% quarter over quarter.
Google and Amazon, which are the only two examples that stand-out for your reference, are old Internet businesses. Naturally they would be larger than a company founded five years ago.
Regarding the early 2000's... who would expect a ten year old business to be worth $200 or $300 billion? Since when can you create such large businesses faster than that? Point being, of course the biggest Internet companies come from that time or earlier, they would inherently have to.
Europe is less capitalistic, is less versed into risk, and is clearly not entrusting so much money to an IT company like google.
It's hard explaining to people what exactly google does for so much money. Europe is more "feet on the ground" when it comes to business in general. What does google sells by the way ? Ads, android (which is mostly open), internet services... it's hard to really tell. In europe, technologies and research will often rather belong to the public sector than the private sector.
The silicon valley is a typically american thing because US business laws and the culture allow it. In europe it just won't. The only way you can really thrive as a programmer in europe, is by doing open source, and Torvalds is a good example of that, so by a loose definition it's only accessible to people who spent a lot of time in universities. There are no other way you are going to do business and getting money typing code in europe. It just won't happen.
I don't think you have to be academic to be successful in open source. One example of non-university developed financially successful open source would be MySQL. I'm sure there are others from other parts of Europe that I'm not familiar with.
I think one thing the EU could really do to help startups here would be to offer almost free services and/or grants to localize their websites/apps into all the EU languages much more quickly and less expensively.
That's not the issue, the overall mentality, strict employment laws, and stricter access to funding is what slowing EU startups down.
Startups do not need free services that ridiculous, they need an environment which will allow them to take risks and not to have to cut trough a mile of red tape to hire and employees.
I like the point made about the hypocracy of Google saying that European companies don't have the right to affect what people in other countries can see in search results, but, at the same time, filter results based on the special interests of US copyright laws.
One of the big issues in Europe is almost non-existent local M&A (and to lesser extent single pan-European shared IPO) market. As long as that is purely focused on US e.g. the exits at all stages (from tiny few million acquihires to hundreds of millions acquisitions) are mostly based in America, a healthy tech market will not emerge in Europe.
89 comments
[ 5.1 ms ] story [ 158 ms ] threadHow many American startups are a result of a pissed off employee working at a successful company going off and creating the same thing his or her employer did but better? And this cycle feeding on itself.
Or university students with an idea getting all the financial, technical, and managerial support necessary to create the next big thing.
You have to understand the process and then try to replicate the process. And each component of the process is as important as the other. You need the whole pie. Not a piece for it to succeed.
You can seed this with massive capital expenditure, tens of billions basically poured into private coffers of Caplists, but the process has to be very similar for it to actually work.
Some numbers might make your point more convincing.
Intel started like this.
See the companies founded by ex-Googlers
In Europe, we have wealth redistribution. A few companies with so much concentrated financial power is not healthy.
Europe's dynasties do not tend to give away their wealth, instead they pass it down through families for generations. Most of Europe's largest companies and fortunes are controlled through family dynasties. American billionaires always dominate the list of most philanthropic.[1] It's also why Europe sees such a low rate of turn-over among their billionaires, and why such a high proportion of their billionaires are derived inherited wealth. [2]
[1] http://www.forbes.com/sites/randalllane/2013/11/18/the-50-ph...
[2] http://i.imgur.com/cvTR3q1.png
How about if Europe's entrenched old money prevents new money from arising, and is part of the problem? Money comes with obvious vast influence on politics. What if that old money acts to protect itself at the expense of economic dynamism and new wealth creation? I think it's a reasonable conclusion that that does in fact occur. Is bunched up old money inherently more conservative? I'd argue yes.
The parent comment implies that wealth is more redistributed in Europe. That is plainly not true, given the extreme inheritance levels of their billionaires and lower rates of philanthropy.
The wealth is also not inherently bound to the operations. You can give away your billions without sinking a business. Berkshire Hathaway isn't going to collapse when Buffett dies or gives his remaining wealth away (Burlington Northern railroad isn't going to tip over when he gives away his last shares, just as BMW wouldn't if the Quandt family ended their dynasty, ditto Walmart with the second generation of Walton heirs). Just as Microsoft isn't collapsing as Gates exits his formerly huge percentage share of ownership (he has gone from ~60% ownership to now ~3% since the IPO, obviously it has not seriously harmed Microsoft). There is a large, important question at the center of this that can be best illustrated by a rhetorical: is Howard Buffett (Warren's oldest son) the best qualified to run Berkshire Hathaway? What are the odds the Quandt family is best suited to steer BMW for the next hundred years? Or that Inditex should be run by the Ortega family forever, or that the Slim family should control such a large swath of telecom in Mexico for the next century? I think that kind of economic dominance by families is more often detrimental (loss of dynamism, too much wealth acquired without earning it) than beneficial, much as a cartel or monopoly ends up being.
Yes, obviously not. But that characteristic detracts from the suitability of "stagnant" as a descriptor.
The stagnation is derived from people inheriting the wealth who do not possess the creation ability or skill level of the originator/s. Put in starker terms: incompetent, low ambition, low skill, low accomplishment heirs that rest on the wealth. I'd argue that's far more often the outcome than not, and I believe we have the proof of that in the history of who starts companies, who creates the most successful companies, and who creates the next tiers of innovative breakthrough companies - and who does not.
Scrappy entrepreneurs like Elon Musk and Steve Jobs do, not the Nth generation of extreme dynastic wealth like the Quandt or Walton families.
In Europe, we have wealth redistribution. A few companies with so much concentrated financial power is not healthy.
1. European laws are too restrictive. It's especially notable with stuff like the hilariously stupid online tax laws the area has (having to apply different tax rates based on the location of the user rather than the business makes it hugely more complex than it has to be) or the right to be forgotten, but it just feels we're too restrictive here in general.
2. Culture. People in the US seem more ambitious and more willing to risk everyone for the small chance of becoming a millionaire/billionaire at the end of it. People in European countries on the other hand seem to be encouraged to avoid risk and avoid anything that might lead to less job security in the short term. Probably because failure in the US is seen as a minor bump in the road, whereas failure in Europe is seen as the worst possible thing imaginable.
3. Money. Not just in the form of venture capital (though that's a huge reason), but also because US startups tend to pay their employees more, whereas their European equivalents stick to the average local wages. Hence the best programmers, designers and other such people usually either find employment in a more stable company (read, one where there's a work/life balance) or move to the US to work in Silicon Valley.
If we want a 'European Google' or European startups in general, we need to become less risk averse, more willing to reward the types of people needed to work in those companies and less obsessed about regulations.
Oh, and fix the issues certain areas have with internet connection speeds. The fact that a lot of areas in large cities like London can't get fibre internet and the likes is not helping our tech businesses compete with their US counterparts.
This is an interesting point. Can you elaborate?
"People in European countries on the other hand seem to be encouraged to avoid risk and avoid anything that might lead to less job security in the short term.
Hence the best programmers, designers and other such people usually either find employment in a more stable company (read, one where there's a work/life balance) or move to the US to work in Silicon Valley."
I think we don't. Europe just isn't setup for breakaway successes in the way that the US is. And we wouldn't be able to stomach the societal cost even if we were to try.
Europe is built to enable a Mittelstand [1] though which also allows for lots of diversity and innovation and is why Germany is still an industrial powerhouse.
If Europe wants to compete it should do so on its own terms; except doing so is virtually impossible when companies can claim ownership of their users data because that inevitably leads to the massive centralized monopolies we're seeing now.
One thing Europe is good at though is pushing through laws which prevent companies from establishing harmful monopolies though and that is what Europe needs to do.
If in addition to "the right to be forgotten" Europe would push through "the right to own your data" and forced companies operating in the EU to return all user data (down to request logs used for analytics) to the user the dynamics of tech industry would change dramatically; and in a positive way for the user too.
That will take a while but I think, or hope, it will happen eventually and either way; it will have a much greater chance of success than trying to copy a model that is inherently at odds with a value system developed over dozens of centuries.
[1] https://en.wikipedia.org/wiki/Mittelstand
Would the world be worse off? Maybe in some ways, but I doubt it'd be significantly so.
The examples you provide for European laws being too restrictive are correct imo, and there are more examples of laws that were, in my mind, the poor execution of a good idea (take the EU privacy directive that forces the opt-in for cookie tracking. This has in its execution by Google etc. generally become more of an annoyance than a privacy feature).
However, I think the decisions the European Court of Justice makes on these issues could be a chance for Europe. The 'right to be forgotten' and the recent safe harbor decision show--in my opinion--that the ECJ wants to establish a more privacy-focused jurisdiction in Europe. That could be a chance for, say a Google competitor that does not track you through AdWords but, instead, relies on a monthly subscription model (this might not be a very good idea, but you get my point). And when Angela Merkel says that 'too much privacy is bad for business', I disagree, because Europe cannot come to the table one decade late and copy what worked in the Bay Area.
If Europe establishes a reputation for a different sort of service that relies on strong encryption, user privacy and the absence of ad-support but rather subscription, I think the European startup world could thrive in serving a market that is currently emerging rather than one that has been there for the better part of a decade.
http://www.theguardian.com/technology/2015/jun/17/duckduckgo...
That's because Google rather have these annoying notices than make it easy to disable tracking. The EU did the right thing in leaving it up to the industry how to solve these problems, it's just that the industry doesn't want to.
Engineers in SV are paid bucket loads of money.
They can afford to take one year of to travel the world or just work on their own projects.
For me that is key.
How many people do you know in Europe that can do that?
Another thing is in Europe the biggest tech hub is in London. And if you're in London you have to wonder
Why am I dealing with this crappy weather when I can move to somewhere where I'm paid 2-3x more and it's summer all year?
I know someone who falls along these exact lines and has moved to SV. Although he was already working remotely to a US company.
Can they?
> Why am I dealing with this crappy weather when I can move to somewhere where I'm paid 2-3x more and it's summer all year?
Because you don't risk bankruptcy by having a health issue, if you're single it's not a sausage fest, more laid back work (in SF it seems you're bound to stay longer times at the office), greater tourism choices (a short trip away) and probably still cheaper than rent in SF even if we're talking London
We have another reason right in this very answer: People in SV are willing to take more risk and sacrifice. Sure there are chances one may be bankrupted because of a health issue. Sure there are fewer entertainment choices. Living in SV may not be an ideal lifestyle for many but it has attracted a lot of adventurous mind from all over the world, who together conjure up trailblazing ventures.
I don't think people in general consider more risk being better. Rather, higher reward often comes with higher risk. People aim for higher reward obviously have to accept the risk associated with it. It just so happens that, as you said, SV is the place to be for the tech industry.
> SV is in many ways risk averse. The days when any kid could get a million dollars are over. Almost every success story seems to happen on a background of brand name colleges, companies, incubators or investors.
I don't argue for or against the risk averse nature of SV. And of course, knowing the right people helps get your foot in the door everywhere. Undeniably though, for variety of reasons, there exists an ecosystem in SV that breeds the creation of hi tech businesses. If you want to make a name for yourself, being in SV makes a lot of sense. It isn't easy to replicate that elsewhere.
Just look at the list of car companies that set up shop in SV in the last few years:
https://media.ford.com/content/fordmedia/fna/us/en/news/2015...
http://www.technologytell.com/in-car-tech/1848/volvo-geely-g...
http://www.technologytell.com/in-car-tech/1798/renault-nissa...
http://www.industryweek.com/expansion-management/expansion-m...
VW has been there essentially forever, apparently: https://en.wikipedia.org/wiki/VW_Electronics_Research_Labora...
Those are big names in a very established industry, yet they can't afford not to have a presence in SV.
Hours I'd assume wouldn't be so different in a real startup, since that sort of business kind of depends upon its employees not really doing anything else in the day.
And rent is definitely not cheaper, not if you want to live anywhere decent.
Still, you're right in terms of tourism choices, and it's a lot easier and more enjoyable to explore London on foot.
Actually, London's weather isn't half bad compared to other places in Europe. At least there is no freezing cold, no real heat waves and less rain than in Paris, especially in the summer.
The problem is xenophobia. Hate of Europe is getting ever more vitriolic and irrational.
I did that, after only a couple of years in the tech industry. Most of my friends could do that. I wrote a tutorial of sorts how to do things like this in a comment on HN a while ago, but removed it because people seemed to get upset (I could summaries if someone is interested).
Most Europeans prefer a stable life with some luxuries instead of a lottery type life where you may get fired at any point.
A lot of people in Europe who say we should be like Silicon Valley only see the money these companies make but not what it took to get there and the toll it takes on the work force.
And the taxes in US are lower.
The spirit of Silicon Valley generally goes along the lines of "all or nothing".
Europe generally sees more value in a sane and balanced life style, where physical/mental health, family, stability, etc. play an important role and living itself is more important than what you will have achieved at the end of your life (in terms of money or material things).
But to do business through all European union, there's way more added issues at the beginning then compared to Silicon Valley vs. US (similar culture, values, interests, language) or eastern countries (China, Korea, Russia and their markets).
I also agree about the employment part from both sides (legal and employee mentality) with the exception of highly competitive fields (big 4, high end law firms) you would rarely find many employees willing to work for 12-14 hours a day when need be.
Even in the accelerators unless it was a "beer and talk night" the place would pretty much start to clear out around 5, and by 7 there would be no one there. Similar accelerators in Eastern Europe or the Baltic states (as well as out side of the EU) would be quite often still quite full till 11pm and even later.
Employment laws in many countries also make it very hard for startups to actually develop, the UK (and to some extend eastern Europe) probably has it's the easiest (which is why I think that and the combination of access to financial institution is why accelerators like London) as small businesses are still exempt from things like mandatory pension.
However hiring employees in other European countries may incur heavy financial costs which include pension, healthcare, allot of paid vacation and other benefits, that combined with the cost of actually managing all the HR related stuff and the fact that in some countries firing employees on a permanent contract requires you to involve a court makes it very unattractive for startups.
I also agree about the fact that many employees simply do not want that life style, but this has also been some what solidified by employers, as you won't find many if any at employers at all willing to pay a kings ransom for extraordinary talent most roles will have a salary range set to them and while it's possible for some one to make 10% more than their colleague or even in some very rare cases 15-20% (which will usually include other responsibilities) you wont find people making 50% not to mention double what their colleagues do simply based on their apparent talent or what they've demanded during hiring / what was offered at that time.
1. Russia, China, India and other markets that to some extent have "their own Google" are completely horrible in terms of running companies. Much more so than Europe. The US is no dream in terms of e.g. declaring taxes either. I think this has more to do with attitude than anything else. US companies simply hire someone to do this.
2. That would explain why people doesn't start companies, if Europe didn't already have many successful technology companies. It offers little explanation why those companies doesn't go on to become "Googles".
3. I do somewhat agree with this one. Because while the technology industry do pay good salaries in Europe startups usually doesn't even though they are in high cost markets. I'm not sure this is actually that different from the US though. There are huge incentives for "the best" programmers to work at Apple/Google/Facebook where they have higher salary and relative job security, especially if the want to keep up with the housing market.
I would say that that almost they entire reason why Europe doesn't "have a Google" is because we are part of the US market. All our contenders in the early days used to be domestic. Once we realized that we had to be global US companies bought those that were successful. Skype, for example, could have become a Google if it had been forced to stand on it's own or been acquired by a local company like Ericsson. Rather it was built to be sold and was to Microsoft.
There is a Finnish service called irc-galleria.net. It's a service that was created to let irc users to share pictures of themselves to other irc users. It got really big in Finland. They even had big screen in center of Helsinki to show new pictures uploaded to the service. They had this paid feature which let you keep a list of friends in there. Everybody talked about irc-galleria stalking.
Then Facebook came. The major difference was that facebook let you make friends for free. Year later nobody remembers irc-galleria.
Dislodging a platform is easier than ever. It's enough to make better or cheaper product, then just get lucky. Previously you had to also take distribution and marketing into account and then get lucky.
Irc-galleria was many million euro behemoth in the context of Finland. Facebook at the time could not spend even 10k to tackle irc-galleria.
Tackling many billion-euro incumbent is probably harder than tackling many million-euro incumbent. But it's probably like twice as hard, not 1000 times harder. And it has happened in less favorable situations before. Look up Toyota.
The most frustrating searches I've had with google are always about some thing I have seen before, but can't find again.
It would be relatively easy to optimize for this if you can have some kind of bookmark app and search history available. So that search would prioritize stuff I have bookmarked or found previously. It would be probably be valuable for the search engine to know what products I have bookmarked. The catch here is that I'm not going to trust google with that data.
So essentially delicious with very powerful search as by product.
No deep analysis from me, but very briefly looking at ROI of Google's shareholders one can see it flows to investors worldwide, not the US in particular.
Taxes then... very minimal, and are mostly redirected through a Dutch-Irish tax scheme anyway, EU probably profits more than the US.
Employment, 50k or so, that's significant for sure. But 40% is outside the US, and compare it say to Walmart which employs literally a couple million, and you'll find tech companies in general don't make large dents in employment figures.
As for actual services, there's barely any difference. A European benefits virtually the same from Google's products and services, albeit sometimes say the launch of the latest Nexus happens two weeks later in small European countries like the Netherlands.
Mostly I'd say the benefits are related to generating and disseminating your own culture, more political/legal influence in worldwide companies, drawing talent to your country etc. These benefits are significant, but I don't think Europe has anything to be alarmed about. Tech here is great, lots of solid companies with billion dollar valuations, solid infrastructure, but fewer unicorns. And that's no surprise with the EU being, deep down, a fragmented market where the biggest first-language market is German which stands at 18% of the EU population. It's not easy to roll out companies that grow to hundreds of millions of people in Europe, if the biggest language that people speak as a first language is only spoken by 18% of the union. European talent with great ideas that aim very large tend to go English first, and then move to the US at the earliest signs of solid traction. Everyone else stays, and that's how you get lots of solid companies like Supercell with a few billion dollars valuation that are relatively small compared to a Facebook. That's not a bad thing.
We are a <10 person startup, and yet we have customers that speak Portuguese, Spanish, French and English.
More importantly though, the reason I partially disagree is that language is just one thing. I'm using it as a proxy to show fragmentation in Europe, show differences in culture. Yes one can translate, but it's just one of various issues. Take Dublin for example, tons of tech companies are located there because of fiscal reasons, and you'll find sales teams for google, twitter, FB, Oracle etc etc... you have entire teams, localised. I've got friends working in the Dutch teams of these companies. They call Dutch customers, from Dublin, rerouted through a Dutch line so the customer sees a dutch phone number coming in. That's not because these companies love the diversity of these employees, but purely because that's how Europe still works, each country is unique and you can't interface with millions of regular people in their second/third language and expect to be successful. You don't call French people in English to do sales, in general. (of course, plenty of exceptions but they're still a minority). They've got these entire teams set up targetting countries individually because you usually can't do it any other way. Building these teams takes money, US companies can build US teams, decentralised somewhat, and reach a quarter billion people, then use that cashflow (or investment capital) to build European teams. European companies need to establish in a single market of 10-70m people, then use that cashflow or investment capital to do the same in other smaller EU markets. It's doable, which is why we see lots of successful companies worth a few billion. But scaling like that is slower, you have the odds to get acquired by a larger American (or Asian nowadays) venture earlier than scaling worldwide.
It's like you have a school with 1000 kids, and 20 schools with 100 kids, all quite different and requiring their own approach and investment. 5 businesses start selling candy in one of the small schools and one starts in the big school. It's not a surprising outcome the business in the biggest school will likely scale the fastest, having only to implement 1 approach and getting tons of market exposure, and then has cashflow to acquire or outcompete the rest.
Anyway language alone isn't everything, I was just using it as an example. Take something like lunch culture between the Netherlands, France and Spain. Completely different, running a startup in the lunch industry requires entirely different business approaches. The US has tons of internal diversity, but nothing quite like this.
The EU is awesome, it's very flawed but I love the idea of the union and it's benefited me greatly, so far. But when talking about the EU in this context, compared to China or the US, we really mustn't gloss over the fact these are tens of very different mostly small markets with only some standardised elements. (some EU import/export stuff, the euro, SEPA etc...) I think this diversity plays a major role in company's ability to scale. I can't count the number of successful startups in say France, that then failed to establish properly in say Germany. Some American companies can bruteforce success because they already have large business at scale in the US to finance an adventure in Europe.
Different laws. Of course the EU exists to combat exactly that problem, but they haven't succeeded yet.
The problem your company tries to solve may not even be relevant in half the markets.
https://www.qwant.com/
http://www.dw.com/en/eu-allows-france-to-bankroll-google-riv...
They should instead look in China, where there already is not only a second Google but also a second Facebook, Amazon, WhatsApp, Stripe, ...
So, why did the Chinese succeed where Europe failed? Here are my thoughts:
* Regulation: With its strict censorship and great firewall, the Chinese government effectively shut out most American IT companies from their market, giving local companies enough time to grow.
* Culture: Chinese culture is much more different from American than European culture is, hence it is also much more difficult to adapt an American IT service to the Chinese market than to the European.
* Market size: With 1.3 billion people, 900 million of which speak Mandarin the market size for any IT service is enormous, even taking into account that many people still do not have reliable Internet access or a lot of money to buy services / products online. Likewise, the market growth is much higher than in the US or Europe.
Personally I believe that the main competition for American IT companies will not come from Europe but from China. Right now, most Chinese IT startups only follow in the roots of their successful American idols, but with so many well-educated young entrepreneurs this should change soon, and I predict that we will see more and more disruptive Internet startups "made in China" very soon.
Because they are in Europe, not China. It's a British article.
How many tech company founders met at university? Now, how many studied the exact same things? I'd say a lot less of them.
Well, a short search returns:
Google: two PhDs studying the same thing.
Apple: Jobs and Woz met when the former was in High School; they never attended the same college.
Yahoo: two EE graduate students.
Microsoft: childhood friends, didn't attend the same college.
Oracle: didn't attend the same college, met when working for the same company.
Red Hat: didn't attend the same college.
Salesforce: met while working at Oracle.
At least for the software behemoths, it seems it's not that important to have mixed colleges.
So what else then... Taxes, here tech companies are notorious. Stories of FB paying a few thousand in total taxes in the UK, Apple leaving its cash abroad to avoid taxation, Google channeling its revenues through a royalty-scheme between Ireland and the Netherlands that goes virtually untaxed (Dutch Sandwich) etc... tax wise these companies contribute little to the place of their main business (e.g. the US for the above three companies).
Then, employment? Here too, tech companies are known for providing relatively little employment compared to the size of the business, versus other industries. To take an extreme example, walmart (a company which pulls the vast majority of its revenues from the US alone) has up til recently had more store locations, than FB has employees. FB doesn't even have 12k employees, Walmart has literally a couple million. The article mentions Whatsapp as an example, it just had 55 employees when it was sold for almost $20b Compare that with say Vente Privee, a French online retailer that has 2500 employees and close to $2b in revenue and a slightly higher valuation, that nobody talks about. Which would you rather have in your country, creating jobs? You may still (likely) say Whatsapp, but it wouldn't be an obvious answer. Instagram is similar, 18 employees, who cares whether they're in the US or not? It's a meaningless figure for employment alone. And again, ownership wise the billion dollar valued company is in the hands of international investors, and tax wise it's likely little to nothing.
So what's the contribution of these US companies to the US then? What is Europe really missing? It profits from all the international innovations (I happily use Google's services), while it taxes the above companies for doing business in the EU.
If tech was shitty in Europe, sure, all of this would be alarming. But we have great research (e.g. hadron collider), IT/ICT infrastructure is very solid, if I look at my own country we have digitised and modernised everything from insurance to banking to tax filings, at the supermarket I pay via NFC, as I do in a bus, metro, train or tram. I don't live in some outdated world without technology.
There are very obvious counterarguments to make... in particular political and cultural control and influence that large companies like Google have and the power that wields, that Europe thereby doesn't have, can be or become an issue. Reinventing our own industries the next few decades without inspiring tech companies, is trickier. Seeing talent trained at great European universities with great startup ideas fly to the US for various reasons, is an issue. I appreciate all of that, and yet I feel the importance of companies like FB's contributions to the US as opposed to the rest of the world, is overstated, and that we're not missing out all that much by not having a European FB, for example.
At the end of the day there are 3 superlarge markets, the US, Europe and China. Then a number of very large ones like India or Japan. But of those first three, the EU is merely a partial economic, political and legal union, with a wide range of languages, laws, cultures and systems. While the US and China certainly have internal diversity, it's nothing like the EU. It's why we have tons of companies with a few billion dollar valuations, that capture a substantial portion of the EU but far from all of it. The biggest first language market in the EU is German, and it stands at 18% of the EU as a first language, see what I mean? In the US or China, you can pretty much roll out tech products nationally in many cases, not without any friction, but in a way that's much more natural than in the E...
The main source of disagreement was the format of the search engine, with German engineers favoring a text-based search engine and the French engineers favoring a multimedia search engine. Many German engineers also balked at what they thought was becoming too much of an anti-Google project, rather than a project driven by its own ideals."
https://en.wikipedia.org/wiki/Quaero
https://www.exalead.com/search/
The project failed to deliver. Though the Exalead web search engine survived and got bought by Dassault Systems (CATIA 3D CAD). Next time they should open source the public funded projects...
Homegrown American, Chinese or Japanese Internet company can have hundreds of millions in revenue before it even starts to think about localization and adjusting to other countries, cultures, languages, payment system and advertising biz.
Network effect rules in the Internet business and US based business had huge upper leg in this regard in early 2000s.
Also recently, international payment can be considered a solved problem with iban/bic, PayPal and credit cards.
Which means you can get by just as well with English, French or German only, and some point down the line you add i18n for one or two other languages first, and then whatever there might be a demand for.
On the other side of the coin, next-day national shipping for 3,50€ to 5€ is the norm around here. Go try that in NA.
I live in Finland and I can tell you that you don't have full access to mass markets unless you handle the language, deliveries and local payment methods as well.
Case: https://www.varusteleka.fi/en It's very successful Finnish army/outdoors store that sells mostly trough net (probably biggest in the Europe). They have build loyal international customer base outside Finland mainly because they have a great customer service and they're very honest about the products it sells. No marketing bullshit, if they sell inferior products, they tell that the product sucks balls and sell it very cheap.
They have been gradually expanding their operations from Finland to Sweden, Estonia, Russia and other countries. Similar company started in Minnesota (same size as Finland) would be several times bigger by now.
Not entirely true, they are not just in advertising or catalog merchant business: Uber, Airbnb, Facebook, LinkedIn, Twitter, Priceline.com, Netflix, Palintir, Salesforce, Workday, PayPal
LinkedIn for example is a $31 billion market cap business social network, that is still growing its sales 10% quarter over quarter.
Google and Amazon, which are the only two examples that stand-out for your reference, are old Internet businesses. Naturally they would be larger than a company founded five years ago.
Regarding the early 2000's... who would expect a ten year old business to be worth $200 or $300 billion? Since when can you create such large businesses faster than that? Point being, of course the biggest Internet companies come from that time or earlier, they would inherently have to.
It's hard explaining to people what exactly google does for so much money. Europe is more "feet on the ground" when it comes to business in general. What does google sells by the way ? Ads, android (which is mostly open), internet services... it's hard to really tell. In europe, technologies and research will often rather belong to the public sector than the private sector.
The silicon valley is a typically american thing because US business laws and the culture allow it. In europe it just won't. The only way you can really thrive as a programmer in europe, is by doing open source, and Torvalds is a good example of that, so by a loose definition it's only accessible to people who spent a lot of time in universities. There are no other way you are going to do business and getting money typing code in europe. It just won't happen.
I too could make the most amazing software if I could by open sourcing it. Without resources nor the organization, nothing will happen.
Startups do not need free services that ridiculous, they need an environment which will allow them to take risks and not to have to cut trough a mile of red tape to hire and employees.