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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?

#141

Post by hodwik »

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…

Thank you. The knee-jerk belief that small business is always better is profoundly un-historical.

Most of the greatest inventions of the past 100 years have come from large businesses that had the man-power and capital to invest in significant R&D departments.

Like I said below; AMD and Intel have a duopoly on x86 processors and have for ages. Intel's profit margins waver between 1/4 and 1/3 of revenue. Simultaneously, processors get better and cheaper every single year.

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

#142

Post by yxhuvud »

briandear wrote: post #126
stretchwithme wrote: post #91

Earlier quoted context omitted.

Its number two, the ability to move to somewhere where you can keep more of what you create.

Why is this downvoted? It is exceptionally valid. Starting a company in France subjects you to almost punitive labor laws, horrible taxes and regulation about almost very aspect of your business. Even doing something as simple as buying a rental property and leasing it out in France is loaded with difficulty. For example, an eviction can take years. Leases are standard for three years with the tenant being able to ex…

It is downvoted because most European unicorns happen to be from the second highest taxed country in the world. Which accidentally also shut down in the summer.

Complaining about bureaucracy sounds like a more believable theory considering that the Swedish one is pretty streamlined all things considered, but that is a totally separate issue than the sheer amount of taxes paid.

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

#143

Post by jon-wood »

csomar wrote: post #116

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…

Those 503 million Europeans are spread across 50+ different countries with widely varying laws and customs, and speak dozens of languages. To consider them a single coherent market doesn't make any sense.

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

#144

Post by bitL »

s73v3r wrote: post #110
bitL wrote: post #99

There is no Delaware. Taxes are paid regardless of whether the company hits $1M revenue or not, salary taxes are high, health/social insurance is mandatory and paid for the most part by the employer, there is a minimal salary, extensive bureaucracy and you can't sign away most of your rights if necessary for company survival. Moreover, some countries impose rules which make starting up with little to no money impossi…

"and you can't sign away most of your rights if necessary for company survival. " I don't believe for a second that someone signing away their rights is necessary for company survival. Maybe you as a company leader need to do a better job so you don't come to that point, and if you have, then maybe you aren't fit to run a company.

This doesn't have anything to do with my preferences; frankly I am disgusted by it, but it's a common practice in the US to sign away the rights if you want to get funded by many VCs. So those VCs obviously prefer US as they can't (if "necessary") do the same shady moves in Europe (yet).

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

#145

Post by e5india »

There are a couple things missing from this article that really need to be fleshed out:

1. You're comparing the unicorns which is like comparing the top of the pyramid without measuring the base. In other words, where are the figures for seed-round startups? What is the amount of capital available to startups at the different stages in the business life cycle? Without those numbers we can't really tell if this is a matter of investors in the EU being less efficient in their investments or if its simply a matter of scale.

2. The other mistake that people I think when making this comparison is in comparing the success of the US market compared to Europe as a whole. First of all, you have to keep in mind that much of the success in the tech sector is highly localized. Now obviously the definition of 'tech sector' can vary wildly but generally when we talk about The Tech Sector we mean Silicon Valley. Almost every other state not named California has tried to replicate Silicon Valley and met with the same lack of success you're speaking about here. The major two exceptions are New York and Texas in that order. The rest of the American States see the same kind of out migration of tech chasing money that the essay sees among foreign tech entrepreneurs.

3. Expanding on the above: on a national level we don't care if the tech sector concentrates in California or Texas or wherever as long as it is in the US. The EU might refer to itself as a union, but are the French willing to invest in a tech sector centralized in Romania for the benefit of a Europe as a whole? Not likely. Silicon Valley, as much as we celebrate the free market aspect of it's success, also benefited from massive federal government spending in that region that played a huge rule in establishing its tech ecosystem back in the 50s and 60s.

edit: I've been editing for grammar.

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

#146

Post by JamesBarney »

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…

Most unicorns get so big from network effects so I suspect they play a similar role to language. The social connected graph is a lot less connected across Europe than across the U.S.

Imagine starting a Facebook in Germany versus the U.S. Spreading from state to state is easy because there is a large amount of media and social overlap. If you have a successful startup in California its much easier to spread to Texas, New York, Florida, and Illinois than to spread from Germany to England, France, Italy, and Russia.

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

#148

Post by SneakerXZ »

It is quite easy question actually.

In short, US is unified market with one language, laws for business are same across all states, one currency, one culture, low taxes, no social system and a lot of money.

In EU you have 28 countries, 24 languages which equals to same amount of cultures. 11 currencies. Every country got own laws so once you make business across many countries, you have taxation and law hell. EU tries to improve it so it is getting better but it is still very bad. You basically need a lawyer and a translator for every country where you operate. We have quite big taxes, social system and health system. All these needs to be payed for every employee and it increases the operation cost.

The country that I am from, we had better search engine than Google before Google, we had Uber before Uber and many other. Unfortunately they didn't expand because of problems I mentioned and nobody gave investment that would overcome all these problems. At the end when big name comes to our market they just buy established local competitor and rename it.

Also Silicon Valley is a bubble. In Europe we never heard about most of startups from there and we have local competitors that are established here and do basically same things.

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

#149

Post by jedrek »

bane wrote: post #101
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…

So what, other than language, prevents somebody from starting only European-wide initiatives and reaping the benefits of the entire European market? I don't mean to sound like I'm minimizing the language issue, but it is surmountable. To contradict my devil's advocate question above: My guess and observation is that the ROI on certain localizations isn't good enough to justify the work needed to make a pan-European g…

But it's not only language, there are real legal, logistical and cultural differences between countries. You negotiate for content rights in the US, and you have them in the US.

Also, by the time you've gotten enough traction in your country, there's a me-too (or a dozen) in your other markets.

Look, you're a start up, you're running lean, you're cranking out a MVP - are you really going to invest an extra 40% into trying to get into 3 other markets before you're able to get your head above water?

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

#150

Post by hodwik »

briandear wrote: post #133
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…

Little companies are rarely disruptive and disruption is what creates value and drives society forward.

Exactly, R&D requires capital. Capital comes from profits. Overly competitive markets destroys profits, destroying capital. Thus too much competition destroys R&D.

Look at the airlines. There doesn't need to be this much competition in the airline industry (https://en.wikipedia.org/wiki/List_of_airlines). They've had too many players for far too long, and it's caused them to compete to the bottom.

Sure, flights are "cheap", but not as cheap as they would be if these companies could afford to upgrade their infrastructure, invest in more modernization efforts, and so on. In fact, the average airline makes about 1% return, or $100 in profit for every $10,000 they spend. That's not a recipe for a healthy business, or a healthy industry.

By comparison, AMD and Intel have a duopoly on x86 processors and have for ages. Intel's profit margins waver between 1/4 and 1/3 of revenue. Simultaneously, processors get better and cheaper every single year.

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