4 ms·

The mindset in SV is to fail fast - yes, with all the consequences for the investors. That's why investing in startups is a high risk investment. And that's als

by mk89 8y ago

The mindset in SV is to fail fast - yes, with all the consequences for the investors. That's why investing in startups is a high risk investment. And that's also why the cautious way of doing business in Europe doesn't help with the startup economy. Being too cautious prevents from taking high risks. I interviewed several times with startups proud of not having any funding behind. Very nice. Still, my question is... Who cares? The main difference is that in the USA money is constantly being invested, there is a lot of debt but that's the way to innovate. In Europe on the other hand, if you fail, or if you make debts you better hide yourself.

iforgotpassword 8y ago
I agree. The way to run startups and maybe to some extend tech companies in general seems not that compatible to the German mind set. Every industry Germany is or was internationally successful in rewards you for being precise, optimizing a lot and generally investing a lot of time. It's pretty much the opposite of the fail fast approach where you quickly cobble something together, throw it at the wall and hope it sticks, if it does, you start to think about everything else. (Inb4 counter-examples. Yes this is oversimplified, exaggerated, stereotyped)
hnkf 8y ago
This is precisely why I despise startup culture. What about the risk for the workers and your customers? What are the grand innovations you think Europe couldn’t produce because we’re more careful?
- mk89 8y ago
  Workers know what they are getting into. Customers know what they are buying. It's an ecosystem that lives on its own. Could you think of Google made in Europe? In Germany, in France, or in Italy? It's no wonder that many Europeans tend to go and live in the USA for that reason.
  - mirko22 8y ago
    That’s very presumptuous, there is loads of US people in Europe too... And you could argue if Google was startup back then or not. I would say not.
    - mk89 8y ago
      What about Amazon? And eBay? And Yahoo? Lots of US people in Europe, true. Doing software? I really really doubt it. Or they left for personal motivations. Leaving US for a developer is like leaving Ferrari for an automobile engineer. You can't top that. Anything else is a step backwards in terms of technology, unless you go to work for some institution - I see the university of Zürich is really advanced, for example. Also, the topic was about innovation, capital, etc. I would prefer not to go too much off topic.
  - sgift 8y ago
    > Could you think of Google made in Europe? In Germany, in France, or in Italy? Some of the biggest companies in the world are from Europe. All of them started as small companies. So, yeah, Google made in Europe is possible. Tech is not a special snowflake industry with other rules than everyone else.
    - mk89 8y ago
      Google made in Europe is possible, facts so far say otherwise, though. If you can mention one or two companies like that, it'd be great. Also, some of the biggest companies in the world are European, that's true. However, they are all but software companies (except for SAP, a b2b company). In Europe we are among the best in pharmaceuticals, cars, chemicals, etc. Sadly enough, software is nothing Europe is ahead with. The reason? In my opinion the fact that software is not tangible and innovation with software is a high risk business - often not scientific or rational. You need to try it out. Go and propose something like Snapchat to a European investor. The application for me is nonsense, I myself can't still see how it works, but it's valued billions. Did it have a business plan? Maybe. However I really doubt that it was 200 pages long. That's not something that the no-debt-at-all European mindset can deal with. I think it's partially cultural and partially historical. A sort of perfectionism that doesn't leave space to failure mixed with a world where corporations and lobbies are super protected and no matter what, they are always the winners and the way to do business. WhatsApp took 2-3 years before it became a standard messaging app. You can't always foresee it. It just happens. Others failed. Now everyone uses WhatsApp. Ps. I am European.
andor 8y ago
Failing fast is done to reduce risk. The quicker a company fails with an idea, i.e. discovers that there is no market fit, the fewer money was wasted on it. The remaining budget can be used to try other ideas. The big company model, where something unproven is developed for a long time by a large team, is substantially more risky. Only when they go live after "finishing" their product they might discover that nobody wants it. Anybody trying to innovate will fail at one point or another, because not all bets play out. So the key is to make the bets as small as possible and therefore "fail" as quickly as possible.
- mk89 8y ago
  You are right! I only saw this from the perspective of the investor that gives money and "hopes" it will work. This doesn't contradict the fact, though, that in Europe the "big plan" tends to work for a simple reason: there are already deals (if it's a b2b) or the product doesn't innovate and it's based on something already working elsewhere. Obviously this prevents innovation.
- chopin 8y ago
  But with this model you can create only shallow products. It's difficult to create something with high upfront costs this way.
ttul 8y ago
I like this response the best. Silicon Valley is an extremely expensive place to start a business. But, if you have the right idea and people, the Valley will give you everything you need to scale. If you don’t, your business will fail quickly because you won’t be able to pay the enormously expensive rent and engineers. And even if you can, they’ll leave if they don’t believe in your idea, because there are so many other places to go change the world at. Starting a business somewhere else is fine. It won’t be so fast though.
- ttul 8y ago
  Oh and just a footnote but IMHO Canada produces excellent technology and engineers, but its tech companies are far too coddled by the SRED tax credit, which should be scrapped to enable faster failure. A startup can get up 65% or so if it’s engineering salaries back every year as a refundable tax credit on qualifying R&D...
  - mk89 8y ago
    I don't know enough about Canada. I think many countries produce very smart engineers. I mean, Redis was created by some Italian guys , akka was created by some Swedish guys, and I think Scala was created by the technical University in Zürich. I will never question the high level of smart people in Europe or in any other country in this world. It's just sad that such places don't change the way of doing business, because it's their own fault if they are lagging behind. Then Macron comes with the French WhatsApp...
    - adventured 8y ago
      I entirely agree with your point about global technical talent. Most of the top 40 or 50 countries have plenty of it. I've been reading discussions like this thread for more than two decades, since the early days of the boom in the 1990s. I think the mistake being frequently made in this thread and every other thread, is the premise that you can replicate the super context that the US and China represent. I don't believe there is anything realistically that Germany, France, Britain, Russia, et al. can do to recreate what those two uber markets have going for them. It is impossible to do it. The focus is always on things like funding, taxes, regulations, cultural aversions to risk, and so on. It doesn't matter. In the time a German start-up with identical funding is working on grinding its way through 40 different countries in Europe (most with 1/4 to 1/2 the spending power of consumers in the US) to match the economics of the US market, the US peer already owns the US market, and is assaulting the global market from its position of strength. The US company can then spend abnormal sums of capital on prying away each individual market in Europe, country by country, thanks to that US haven. It instantly puts the European competitor/s on their heels, and discourages investors. The US is by a large margin the most lucrative, accessible, big market on the planet (and you almost automatically get another large market with it, via Canada); if a competitor locks that up, you've got a problem in which you'll never be safe from them using the US market as a springboard to perpetually assault your European position. It becomes a strategy of divide and conquer then. Europe - the EU specifically - has two choices. Blockade foreign competition ala China (no guarantee that will work out well, it may lead to stagnation and brain drain, along with foreign market restriction tit-for-tat). Or complete the full integration of the EU and push for language, regulatory and cultural consolidation (that will never happen). If you're an individual company, you have another option: get a big part of the US market early on. Spotify did this (and as others have noted, Swedish companies seem to be quite adept at it thanks to the wide adoption of English and understanding of US culture there). If they hadn't, they'd be back on their heels right now as Apple Music rapidly gets larger (Apple Music would have all of the US market and would be pressing that much harder on Spotify now). Atlassian as another example, would be a far smaller company without their piece of the US market. They'd be a trivial takeover target for someone else, as Australia + New Zealand would never provide enough of a base of scale to compete toe to toe with the giants. The US market is why Shopify is worth $17 billion and growing so fast. Had they just focused on Canada, a US competitor would wipe them out and or acquire them on the cheap. They had to get the US market or else. With that US springboard in place, used properly, they can go get the world, using the US as an immense funding engine for expansion. Out of that market capture they'll have accomplished 10x growth, from $100m in sales to $1b, in less than five years. Getting that sales snowball to roll downhill in the US, is one of the cheapest forms of expansion funding there is, once it goes, it goes.
gumby 8y ago
> The main difference is that in the USA money is constantly being invested, there is a lot of debt but that's the way to innovate. By the way debt financing is quite uncommon for startups in the US. It's almost all equity.

by mk89 8y ago

iforgotpassword 8y ago

I agree. The way to run startups and maybe to some extend tech companies in general seems not that compatible to the German mind set. Every industry Germany is or was internationally successful in rewards you for being precise, optimizing a lot and generally investing a lot of time. It's pretty much the opposite of the fail fast approach where you quickly cobble something together, throw it at the wall and hope it sticks, if it does, you start to think about everything else. (Inb4 counter-examples. Yes this is oversimplified, exaggerated, stereotyped)

hnkf 8y ago

This is precisely why I despise startup culture. What about the risk for the workers and your customers? What are the grand innovations you think Europe couldn’t produce because we’re more careful?

mk89 8y ago
Workers know what they are getting into. Customers know what they are buying. It's an ecosystem that lives on its own. Could you think of Google made in Europe? In Germany, in France, or in Italy? It's no wonder that many Europeans tend to go and live in the USA for that reason.
- mirko22 8y ago
  That’s very presumptuous, there is loads of US people in Europe too... And you could argue if Google was startup back then or not. I would say not.
  - mk89 8y ago
    What about Amazon? And eBay? And Yahoo? Lots of US people in Europe, true. Doing software? I really really doubt it. Or they left for personal motivations. Leaving US for a developer is like leaving Ferrari for an automobile engineer. You can't top that. Anything else is a step backwards in terms of technology, unless you go to work for some institution - I see the university of Zürich is really advanced, for example. Also, the topic was about innovation, capital, etc. I would prefer not to go too much off topic.
- sgift 8y ago
  > Could you think of Google made in Europe? In Germany, in France, or in Italy? Some of the biggest companies in the world are from Europe. All of them started as small companies. So, yeah, Google made in Europe is possible. Tech is not a special snowflake industry with other rules than everyone else.
  - mk89 8y ago
    Google made in Europe is possible, facts so far say otherwise, though. If you can mention one or two companies like that, it'd be great. Also, some of the biggest companies in the world are European, that's true. However, they are all but software companies (except for SAP, a b2b company). In Europe we are among the best in pharmaceuticals, cars, chemicals, etc. Sadly enough, software is nothing Europe is ahead with. The reason? In my opinion the fact that software is not tangible and innovation with software is a high risk business - often not scientific or rational. You need to try it out. Go and propose something like Snapchat to a European investor. The application for me is nonsense, I myself can't still see how it works, but it's valued billions. Did it have a business plan? Maybe. However I really doubt that it was 200 pages long. That's not something that the no-debt-at-all European mindset can deal with. I think it's partially cultural and partially historical. A sort of perfectionism that doesn't leave space to failure mixed with a world where corporations and lobbies are super protected and no matter what, they are always the winners and the way to do business. WhatsApp took 2-3 years before it became a standard messaging app. You can't always foresee it. It just happens. Others failed. Now everyone uses WhatsApp. Ps. I am European.

andor 8y ago

Failing fast is done to reduce risk. The quicker a company fails with an idea, i.e. discovers that there is no market fit, the fewer money was wasted on it. The remaining budget can be used to try other ideas. The big company model, where something unproven is developed for a long time by a large team, is substantially more risky. Only when they go live after "finishing" their product they might discover that nobody wants it. Anybody trying to innovate will fail at one point or another, because not all bets play out. So the key is to make the bets as small as possible and therefore "fail" as quickly as possible.

mk89 8y ago
You are right! I only saw this from the perspective of the investor that gives money and "hopes" it will work. This doesn't contradict the fact, though, that in Europe the "big plan" tends to work for a simple reason: there are already deals (if it's a b2b) or the product doesn't innovate and it's based on something already working elsewhere. Obviously this prevents innovation.
chopin 8y ago
But with this model you can create only shallow products. It's difficult to create something with high upfront costs this way.

ttul 8y ago

I like this response the best. Silicon Valley is an extremely expensive place to start a business. But, if you have the right idea and people, the Valley will give you everything you need to scale. If you don’t, your business will fail quickly because you won’t be able to pay the enormously expensive rent and engineers. And even if you can, they’ll leave if they don’t believe in your idea, because there are so many other places to go change the world at. Starting a business somewhere else is fine. It won’t be so fast though.

ttul 8y ago
Oh and just a footnote but IMHO Canada produces excellent technology and engineers, but its tech companies are far too coddled by the SRED tax credit, which should be scrapped to enable faster failure. A startup can get up 65% or so if it’s engineering salaries back every year as a refundable tax credit on qualifying R&D...
- mk89 8y ago
  I don't know enough about Canada. I think many countries produce very smart engineers. I mean, Redis was created by some Italian guys , akka was created by some Swedish guys, and I think Scala was created by the technical University in Zürich. I will never question the high level of smart people in Europe or in any other country in this world. It's just sad that such places don't change the way of doing business, because it's their own fault if they are lagging behind. Then Macron comes with the French WhatsApp...
  - adventured 8y ago
    I entirely agree with your point about global technical talent. Most of the top 40 or 50 countries have plenty of it. I've been reading discussions like this thread for more than two decades, since the early days of the boom in the 1990s. I think the mistake being frequently made in this thread and every other thread, is the premise that you can replicate the super context that the US and China represent. I don't believe there is anything realistically that Germany, France, Britain, Russia, et al. can do to recreate what those two uber markets have going for them. It is impossible to do it. The focus is always on things like funding, taxes, regulations, cultural aversions to risk, and so on. It doesn't matter. In the time a German start-up with identical funding is working on grinding its way through 40 different countries in Europe (most with 1/4 to 1/2 the spending power of consumers in the US) to match the economics of the US market, the US peer already owns the US market, and is assaulting the global market from its position of strength. The US company can then spend abnormal sums of capital on prying away each individual market in Europe, country by country, thanks to that US haven. It instantly puts the European competitor/s on their heels, and discourages investors. The US is by a large margin the most lucrative, accessible, big market on the planet (and you almost automatically get another large market with it, via Canada); if a competitor locks that up, you've got a problem in which you'll never be safe from them using the US market as a springboard to perpetually assault your European position. It becomes a strategy of divide and conquer then. Europe - the EU specifically - has two choices. Blockade foreign competition ala China (no guarantee that will work out well, it may lead to stagnation and brain drain, along with foreign market restriction tit-for-tat). Or complete the full integration of the EU and push for language, regulatory and cultural consolidation (that will never happen). If you're an individual company, you have another option: get a big part of the US market early on. Spotify did this (and as others have noted, Swedish companies seem to be quite adept at it thanks to the wide adoption of English and understanding of US culture there). If they hadn't, they'd be back on their heels right now as Apple Music rapidly gets larger (Apple Music would have all of the US market and would be pressing that much harder on Spotify now). Atlassian as another example, would be a far smaller company without their piece of the US market. They'd be a trivial takeover target for someone else, as Australia + New Zealand would never provide enough of a base of scale to compete toe to toe with the giants. The US market is why Shopify is worth $17 billion and growing so fast. Had they just focused on Canada, a US competitor would wipe them out and or acquire them on the cheap. They had to get the US market or else. With that US springboard in place, used properly, they can go get the world, using the US as an immense funding engine for expansion. Out of that market capture they'll have accomplished 10x growth, from $100m in sales to $1b, in less than five years. Getting that sales snowball to roll downhill in the US, is one of the cheapest forms of expansion funding there is, once it goes, it goes.

gumby 8y ago

> The main difference is that in the USA money is constantly being invested, there is a lot of debt but that's the way to innovate. By the way debt financing is quite uncommon for startups in the US. It's almost all equity.