Europe Is Struggling to Foster a Startup Culture

http://on.wsj.com/1FvEGtI

by peterkrieg • 11 years ago

60 86 11 years ago

on.wsj.com

Radle5• 11 years ago

While it is true that a startup culture is very valuable in the IT-section, it's not that true that one needs a startup culture.

I am an engaged computer gamer and we Germans have many successful e-sport stars, E-Sports are not officially recognized in Germany.

Same goes for startups, I can list you 20 Industry leading Game startups and multiple hundred exceptional well doing tech startups in Germany.

Whatever people think about you does not matter as long as you have a great product to sell.

Also the author has a slight notion of american exceptionalism, that something works in the USA is by no means a measurement to go by and say: "Hey you should do this also, it will be working great!" Some detailed research about markets, employees, laws and how to adapt them would do every European government better than simply trying to copy America.

minthd• 11 years ago

Here's another data point supporting the claim that Europe's start-up ecosystem is weak:

https://www.linkedin.com/pulse/73-most-valuable-startups-ear...

This is a list of start-ups(in private control) with value over $1 billion. 73 companies in total , 6 are European , and 15 are Asian.

EDIT: one possibility is that European are suffering a similar problem to that of the Israelis - even though they have great tech/product , they just sell earlier. BTW in Israel(which most agree has a strong start-up ecosystem/culture) it's mainly because they're lacking in certain scaling skills(but they're learning) + and to some extent they try to minimize risk.

digi_owl• 11 years ago

Meh, i will take a company that can do a low valuation but keep on going over a pump and dump VC darling any day.

ovi2562• 11 years ago

Scaling requires specific know-how, lots of capital, and chutzpah. You seem to know more about Israeli startups than I, and I don't doubt that they're learning the first as you say, or that they already have the third.

As for capital for scaling European startups, it is definitely lacking. There's barely capital for seed and early rounds. Maybe in 50 years, after dozens of successful exits will make more people into angels and VCs.

cyphunk2• 11 years ago

The issue in Israel is most startups choose to sell rather early. The same is true of the EU. I don't have a list but remember companies such as a Skype, Rockstar and others that were EU (are?). Many just get purchased. This may have more to do with capital finding food than just risk aversion alone.

Radle5• 11 years ago

I once looked at the companies google purchased and saw many German and Israel tech companies being acquired by google. This sounds plausible.

Still this kind of analysis is very weak for two reasons. Most countries aren't as company friendly as the USA. A discussion about whether Billionares should pay taxes would be unimaginable in most most European countries.

Also America has a strong customer base by default with 320 American citizens and the other 900 Million Nativ speakers, who can easily buy products made for the American market (Especially in the Tech area).

Also those kind of graphs usually get smaller, the higher you go.

One should compare the total amount of startups and divide by citizens, the findings will be a better tool for comparison.

KJasper• 11 years ago

Let's be honest here (I'm Dutch): In the Netherlands failing is looked down upon, investing in something as risky as a start-up is very uncommon and probably frowned upon, working for 40+ hours is okay but we highly value our spare time, there are lots and lots of rules and regulations if you want to hire and fire. All these things are part of our culture and need to be modified in our hearts and rulesets to have a better environment where startups can thrive as well as in the US.

makeitsuckless2• 11 years ago

This is just the bullshit self-loathing of Americanophiles.

"failing is looked down upon". In which f-ing corner of the country? How the hell do you think our tiny country has become so completely disproportionately successful? Because we don't take risks? Because we were to afraid to just set sail and see what happens? Bullshit.

We're the champions of fucking failing. We're the only big soccer nation never to win the World Cup, yet we celebrate our heroes for trying and failing.

Failing is not a bad or shameful thing in Dutch culture. This is just a meme that's being repeated inside a small bubble of people that worship American startup culture and use it as an excuse.

(Edit: the only slightly valid excuse is that bankruptcy in NL can be a bit of a pain in the ass.)

ovi2562• 11 years ago

That's ironic given that your people (the Dutch) were the original European venture capitalists! In the 16th and 17th centuries, they put together and financed again and again (thus repeatable and scalable) overseas trading voyages.

I would hope that spirit left traces in your cultures.

Radle5• 11 years ago

I am German, while I believe that what you say is quite right. I would never give up on the worker protection in order to help start ups, there are other things that can be done.

You shouldn't need to remove the base your country is building on successfully, in order to support new ideas.

Dewie34• 11 years ago

It's funny, I guess, to read about the WSJ referring to European culture. There is no European culture that I know of. Maybe if you look across from the other side of the ocean, contrast your own culture with Europe as a whole, you note the differences and contrasts and then conclude that what you are looking at is tight-knit enough to be called a culture. Maybe like someone travelling from one part of Eurasia to another side, noting how people look and behave and contrast them with the things that are different to their own, and then concluding "this is a distinct culture/group".

Now watch a European disagree with me just to be contrarian.

zeeed• 11 years ago

Exactly.

What the cultural diversity does though, is it makes it harder for startups to serve one big market - that's where US startups have it easier.

Are they "tougher" because of that? I don't think so.

bernardlunn• 11 years ago

I am a Brit living in Switzerland who lived most of his life in America or Asia. Qualify as European? Agree, lots of diversity in Europe and lots of great entrepreneurs as well as resistance to change.

swombat• 11 years ago

Totally disagree. I think you can easily compare European Culture, Asian Culture, North American Culture... they are clearly represented.

Brits, Italians, Polish, Icelandic and Germans clearly form a homogeneous group. A Mexican, New Yorker and Alaskan clearly form another one. And who could disagree that a Chinese, Australian, Indonesian, Indian and Japanese might as well be the same person?

</extreme sarcasm tags>

trimble-alum• 11 years ago

There used to be a lot of resistance in various traditional European business circles (taking meetings, intros, etc.) to working with outsiders, whereas in SV, there is often much less resistance. The other challenge in most countries is dealing with potential customers, staff, partners and other stakeholders that are title, formality, bureaucracy, analysis paralysis and business theater people that can't deal with the reality and uncertainty of nimble, effective action. The latter get the job done, while the former waste time on minimal value-generating activities.

It is easy to make mistakes painting with the broad brush of generalizations, however there are some qualitative patterns which emerge when dealing businesspeople from say Argentina or Japan, but there are always exceptions. (Just be sure to know the expected traditions and test out the other parties to see how cool are they.)

matt4077• 11 years ago

I disagree with yo not to be contrarian, but because you're wrong.

Firstly, inner-European differences are almost by definition smaller than, say, those between Europeans and Asians. Of course there are still cultural differences between Greeks and Irish. But to deny similarities is equally misguided.

Secondly, these differences are getting smaller and smaller. Timothy G. Ash calls it "The Easyjet Generation": young university students, used to cheap airline travel, are creating a unified European culture. I know young people from almost every European country and I feel more connected to them to, say, my 50-year old working class neighbours.

tormeh• 11 years ago

Erasmus is also pretty good at this. I highly recommend it. It's kind of amazing. Which is something I can say without being hyperbolic.

Dewie34• 11 years ago

Firstly, inner-European differences are almost by definition smaller than, say, those between Europeans and Asians.

To say that the differences are smaller is one thing. To call them one culture is an entirely other.

I know young people from almost every European country and I feel more connected to them to, say, my 50-year old working class neighbours

Yes, I bet you feel very connected to the English-speaking, or German-speaking, or whatever common language-speaking friends you have who have the inclination, interest and time to learn these common languages and to travel to several countries in order to meet new people (not just to go on a vacation and/or "meet new people while getting wasted"). But is that really such a big group that you would call them something relating to a generation? That's a big word to throw around.

sillygoose3• 11 years ago

I disagree with yo not to be contrarian, but because you're wrong.

You're wrong about him being wrong. He said there's no one European culture, and you even agree with him:

Of course there are still cultural differences between Greeks and Irish.

phaemon• 11 years ago

I know young people from almost every European country and I feel more connected to them to, say, my 50-year old working class neighbours.

I'm sure you do, in certain ways. But, for example, perhaps some of your friends have 50-year old neighbours, who work in a lower paid job, and yet it would simply never occur to them that they were a different "class" and therefore not to be associated with. That's part of your culture.

pjc503• 11 years ago

I feel more connected to them to, say, my 50-year old working class neighbours

.. and vice versa, I'm sure, which is why some of them are voting for anti-Europe parties.

crusso• 11 years ago

I don't think the WSJ is claiming that all of Europe shares the same food and language. The notion of a culture can be contextually scoped and only include commonalities across that scope. You could talk about a US culture. You could talk about a Southern US culture. You could drill down further to talk about a Louisiana culture.

One could say that the EU and its laws embody commonalities across Europe that create the outlines of a culture.

elorant2• 11 years ago

I could give you a very simple example of cultural similarity across Europe. Religion. Pretty much the majority of European countries are Christians.

IMHO there are more similarities between European countries than between US States.

Dewie34• 11 years ago

I could give you a very simple example of cultural similarity across Europe. Religion. Pretty much the majority of European countries are Christians.

Christianity is kind of a big religion. The Americas (note the 's') could be said to be Christian. So I guess the Americas is one culture. At least Euorope also has the Orthodox branch. Not to mention the muslims in the Balkans.

IMHO there are more similarities between European countries than between US States.

It genuinly blows my mind that some people actually believe this.

QuantumCookie3• 11 years ago

You can definitely cherry pick some examples for that to be the case, particularly for historical reasons and/or very close cultural ties. From an outsiders perspective, Austria and Germany are extremely similar (though neither Austrians or Germans would tend to agree!)

Whilst cultural differences in the US do undoubtedly exist, in Europe simply travelling a hundred miles can take you across 3 countries with 3 languages and 3 distinct cultures. There's plenty of diversity to be found.

k-mcgrady2• 11 years ago

> Pretty much the majority of European countries are Christians.

Source? I doubt this. Secularism is quite high in Europe and I think their is also quite a high muslim population.

> IMHO there are more similarities between European countries than between US States.

I can't believe you actually believe this. Different languages in most European countries. Different customs and traditions. Vastly different tastes in cuisine. Vastly varying levels of wealth/poverty. etc.

ExpiredLink• 11 years ago

It's called 'Western culture'.

Edit: a.k.a. occident

Hyperborian• 11 years ago

...and then conclude that what you are looking at is tight-knit enough to be called a culture.

There is no such qulaificiation on what constitutes a culture. You're making the common mistake of thinking that "culture" reffers to some sort of exclusive club, as though you're either in one or another.

Of course there is a European culture, as well as German, French, Britsh, and other national cultures, as well as local city, town, neighborhood, and even unique internal family cultures. It all overlaps for each of us in our own way.

There is almost certainly a human culture as well, we just lack sufficient comparisons to define it properly at the moment.

joepvd• 11 years ago

OT, but the only times I've encountered the word "foster", it is in the context of the European Commission, specifically in the context of what they want to achieve with grants.

Is it my limited exposure to English, or has the European Commission appropriated this word, and has by the way infected WSJ to use it?

mryan• 11 years ago

In the politest way possible, it is the former. :-)

"Fostering a X culture" is a common phrase outside of the EC.

SEJeff2• 11 years ago

Tell that to the many startups in Berlin, where it is cheap to live and there are a lot of great tech companies. Berlin is like the Los Angeles (aka cultural melting pot) of much of Europe.

smcl• 11 years ago

I think London has a better reputation as a cultural melting pot really

SEJeff2• 11 years ago

And unlike Berlin, it is very expensive to live and work. That being said I <3 both, but think Berlin is a much better place for startup culture.

paulhauggis• 11 years ago

Not only culture, but regulations and taxes also effect the ability to create a startup.

Here is an explanation of French law: http://www.quora.com/Is-it-true-that-its-impossible-to-fire-...

As it says in the first comment, it almost becomes easier to try to get the person to quit with 6 month severance than go through all the hoops that you need to go through to actually fire someone.

michaelochurch4• 11 years ago

Six months of severance per fired employee is a rounding error. If you're doing things right and hiring properly, less than 2% of the people you bring in should ever be fired anyway. So you're talking about 0.12 months (just 4 days) of salary per employee. Again, a rounding error.

Also, the sleazy tech company alternative (to severance) of PIPing the employee for 2-3 months is more expensive than severance, because of the effects on morale to force the manager to run a kangaroo court and the team to deal with a walking-dead employee who's probably pissing on morale intentionally (I would).

France (and, more generally, Europe) has its problems but that is not even on the top 20. Social class fatalism is more of a problem, and that's reinforced by the fact that (unlike in the U.S.) it's very hard to get even moderately wealthy by working. Programmers and lawyers and doctors make less than here, and costs of living are higher, which means that born social class imposes a ceiling. European countries are far better places than the U.S. for the poor and working class, but the middle-class people who want to rise further tend to come here. This is even worse in parts of Asia, where the idea that you can get rich by working is laughable.

jseliger• 11 years ago

Six months of severance per fired employee is a rounding error

For a marginal startup founded on a Mastercard and only tenuously on the right side of the border between life and death six months of severance is not a rounding error.

realusername• 11 years ago

I quite agree with that statement. I can talk about the French case since I'm French but I don't know about Germany. There is a lot of obstacles for a startup that you will have compared to other countries but I would not say that firing someone is one of them, it's just that you need a reason to fire someone, you can't just fire them like this. One of the main problem for me is the taxes which are ridiculously high but the most critical point in my opinion is the bureaucracy. The amount of paperwork is so high that you need to seek for advices all the time, the system is really really over-complex, it takes ages for the administration to process stuff, the bureaucracy is really killing the country. I still discover stuff every year I did not know about, if you never lived in a country like this, you have no idea how badly it can affect the economy.

mason240• 11 years ago

You have unintentionally demonstrated how excessive labor regulation benefits giant corporations at the expense of small businesses and start ups.

Dewie34• 11 years ago

Do you have any evidence of the fabled American social mobility? The faith in it is high, but recent things I've read seems to indicate that it's more of a dream than reality. But it's all too disorganized for me to find any sources off the top of my head.

All it takes for people like Europeans to move to a place like America is to believe in the dream. It doesn't really have to be real.

xvirk• 11 years ago

First of all, Europe is a huge continent with a very diverse population. Secondly people in every country have different levels of risk tolerance. Thirdly social class is not so big issue. Of course it depends on country for example Scandinavian and Central European countries don't have social class systems as much developed as in UK.

Maro2• 11 years ago

Here in Hungary we have Prezi, Ustream, Logmein, and some smaller startups.

adventured• 11 years ago

Ustream isn't a Hungary startup, it was founded (and is based) in San Francisco. It opened an office in Hungary.

http://www.ustream.tv/our-company/about

https://www.crunchbase.com/organization/ustream

michaelochurch4• 11 years ago

I was in Budapest in 2003 and I have to say: the creative energy that was there seemed to be singular. I hope it's still strong. I don't know if I could convince my wife to move (it would set back the clock on her U.S. citizenship) but I'd love to get out there more often.

I came up with this card game (Ambition) out there: https://docs.google.com/document/d/1S7lsZKzHuuhoTb2Wj_L3zrhH...

Maro2• 11 years ago

I work at Prezi. We have a lot of expats from the US who come and work here in Budapest. Prezi is like a patch of SF in beautiful Budapest. If you're interested, drop me a line :)

upstandingdude3• 11 years ago

Although there are many start-ups in Berlin it's pretty tough to navigate all the laws and regulations and more often than not it involves money. So when you try to start a garage business you will discover obstacle after obstacle. It is pretty hard to "just try" a business idea because with all the crap you have to do and pay it HAS to work. I still after 5 years discover some regulations that I completely missed and I always hope that there's no big one hiding behind the bushes. There is a saying in Germany: if you own a business you got one foot in prison.

bozoclownn• 11 years ago

Latest complicated regulation: 'Mindestlohn' and interns.

chkerth2• 11 years ago

Even though Mindestlohn does not apply to interns, who stay up to 3 months, it is still a bad thing for startups.

QuantumCookie3• 11 years ago

Related: Do you know of any good sources to look up rules and regulations like this? Looking at single owner, bootstrapped stuff? (German language is ok too)

chkerth2• 11 years ago

What exactly are you looking for?

sillygoose3• 11 years ago

I still after 5 years discover some regulations that I completely missed and I always hope that there's no big one hiding behind the bushes.

Any juicy examples you could tell us about?

upstandingdude3• 11 years ago

Mostly its small things, one major one that took me by surprise but is now long fixed was:

If you sell physical goods and you put it in a box or wrapper, which you do because shipping, you need to have a membership with one of many private recycling firms that are part of one of the overarching systems (green dot, resy etc.). You never send anything to this company, this company never does anything directly for you. They only ask you once a year to tell them how many tons of cardboard, plastic, and metal you used to package your goods. Then you pay them according to that amount. If you are below a certain amount you pay a minimum fee.*

New regulations and changes are also a major pain:

One of the newer things is that you can't use google analytics on your webshop. If you want to use it it can only be anonymized, you need to state some legal BS in your terms and conditions and you need to make a direct contract with google in order for it to be legal...

The button that finally seals the deal has to have a specific text on which the lawyers are still fighting which of the options actually is legal to use.

For each of those you could receive a legal notice from anyone that is remotely competing (read: any other business) with a heap of legal fees attached that could put you out of business.

* Fun Fact: There's already a recycling surcharge on all the boxes you buy. The customer also pays for the recycling of his waste.

wolfgke2• 11 years ago

There is a saying in Germany: if you own a business you got one foot in prison.

So true. On the other hand, it is said (not a proverb, but a tendency in the feeling) that if you start a business, you have to become very rich faster than prosecution finds you out.

amix• 11 years ago

The major problem is that some of the best Europeans leave to US to start or join startup companies (e.g. Stripe). And if you look at the best US companies you will typically see a large amounts of Europeans in them. So Europeans are very capable of starting and joining startups - they just don't do it in Europe.

What Europe needs is a better way to keep the talent at home.

VeejayRampay2• 11 years ago

We know how to keep the talent at home. The simple solution is to pay them more money (which people tend to crave). But because most European countries have more social security cushion, we tend to pay more taxes. This makes it difficult to compete for companies in say France, Germany, Sweden, etc.

So, at the risk of being extremely antagonistic with this, the solution is for us as societies to start caring less about the less fortunate and give more to the "job creators" like it's done in the USA.

Then we'll be able to compete on a level ground.

rjaco31• 11 years ago

What's the point of being competitive if you throw your quality of life away to obtain it?

felixjmorgan• 11 years ago

I think we're doing alright in London? Pop over to Silicon Roundabout and every bar man will want to tell you about his App. There's start-ups and incubators everywhere. The one thing we don't have the same structure of is VCs - the US kills us there. It's growing though, and the government is really pushing to grow it further.

neverminder2• 11 years ago

Slightly OT: what would be best places in Silicon Roundabout to hang out for a software engineer who's thinking about (but not quite ready yet) of starting his own gig? Google Campus closes at the same time I finish work in The City, it's a bit of a shame.

thruflo• 11 years ago

I'd hop on meetup.com -- most of the tech / startup events are around Shoreditch. Things like 3beards, open coffee (tot ct rd way), don't pitch me bro, etc.

Or see what's on at tech hub, innovation warehouse, etc.

backtoyoujim2• 11 years ago

Is this really a problem ?

I was under the impression that the vast majority of start-ups 1. fail or 2. require employees to expend huge effort while the lion's share of the revenue gain is made by the C-level officers.

Why would an European labor force want to expose itself to the "start-up" platform ?

omouse• 11 years ago

The idea is that you let a million flowers of innovation bloom. You shouldn't need VCs to pursue your ideas and it's usually recommended (Joel Spolsky, Philip Greenspun, Jason Fried and DHH etc. recommend against it).

It should be better in Europe because of the safety net and limited work hours; sure it's easier to be comfortable, but it's also easier to take some time off and work on a cool idea that doesn't have to be a revenue generator.

backtoyoujim2• 11 years ago

But the safety net requires companies to absorb the risk that start-ups pass on to the work force.

How would a small company get around the cost of doing business where labor is actually valued?

makeitsuckless2• 11 years ago

Yawn.

The only major thing we're lacking in Europe is venture capital.

All the other cultural differences (which aren't "European" but vary wildly from country to country), are red herrings Americans and European self-haters like to emphasize. But in reality we a) learned to work with them a long time ago, otherwise we would never have been economically successful, and b) those differences are strengths as well as weaknesses in equal measure.

Yes, the lack of a barrier-free "single market" is also a bit of a pain, but the biggest issue here is language and culture, not laws and regulations, and that's not going to change any time soon. So there's no point on dwelling on it, it's like complaining that the climate in Norway isn't suited for growing bananas.

In reality there are lively start-up scenes all over Europe, with more than enough entrepreneurs willing to take risks, more than enough smart people with innovative ideas, and more than enough people willing to work for them.

The one and only thing that is truly missing is funding, funding and funding. The investment culture is the only place where there is a suffocating risk-averse attitude.

(And most of those anecdotes about how stuffy and risk-averse European culture is are bullshit outliers. I can dig up a ton of totally true anecdotes about the US and make American culture look completely fucking insane. It has nothing to do with the day to day reality of living and doing business on either continent.)

michaelochurch4• 11 years ago

The difference isn't that Europeans are risk-averse. It's that, if you come from a relatively privileged background and have connections in Silicon Valley, you can launch a startup without taking any real risk.

Speaking for my fellow Americans, we're as terrified of being broke as anyone else. (In fact, we have more to fear, because we don't have universal health care.) That said, these kids who become founders straight out of Stanford aren't taking any real risk. They say they are, to justify getting 100 times more equity than their employees, but their backers have enough pull to ensure a "managed outcome" (acqui-hire into a middle-management role) even if the worst should happen.

We are just as risk-averse as Europeans. On both sides of the Atlantic, there are a few people who naturally tend toward creative risk (who are usually socially rejected, there and here) and a much larger set of people who climb the ladder that's put in front of them, follow the rules, and get into positions of power or influence the old-fashioned way (two parts schmoozing, one part birth, two parts luck). The major difference is in the window dressing. In Europe or New York, that ladder tends to be banking or consulting. In Palo Alto, it's programmer or PM to executive to founder to angel investor to VC... but if you go to the right schools, you can skip a couple of the bottom rungs. The actual willingness of the people to take risks isn't any different in one place or the other.

Of course, when it comes to risk attitudes around capital, it's a different environment entirely. Europe is too conservative and cynical for its own good, and California is too optimistic (and thus prone to "capital evaporation" by socially well connected types) and far too trusting of the wrong sorts of people.

Vexs• 11 years ago

In regards to hardware startups, I would think Europe should have the leading edge in comparison to America due to their proximity to China- in America, if I want to start sourcing parts from china, or go into production, It's a significant endeavor. If I'm just a hobbyist screwing around at a workbench, I can pay a huge markup on parts from American vendors, or I can wait 3 weeks to get the same thing from China.

I can't speak from experience in regards to hardware startups, I've just made a handful of one-off boards, but after reading Bunnie's blog in regards to his trips to China and such, the importance of location near it becomes apparent.

pjc503• 11 years ago

"proximity to China"? We're not significantly closer. We get our parts by ocean or air shipping with roughly the same costs.

But we do have WEEE and CE regulations which make selling small-batch electronics a huge pain. I'm very impressed that Arduino managed it, and Pi had a last-minute CE approval near-disaster.

kfk• 11 years ago

At least for me, there are 2 main problems: taxes and language.

Taxes: here in Germany you pay 19% VAT on all transactions. Then, income tax, which quickly reaches 42%, then solidarity tax, basically almost half of your earnings evaporate

Language: it's tough to address a decently large market, the biggest market (German speaking) is about 100M people, that's 4 times less than the USA market

You can easily see that those 2 points quickly add up and create "corollary" problems. With those taxes + social security, to give a strong employee a strong salary you go towards a cost of +150k. To pay that much to employees you would need a big market to address to get revenues, but the market is small-ish, or you might look for VC money, but people with money are too scattered across too many languages and countries.

cyphunk2• 11 years ago

On the other hand... who gives a flygin f' about a startup ecosystem? If to get a strong startup scene I have to live in a society that loves risk (and loves to tell you that taking it is a character quality)... no thanks. I'll happily take degrowth instead.

Europe Is Struggling to Foster a Startup Culture

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