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Why Is Europe Failing to Create More $1B Startups?

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Re: Why Is Europe Failing to Create More $1B Startups?

#111

Post by ThomPete »

qiqing wrote: post #96
vonnik wrote: post #88

Not sure that the premise of this article is even correct. I can think of a lot of successful European startups -- Minecraft, Spotify, Skype, DeepMind, the list goes on... -- and just as many startups led by Europeans that have succeeded in America (Lending Club, etc.). But if Europe has trouble supporting "unicorns", there are probably a couple reasons: 1) Gaps in the funding ladder. 2) Talent flight. 3) A preferenc…

The article also doesn't mention an obvious bias, that is, if a startup starts in Europe, there are a lot of incentives for that startup to move to the U.S. early in its life cycle. In that scenario, the startups who become successful (and who originated elsewhere) all get counted as U.S. successes. This would vastly undercount both the total number of startups elsewhere as well as the number of successful startups.

This is entirely correct and I know several founders who did so, but thats not really the point I am trying to make (which admittedly I didn't make well)

The question that still stands is why they are moving the the US.

Re: Why Is Europe Failing to Create More $1B Startups?

#112

Post by s73v3r »

ThomPete wrote: post #5
atmosx wrote: post #3

Lack of investors. Simple as that. Companies that run on deficit for 5-10 years can not survive in Europe. Facebook, twitter, etc. Wouldn't be able to survive in Europe, simple as that. ps. I hate the word 'unicorn'.

I hate the word unicorn too, but it's shorter than private market companies with a valuation of more than $1 billion :) With regards to lack of investors I don't think it's as simple as that. If it was only a matter of investments then surely US investors or Asian investors could just come in with the money. There is something that makes European VCs risk averse and keep american investors out of Europe IMO.

I dunno, because if it was as simple as that, then those American VCs would be investing all over the US already. As is, most of them are just staying in their little bubble.

Re: Why Is Europe Failing to Create More $1B Startups?

#113

Post by bildung »

nakedrobot2 wrote: post #85
atmosx wrote: post #3

Lack of investors. Simple as that. Companies that run on deficit for 5-10 years can not survive in Europe. Facebook, twitter, etc. Wouldn't be able to survive in Europe, simple as that. ps. I hate the word 'unicorn'.

Because investors in Europe are a bunch of pathetic spineless banker types.

> Because investors in Europe are a bunch of pathetic spineless banker types.

Or investors in Europe have enough opportunities to generate more than the typical return on investment of VC? The average VC ROI is really low, it gets outperformed even by passive index funds IIRC.

Edit: Found the source.

"Yet 2013 annual industry performance data from Cambridge Associates shows that venture capital continues to underperform the S&P 500, NASDAQ and Russell 2000."

https://hbr.org/2014/08/venture-capitalists-get-paid-well-to...

Re: Why Is Europe Failing to Create More $1B Startups?

#114

Post by ThomPete »

rjsw wrote: post #81
ThomPete wrote: post #80

Earlier quoted context omitted.

Thats not what I am saying at all though. In fact I am very open in the essay to the question as to whether it's even something you would want. But the fact is that they have an effect on the world outside the US. Perhaps you are fine with that, I would love to see some more Europeans get into the game if nothing else to boost morality and have more people try and create companies.

Your essay does suggest to me that you think that companies like Uber and AirBnb are a good thing though. If a proportion of those europeans who could run startups hold back from following certain business models then you will get fewer startups overall.

I guess I can always keep rewriting it in every paragraph, but I tried to be up front because I knew some would interpret it like that. This is why I wrote:

Before you read on: This is a complex issue and I don’t claim to have the answers. In fact it’s going to ask more questions than it answers and I wasn’t even sure I wanted to publish it. It’s not even obvious why chasing unicorns is such a good idea.

In the beginning and:

Unicorns might not be what Europe want and we might all agree it’s an unsustainable model.

in the end.

Not sure how much more I could have done before someone started complaining that i was repeating myself :)

Re: Why Is Europe Failing to Create More $1B Startups?

#116

Post by csomar »

The third reason I hear is that the US market is bigger and therefore it’s easier to get traction. Yet there are 503 million Europeans living inside the EU vs. 319 million US living in the US. If the size of the market was any indication of how many unicorns a market could create, Europe would be in the lead. So size of the market alone isn’t an explanation either at least not by comparing the numbers.

I really don't find the EU market to be bigger than the USA market. The US already has tech giants that no other country has (China is starting to have some). So if we are starting from here, the US market is much bigger since it's usually these big/giant companies that drive the VC/Startup market.

The tech industry in the US took the lead. Why? It's complicated to tell. Countries emerge from poverty to richness but there is little correlation how that happens. And if we know how it works, shouldn't we be all rich now?

Re: Why Is Europe Failing to Create More $1B Startups?

#117

Post by candu »

robwilliams wrote: post #82
adaml_623 wrote: post #78

Earlier quoted context omitted.

Ok you have a valid point but since the article is full of kind of wishy washy questions I didn't feel guilty about adding some more into the mix. The title 'Why is Europe Failing to Create More Unicorns?' has an implicit bias in it. The question is saying that Europeans should create more of these massive new companies. 10 smaller companies might be better than 1 big company. 100 companies worth $10 million dollars…

>10 smaller companies might be better than 1 big company. 100 companies worth $10 million dollars each might provide the same number of jobs and the same services to the economy. I'm not sure what point you're trying to make. It's beneficial that Airbnb is so big because I can plan a cross-continent vacation using one website instead of searching for each city's/country's version of it (which may have poor customer s…

While it is true that scale brings certain advantages, larger companies are not an unalloyed good. For instance:

- larger companies can leverage near-monopoly status to prevent meaningful competition, increase rates, etc. (e.g. Verizon/AT&T/Comcast)

- larger companies can collude to drive the price of labor down. (e.g. tech anti-poaching pact.)

- one large company, by being "more efficient", may in fact employ fewer people than your ten smaller companies combined, especially if they are able to invest in large-scale automation initiatives.

- larger companies have a wider view of your activity, making them a single point of failure for personal privacy. (e.g. national security letters, NSA datacenter tapping.)

To paraphrase the parent comment: just because one company can unite the services of ten doesn't mean that it's beneficial.

Re: Why Is Europe Failing to Create More $1B Startups?

#118

Post by olavgg »

donkeyd wrote: post #31

I've posted this before, but since I think it's relevant here: People seem to forget that Europe is not a country. Europe does not have a single uniting language. What happens, is that every country starts their own smaller versions and they stay mostly within that country. If they want to move to another country, there's often already a major player there, and they might not have the means to kick them out. I think…

I absolutely agree with you.

Currently I have a business where I import used computer and network components from US and sell them in the Norwegian market. (I can import pallets of equipment for less than what the total cost is for local shipping in Norway).

While I do make some money on it, the market in Norway is so small that its just a few sales every week. But it's fun, and I'm learning a lot so I still think its worth it.

I would love to sell to the rest of Europe, but I can't solve the logistic problem of transportation of heavy packages. It's hard enough inside Norway.

Doing business in Europe is hard, you have currency issues, language issues, culture differences and then you have all the bureaucracy. All the paperwork, for every minor detail.. :(

Re: Why Is Europe Failing to Create More $1B Startups?

#120

Post by ThomPete »

lumberjack wrote: post #65

>These are of course mostly older companies and not part of the Unicorn category, but at the end of the day that’s just semantics. No, it's not just semantics. Look at the history of Siemens or any other of these old European companies. There's one aspect that is present all their history and that's government involvement. One could even say that their first venture capitalist that gave them a chance was the governme…

You bring on a good point, but thats not what I meant with that so sorry if that was imprecise.

My point is that in the historical context most large companies made it big with or without government help both in the EU and in the US.

So whats changed and thats what I am trying to explore and one of my conclusions is that it might have to do with how Europe is implementing laws. Keep in mind that the EU still have many government supported companies so if thats all it takes then there might be more.

But it's a complex issue which is why I wrote it because I was hoping for discussion like these and points like yours to surface. So thanks.

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