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Or EU could stop ruining the market with all their current programs and deregulate. Most "startups" in the EU are nothing more than grant chasers. There's very

Or EU could stop ruining the market with all their current programs and deregulate. Most "startups" in the EU are nothing more than grant chasers. There's very little private VC money because of all the grants. Even legitimate projects that take these grants aren't necessarily any better for it because of all the overhead they introduce. It's most pronounced in new EU countries that get flooded with these funds.

mschuster91 6y ago
> There's very little private VC money because of all the grants. That's wrong. There are four real reasons: 1) our pension systems are mostly government run and on a rolling scheme (i.e. payments from current workers fund current pensioners, in exchange for future-redeemable points). That means that there is a lot less of "dumb cash" lying around in pension funds that screams to be invested for decades... historically that cash used to be put into "safe bets" such as government bonds but their returns are at below-inflation rates, and the only thing that is "profitable" is spreading out the cash over either the big tech companies or small startups. 2) networking. Just look who's in the "angel investor" rounds: people, both founders and early employees who got lots of money in the dotcom era or in the IPOs of the last years - they are all concentrated in the SV area, and enjoy the benefits of close personal contact, and then of course there is YC and a couple of less known clones which come in later. We simply do not have such networks in Europe. 3) risk aversity. Europeans do not like risk, the most obvious example being us Germans who are notorious for being risk averse, so risk averse that our car companies, 12 years after Tesla hit the market, still believe they can make "clean ICE" cars (by investing in synth-fuel tech). A side effect of that is the infamous Wirecard scandal - they were hyped so hard by everyone including our Chancellor who went lobbying in China simply because they were the only company other than dinosaur SAP who were German, were in digital business, and had (on the paper...) good business numbers. 4) "rags to riches" mentality: us Europeans have generally decent social security networks, stable government funded education - basically, you don't have that mentality, starting with young people, to "always hustle" to survive. We live mostly generally comfortable lives, but we're not driven to exploit whatever and wherever we can, simply because we don't need to. The end result: we don't have venture capital simply because there has been no need for it for decades, it's only a recent trend here.
- throwaway250 6y ago
  Some of your points make sense but some don’t. Pension funds in the US don’t invest in startups. Also founders of most American tech companies had a pretty comfortable upbringing. Most founders like Mark Zuckerberg or Travis Kalanick come from well-to-do families. So comfortable life doesn’t explain the risk aversion of Europeans.
  - refurb 6y ago
    CALPERS the pension fund for CA govt workers certainly invests in venture capital, which invests in start ups. https://www.calpers.ca.gov/page/investments/asset-classes/private-equity https://www.calpers.ca.gov/page/investments/asset-classes/pr...
- ry454 6y ago
  I think all those investors and the tech activity in the SV area is a side effect of one big DoD's initiative: to build a world-class surveillance network with all the infra around it. They expressed this desire to spend trillions on this and a few companies who made it happen are now valued at 1-2 trillions. Attempts to replicate SV by "investing into startups" is like crafting a wooden airplane to summon goods.
stingraycharles 6y ago
I think you’re correct when you say that most “innovation” grants are going to companies that are anything but, but to say that most startups are nothing but grant chasers is absolutely not true. I don’t know where you’re located, but at least here in The Netherlands we seem to have a fairly healthy startup ecosystem, where grants seem to be more of an afterthought because there’s a fair amount of VC money or bootstrapped startups.
- lowdose 6y ago
  Which Dutch unicorns came out of that ecosystem you are talking about?
  - stingraycharles 6y ago
    I don’t know whether they’re Unicorns, but at least we have companies like Booking.com, Adyen, you could argue Gitlab has Dutch roots, and smaller ones such as MessageBird, WeTransfer, Usabilla, etc. These are more well known names, but there are plenty and plenty of smaller ones, where “small” can still be around a hundred employees. Again, I’m not claiming that our startup climate is anything like what your see in SV, but it’s definitely a fairly healthy scene, and it would be an insult to characterize these as grant chasers.
    - lowdose 6y ago
      Gitlab is a remote company because of the poor health of the ecosystem. Mollie & Adyen have had success because of the walled garden iDeal payment system of the Dutch banks. Eindhoven was a very innovative region until Philips decided to move HQ. Even Sweden produced more unicorns with a population size a 1/3 of the Netherlands. Maybe you have had more luck with raising money but I experienced a lot of stupidity from private investors.
    - barry-cotter 6y ago
      Booking is a wholly owned subsidiary of Priceline, a US company and has been for the majority of its existence. It was bought for its considerable IT assets after going bankrupt, IIRC.
dmitriid 6y ago
> Most "startups" in the EU are nothing more than grant chasers. There's very little private VC money because of all the grants. Potato potato. Most "startups" in the US are nothing but VC money chasers and often lose billions of infinite investor money (looking at you, Uber) for indefinite periods of time. How is this different from grants other than it's "free" government money in one case and "free" VC money in the other?
- auganov 6y ago
  Very different. In that sense the VC money is actually "free" money. When you get a grant you're subject to many rules. You usually have to submit a budget and money will only get disbursed in accordance with that plan. And there may be many limitations as to what the budget can contain in the first place. Say only X percent can go towards Y class of spending. Your startup is doing poorly and you want to downsize? Well you can't because you budgeted for X people. Want to cut or increase salaries? You can't. I mean you could fire these people but you'd be forfeiting the funds. So people don't. Then there's pressure. [Private] VC is an honor system. There are very few legal obligations but you're expected to perform. Your continued access to funds will mostly depend on how you're perceived by the VCs. With grants you only need to follow legal requirements. No pressure to perform. The agencies only care about you following the rules. When applying for more money, again, you need to fulfill a bunch of requirements. There's not much of a reputation system. If you get denied but meet all the formal requirements you can often sue and win. And since there's no dilution there's no limit to how many different grants you can take.
  - yholio 6y ago
    I think both of you make interesting points. Clearly, the US market-driven model is more successful at producing companies that can internationalize. But there is little doubt the explosion in venture funds is tied to the financial climate pursued by the US government.
- Ericson2314 6y ago
  And if that VC money comes from QE....wait...

mschuster91 6y ago

> There's very little private VC money because of all the grants. That's wrong. There are four real reasons: 1) our pension systems are mostly government run and on a rolling scheme (i.e. payments from current workers fund current pensioners, in exchange for future-redeemable points). That means that there is a lot less of "dumb cash" lying around in pension funds that screams to be invested for decades... historically that cash used to be put into "safe bets" such as government bonds but their returns are at below-inflation rates, and the only thing that is "profitable" is spreading out the cash over either the big tech companies or small startups. 2) networking. Just look who's in the "angel investor" rounds: people, both founders and early employees who got lots of money in the dotcom era or in the IPOs of the last years - they are all concentrated in the SV area, and enjoy the benefits of close personal contact, and then of course there is YC and a couple of less known clones which come in later. We simply do not have such networks in Europe. 3) risk aversity. Europeans do not like risk, the most obvious example being us Germans who are notorious for being risk averse, so risk averse that our car companies, 12 years after Tesla hit the market, still believe they can make "clean ICE" cars (by investing in synth-fuel tech). A side effect of that is the infamous Wirecard scandal - they were hyped so hard by everyone including our Chancellor who went lobbying in China simply because they were the only company other than dinosaur SAP who were German, were in digital business, and had (on the paper...) good business numbers. 4) "rags to riches" mentality: us Europeans have generally decent social security networks, stable government funded education - basically, you don't have that mentality, starting with young people, to "always hustle" to survive. We live mostly generally comfortable lives, but we're not driven to exploit whatever and wherever we can, simply because we don't need to. The end result: we don't have venture capital simply because there has been no need for it for decades, it's only a recent trend here.

throwaway250 6y ago
Some of your points make sense but some don’t. Pension funds in the US don’t invest in startups. Also founders of most American tech companies had a pretty comfortable upbringing. Most founders like Mark Zuckerberg or Travis Kalanick come from well-to-do families. So comfortable life doesn’t explain the risk aversion of Europeans.
- refurb 6y ago
  CALPERS the pension fund for CA govt workers certainly invests in venture capital, which invests in start ups. https://www.calpers.ca.gov/page/investments/asset-classes/private-equity https://www.calpers.ca.gov/page/investments/asset-classes/pr...
ry454 6y ago
I think all those investors and the tech activity in the SV area is a side effect of one big DoD's initiative: to build a world-class surveillance network with all the infra around it. They expressed this desire to spend trillions on this and a few companies who made it happen are now valued at 1-2 trillions. Attempts to replicate SV by "investing into startups" is like crafting a wooden airplane to summon goods.

stingraycharles 6y ago

I think you’re correct when you say that most “innovation” grants are going to companies that are anything but, but to say that most startups are nothing but grant chasers is absolutely not true. I don’t know where you’re located, but at least here in The Netherlands we seem to have a fairly healthy startup ecosystem, where grants seem to be more of an afterthought because there’s a fair amount of VC money or bootstrapped startups.

lowdose 6y ago
Which Dutch unicorns came out of that ecosystem you are talking about?
- stingraycharles 6y ago
  I don’t know whether they’re Unicorns, but at least we have companies like Booking.com, Adyen, you could argue Gitlab has Dutch roots, and smaller ones such as MessageBird, WeTransfer, Usabilla, etc. These are more well known names, but there are plenty and plenty of smaller ones, where “small” can still be around a hundred employees. Again, I’m not claiming that our startup climate is anything like what your see in SV, but it’s definitely a fairly healthy scene, and it would be an insult to characterize these as grant chasers.
  - lowdose 6y ago
    Gitlab is a remote company because of the poor health of the ecosystem. Mollie & Adyen have had success because of the walled garden iDeal payment system of the Dutch banks. Eindhoven was a very innovative region until Philips decided to move HQ. Even Sweden produced more unicorns with a population size a 1/3 of the Netherlands. Maybe you have had more luck with raising money but I experienced a lot of stupidity from private investors.
  - barry-cotter 6y ago
    Booking is a wholly owned subsidiary of Priceline, a US company and has been for the majority of its existence. It was bought for its considerable IT assets after going bankrupt, IIRC.

dmitriid 6y ago

> Most "startups" in the EU are nothing more than grant chasers. There's very little private VC money because of all the grants. Potato potato. Most "startups" in the US are nothing but VC money chasers and often lose billions of infinite investor money (looking at you, Uber) for indefinite periods of time. How is this different from grants other than it's "free" government money in one case and "free" VC money in the other?

auganov 6y ago
Very different. In that sense the VC money is actually "free" money. When you get a grant you're subject to many rules. You usually have to submit a budget and money will only get disbursed in accordance with that plan. And there may be many limitations as to what the budget can contain in the first place. Say only X percent can go towards Y class of spending. Your startup is doing poorly and you want to downsize? Well you can't because you budgeted for X people. Want to cut or increase salaries? You can't. I mean you could fire these people but you'd be forfeiting the funds. So people don't. Then there's pressure. [Private] VC is an honor system. There are very few legal obligations but you're expected to perform. Your continued access to funds will mostly depend on how you're perceived by the VCs. With grants you only need to follow legal requirements. No pressure to perform. The agencies only care about you following the rules. When applying for more money, again, you need to fulfill a bunch of requirements. There's not much of a reputation system. If you get denied but meet all the formal requirements you can often sue and win. And since there's no dilution there's no limit to how many different grants you can take.
- yholio 6y ago
  I think both of you make interesting points. Clearly, the US market-driven model is more successful at producing companies that can internationalize. But there is little doubt the explosion in venture funds is tied to the financial climate pursued by the US government.
Ericson2314 6y ago
And if that VC money comes from QE....wait...