9 ms·

I don't understand why there is no Silicon Valley in Europe then

redis_mlc 6y ago
The reasons are: 1) The California employee rights, which allow an employee to resign and start a new company in the same area. Boston doesn't have an IT industry because of their onerous non-competes, even though DEC and Wang were located there. 2) European nations often have onerous pension requirements that must be met even before hiring a new employee. 3) Silicon Valley has willing investors. 4) Governments across the world prefer dealing with large entities because of the overhead in dealing with multiple companies, so without the right startup culture, new companies just won't happen.
boulos 6y ago
There are lots of theories. One of the main ones is that national policies around employee equity vary throughout Europe and are often severely disadvantageous (particularly Spain and Germany). Lots of European entrepreneurs are calling on policy makers to both normalize this within the EU, as well as making the policies competitive (e.g., [1]). Of course that statement misses some of the “why not < state in the US >”. The tax treatment in other states is the same, and several have similarly employee friendly policies. If anything, Seattle has become a clear rival to San Francisco, and has restrictive employee policies with regards to non competes (c.f., Microsoft used to sue high profile transfers to Google, Amazon sues ~everyone who leaves AWS, etc.). I think the combo of those things suggest that it comes down to density and freedom of movement. Silicon Valley leapfrogged other places thanks to Shockley => various forks => Intel, Apple and others offering serious equity (the Boston scene didn’t keep up on this front). That fed on itself over and over again, leading to persistence. Seattle is now a powerhouse as a legacy of Microsoft and then Amazon, and all the folks that have come out of it. By contrast, Europe has only had a broad single market for ~30 years. But it’s still super fragmented both in terms of laws and some would argue more importantly by language. 45 years ago when Apple and Microsoft were founded, they were able to hire any engineer in the US (and beyond) that spoke English. By contrast, most European companies were highly national with fairly minimal migration between countries. Europe is closer now to the conditions of the initial Silicon Valley setup (freedom of movement, access to knowledge, everyone speaks a common language), but its decades behind in terms of a history of successes. I believe that the companies spawned from Spotify employees, and so on will spread throughout the European startup scene. But it still takes time. tl;dr: Europe still has some structural barriers, and just a much “younger” startup scene. Edit: plus it’s always important to remember that post WW2, most of Europe was spending its time recovering from the war. [1] https://notoptional.eu/en/policymakers https://notoptional.eu/en/policymakers
- tin7in 6y ago
  > One of the main ones is that national policies around employee equity vary throughout Europe and are often severely disadvantageous (particularly Spain and Germany). Lots of European entrepreneurs are calling on policy makers to both normalize this within the EU, as well as making the policies competitive (e.g., [1]). I would also add that employee perception about the value of equity vs salary varies across countries in Europe. High stable salaries could be preferred over equity in good welfare states with employee-favorable legislation where firing people is harder (Germany & France for example).
  - boulos 6y ago
    Absolutely. Though even the base salary pay differential between European hubs and the Bay Area are substantial. I think the firing people thing is good to point out, but many startups end up not needing to fire individuals: they just go out of business :).
deleted 6y ago
[deleted]
bitL 6y ago
Aversion to risk. I was told by German entrepreneurs that they can get funding only when they give bank/VC/investor a collateral of the same value or if they are already profitable and don't need it anymore.
- garmaine 6y ago
  Also German law doesn't make easy allowances for employee ownership / stock options. There's a hack to get around this where you write a contract for a percentage of the eventual exit, but this limits what sort of exits are possible. European laws, regulations, and investor culture are all setup in ways that hurt startups.
  - jashmatthews 6y ago
    > Also German law doesn't make easy allowances for employee ownership / stock options. Airbnb gave me plenty of RSUs while I worked in Berlin. No problem. The Berlin startups with their shit together also know how to use UK (now Irish) Limited companies, which have no issues with offering options to employees.
    - garmaine 6y ago
      It’s a German tax law issue. It’s legal to do but not advantageous to the employee, because they don’t allow things like 83(b) elections. Not sure how Airbnb made it manageable in your case, but incorporating elsewhere doesn’t fix the issue.
      - hef19898 6y ago
        RSUs are working just fine. I got them from Amazon, I was able to get largely discounted shares from EADS back the day. Tax wise Amazon RSUs were treated like part of my salary, covering taxes when they vested ranged from selling all and selling parts of the RSU or covering taxes cash and keeping all of the RSUs. The discount at EADS was treated as part of my salary. No problem whatsoever. INAL, but all these instnces had in common was the legal entity being stock based (AGs in German parlance). Most companies in Germany end to be GmbHs, in that case ownership is harder to change but accounting is a lot easier. That being said, Berlin start-ups have a tendency to complain a lot. If they wanted, they could make a lot of things work.
tomp 6y ago
AFAIK non-competes are enforceable in Europe, unless they're unreasonable.
ChefboyOG 6y ago
I don't know how much of a role this plays, but even with lower market rates, employing a team in Europe can be an expensive, unwieldy task. Firing in particular seems to be a lengthy, drawn out process. I don't think that's a bad thing, but I can imagine how a significantly increased cost for every bad hire might increase the risk profile of a small startup.
- zdragnar 6y ago
  It is also a big brake on salaries, too. If employees are difficult to let go, and the cost of a bad hire is compounded by that, then it stands to reason that you wouldn't want to pay high salaries. Some companies in the US are terrible at getting rid of bad workers- too many cracks for them to fall through. Some, however, are known for paying high salaries and letting anyone go who doesn't live up to them.
- oliverx0 6y ago
  I think at-will employment in the US is key to their startup ecosystem. It makes their market very "liquid", as you can hire fast and fire fast.
  - davidgay 6y ago
    > I think at-will employment in the US is key to their startup ecosystem. It makes their market very "liquid", as you can hire fast and fire fast. Is that really the case? I would have naively assumed the typical (median) startup path is something like hire, hire, hire, go-bankrupt? And the successful ones more like hire, hire, hire, hire, hire, go-public? Easy firing doesn't seem relevant to either of those?
    - oliverx0 6y ago
      Companies in Europe are much more reluctant to hire precisely because it is so much harder to fire. When I lived in the US, and got offers, the company’s first question would be: what’s the earliest you can start? In Europe my experience has been long processes that are dragged out unnecessarily. Hiring is riskier, and therefore slower. There are 2 sides to it of course, on one hand employees are much more protected from losing their jobs, but on the other one innovation and fast access to jobs is also slower. Also, it is not only about firing. Hiring is also slower because of all the paperwork that needs to happen. For example, in Spain you cannot just hire someone. You need to draft out a contract, cover every possible detail related to the work that the person will be doing, etc. it is just slower in general. This brings me back to my min point though: employment at will.
rdlecler1 6y ago
To pile on, Europe also makes it difficult to raise venture capital funds—particularly smaller micro funds as the startup cost is so high. Europe is going to regulate their way back to the dark ages.
cameldrv 6y ago
Also that Europe lacks large pension funds that are legally allowed to invest in Venture Capital, or a large class of super-rich that will invest in Venture Capital, or a large class of moderately wealthy startup veterans that like to do angel investing (the last one is changing).
ry454 6y ago
I believe Europe can create its own SV by following the USA's route: the Europe's equivalent of DoD (which has access to unlimited funds, tens of trillions of euros), needs to come up with a grand multi-decade project and invest into companies that are going to work on related sub-projects. For USA it was the worldwide surveillance system, but for Europe it may be something else, like ITER (but on a bigger scale) or micropayments system (I don't know if it would be big enough). That grand project needs to be useful and reachable, though. One thing I'm certain about is that VC-style micro investments into micro projects with micro objectives will bring only micro results.
- geomark 6y ago
  I think many/most people ignore this, that some of the mega defense projects spawned many companies that led to huge growth in tech industries. The VHSIC program was one of them. I saw dozens of people from the big defense tech company I was working at go on to found design software companies after their experience designing VHSIC chips, chips that are small by today's standards put pushed the limits of design tools at that time. Same thing was happening at the other VHSIC contractors.
- pm90 6y ago
  A first step might be to expand the European University system to handle the influx of Graduate students that were previously headed to the US. Give funding, poach the frustrated non tenured profs from the US. Essentially reverse what happened during and after WW2, when the anti semitism caused Germany and then mainland Europe to lose all the amazing talent to the US.
  - barry-cotter 6y ago
    > A first step might be to expand the European University system to handle the influx of Graduate students that were previously headed to the US. Give funding, poach the frustrated non tenured profs from the US. There is no European university system. There’s a French one, a German one etc. They all pay much, much worse than their US equivalent because they’re substantially poorer than the US. Remember, if Germany was a US state it would be poorer than every state but Mississippi. And this probably understates the difference. By average household consumption the US is $10,000 ahead of Switzerland, number 2 after Hong Kong. The money to massively increase research spending isn’t there.
0xy 6y ago
Because Europe is not at all competitive for tech talent. Fresh graduates earn significantly more money in America than senior-level developers in Europe, with the quasi-exceptions of London and Switzerland (neither in the EU). Why would European developers allow themselves to be shafted out of millions of dollars by staying in Europe?
- mywacaday 6y ago
  London is still in th EU, maybe not for much longer but still there.
  - libraryofbabel 6y ago
    This is false. The UK left the EU on 31 January. It is now in a “transition period” where it follows EU rules and trade is the same. But it is out of the EU. If you’re going to make factual corrections please check your facts.
- 9HZZRfNlpR 6y ago
  In London it's only fintech, rest of the IT salaries are a joke compared to SV.
jokethrowaway 6y ago
Lots of money, private and public (DoD)
rvba 6y ago
IMHO it is much more connected to lack of capital.
niihau_island 6y ago
Maybe it's because Silicon Valley occurred first, and then oppressed most of Europe's "native" companies? It seems that there are some massive sources of wealth for tech companies, such as search, social networks, and e-commerce companies. In Europe, these have all been supplanted by Google, Facebook, and Amazon respectively. In China, on the other hand, these companies were free to grow and establish their own nexuses of tech talent. As a result, China is the closest to having the Silicon Valley of <x>. Perhaps Europe should take a page from China's (and the US now, I suppose) playbook?
- boc 6y ago
  Don't mistake government-sponsored protectionism and corporate espionage for innovation. I don't think Europe can copy China's playbook without also banning all American tech from their economy.
  - tonyedgecombe 6y ago
    I expect you will see barriers come up over time that make it more difficult for American tech companies in Europe. It makes no sense for the EU to outsource such a valuable part of the economy.
    - boc 6y ago
      Again, protectionism is a dangerous road. If the EU blocked American tech companies, the US would retaliate in kind. While it's possible that Europe could eventually become self-sustaining if given a friendly environment to grow indigenous tech companies, losing access to every major OS overnight (as just a small example of the potential retaliation) would be a pretty devastating experience for Europe. You can't replace Microsoft, Apple, and Google overnight.
      - tonyedgecombe 6y ago
        It already exists, there are tariffs for American vehicles entering Europe and the US for instance. >losing access to every major OS overnight That wouldn't really be in America's interest would it?

The reasons are: 1) The California employee rights, which allow an employee to resign and start a new company in the same area. Boston doesn't have an IT industry because of their onerous non-competes, even though DEC and Wang were located there. 2) European nations often have onerous pension requirements that must be met even before hiring a new employee. 3) Silicon Valley has willing investors. 4) Governments across the world prefer dealing with large entities because of the overhead in dealing with multiple companies, so without the right startup culture, new companies just won't happen.

boulos 6y ago

There are lots of theories. One of the main ones is that national policies around employee equity vary throughout Europe and are often severely disadvantageous (particularly Spain and Germany). Lots of European entrepreneurs are calling on policy makers to both normalize this within the EU, as well as making the policies competitive (e.g., [1]). Of course that statement misses some of the “why not < state in the US >”. The tax treatment in other states is the same, and several have similarly employee friendly policies. If anything, Seattle has become a clear rival to San Francisco, and has restrictive employee policies with regards to non competes (c.f., Microsoft used to sue high profile transfers to Google, Amazon sues ~everyone who leaves AWS, etc.). I think the combo of those things suggest that it comes down to density and freedom of movement. Silicon Valley leapfrogged other places thanks to Shockley => various forks => Intel, Apple and others offering serious equity (the Boston scene didn’t keep up on this front). That fed on itself over and over again, leading to persistence. Seattle is now a powerhouse as a legacy of Microsoft and then Amazon, and all the folks that have come out of it. By contrast, Europe has only had a broad single market for ~30 years. But it’s still super fragmented both in terms of laws and some would argue more importantly by language. 45 years ago when Apple and Microsoft were founded, they were able to hire any engineer in the US (and beyond) that spoke English. By contrast, most European companies were highly national with fairly minimal migration between countries. Europe is closer now to the conditions of the initial Silicon Valley setup (freedom of movement, access to knowledge, everyone speaks a common language), but its decades behind in terms of a history of successes. I believe that the companies spawned from Spotify employees, and so on will spread throughout the European startup scene. But it still takes time. tl;dr: Europe still has some structural barriers, and just a much “younger” startup scene. Edit: plus it’s always important to remember that post WW2, most of Europe was spending its time recovering from the war. [1] https://notoptional.eu/en/policymakers https://notoptional.eu/en/policymakers

tin7in 6y ago
> One of the main ones is that national policies around employee equity vary throughout Europe and are often severely disadvantageous (particularly Spain and Germany). Lots of European entrepreneurs are calling on policy makers to both normalize this within the EU, as well as making the policies competitive (e.g., [1]). I would also add that employee perception about the value of equity vs salary varies across countries in Europe. High stable salaries could be preferred over equity in good welfare states with employee-favorable legislation where firing people is harder (Germany & France for example).
- boulos 6y ago
  Absolutely. Though even the base salary pay differential between European hubs and the Bay Area are substantial. I think the firing people thing is good to point out, but many startups end up not needing to fire individuals: they just go out of business :).

deleted 6y ago

[deleted]

bitL 6y ago

Aversion to risk. I was told by German entrepreneurs that they can get funding only when they give bank/VC/investor a collateral of the same value or if they are already profitable and don't need it anymore.

garmaine 6y ago
Also German law doesn't make easy allowances for employee ownership / stock options. There's a hack to get around this where you write a contract for a percentage of the eventual exit, but this limits what sort of exits are possible. European laws, regulations, and investor culture are all setup in ways that hurt startups.
- jashmatthews 6y ago
  > Also German law doesn't make easy allowances for employee ownership / stock options. Airbnb gave me plenty of RSUs while I worked in Berlin. No problem. The Berlin startups with their shit together also know how to use UK (now Irish) Limited companies, which have no issues with offering options to employees.
  - garmaine 6y ago
    It’s a German tax law issue. It’s legal to do but not advantageous to the employee, because they don’t allow things like 83(b) elections. Not sure how Airbnb made it manageable in your case, but incorporating elsewhere doesn’t fix the issue.
    - hef19898 6y ago
      RSUs are working just fine. I got them from Amazon, I was able to get largely discounted shares from EADS back the day. Tax wise Amazon RSUs were treated like part of my salary, covering taxes when they vested ranged from selling all and selling parts of the RSU or covering taxes cash and keeping all of the RSUs. The discount at EADS was treated as part of my salary. No problem whatsoever. INAL, but all these instnces had in common was the legal entity being stock based (AGs in German parlance). Most companies in Germany end to be GmbHs, in that case ownership is harder to change but accounting is a lot easier. That being said, Berlin start-ups have a tendency to complain a lot. If they wanted, they could make a lot of things work.

tomp 6y ago

AFAIK non-competes are enforceable in Europe, unless they're unreasonable.

ChefboyOG 6y ago

I don't know how much of a role this plays, but even with lower market rates, employing a team in Europe can be an expensive, unwieldy task. Firing in particular seems to be a lengthy, drawn out process. I don't think that's a bad thing, but I can imagine how a significantly increased cost for every bad hire might increase the risk profile of a small startup.

zdragnar 6y ago
It is also a big brake on salaries, too. If employees are difficult to let go, and the cost of a bad hire is compounded by that, then it stands to reason that you wouldn't want to pay high salaries. Some companies in the US are terrible at getting rid of bad workers- too many cracks for them to fall through. Some, however, are known for paying high salaries and letting anyone go who doesn't live up to them.
oliverx0 6y ago
I think at-will employment in the US is key to their startup ecosystem. It makes their market very "liquid", as you can hire fast and fire fast.
- davidgay 6y ago
  > I think at-will employment in the US is key to their startup ecosystem. It makes their market very "liquid", as you can hire fast and fire fast. Is that really the case? I would have naively assumed the typical (median) startup path is something like hire, hire, hire, go-bankrupt? And the successful ones more like hire, hire, hire, hire, hire, go-public? Easy firing doesn't seem relevant to either of those?
  - oliverx0 6y ago
    Companies in Europe are much more reluctant to hire precisely because it is so much harder to fire. When I lived in the US, and got offers, the company’s first question would be: what’s the earliest you can start? In Europe my experience has been long processes that are dragged out unnecessarily. Hiring is riskier, and therefore slower. There are 2 sides to it of course, on one hand employees are much more protected from losing their jobs, but on the other one innovation and fast access to jobs is also slower. Also, it is not only about firing. Hiring is also slower because of all the paperwork that needs to happen. For example, in Spain you cannot just hire someone. You need to draft out a contract, cover every possible detail related to the work that the person will be doing, etc. it is just slower in general. This brings me back to my min point though: employment at will.

rdlecler1 6y ago

To pile on, Europe also makes it difficult to raise venture capital funds—particularly smaller micro funds as the startup cost is so high. Europe is going to regulate their way back to the dark ages.

cameldrv 6y ago

Also that Europe lacks large pension funds that are legally allowed to invest in Venture Capital, or a large class of super-rich that will invest in Venture Capital, or a large class of moderately wealthy startup veterans that like to do angel investing (the last one is changing).

ry454 6y ago

I believe Europe can create its own SV by following the USA's route: the Europe's equivalent of DoD (which has access to unlimited funds, tens of trillions of euros), needs to come up with a grand multi-decade project and invest into companies that are going to work on related sub-projects. For USA it was the worldwide surveillance system, but for Europe it may be something else, like ITER (but on a bigger scale) or micropayments system (I don't know if it would be big enough). That grand project needs to be useful and reachable, though. One thing I'm certain about is that VC-style micro investments into micro projects with micro objectives will bring only micro results.

geomark 6y ago
I think many/most people ignore this, that some of the mega defense projects spawned many companies that led to huge growth in tech industries. The VHSIC program was one of them. I saw dozens of people from the big defense tech company I was working at go on to found design software companies after their experience designing VHSIC chips, chips that are small by today's standards put pushed the limits of design tools at that time. Same thing was happening at the other VHSIC contractors.
pm90 6y ago
A first step might be to expand the European University system to handle the influx of Graduate students that were previously headed to the US. Give funding, poach the frustrated non tenured profs from the US. Essentially reverse what happened during and after WW2, when the anti semitism caused Germany and then mainland Europe to lose all the amazing talent to the US.
- barry-cotter 6y ago
  > A first step might be to expand the European University system to handle the influx of Graduate students that were previously headed to the US. Give funding, poach the frustrated non tenured profs from the US. There is no European university system. There’s a French one, a German one etc. They all pay much, much worse than their US equivalent because they’re substantially poorer than the US. Remember, if Germany was a US state it would be poorer than every state but Mississippi. And this probably understates the difference. By average household consumption the US is $10,000 ahead of Switzerland, number 2 after Hong Kong. The money to massively increase research spending isn’t there.

0xy 6y ago

Because Europe is not at all competitive for tech talent. Fresh graduates earn significantly more money in America than senior-level developers in Europe, with the quasi-exceptions of London and Switzerland (neither in the EU). Why would European developers allow themselves to be shafted out of millions of dollars by staying in Europe?

mywacaday 6y ago
London is still in th EU, maybe not for much longer but still there.
- libraryofbabel 6y ago
  This is false. The UK left the EU on 31 January. It is now in a “transition period” where it follows EU rules and trade is the same. But it is out of the EU. If you’re going to make factual corrections please check your facts.
9HZZRfNlpR 6y ago
In London it's only fintech, rest of the IT salaries are a joke compared to SV.

jokethrowaway 6y ago

Lots of money, private and public (DoD)

rvba 6y ago

IMHO it is much more connected to lack of capital.

niihau_island 6y ago

Maybe it's because Silicon Valley occurred first, and then oppressed most of Europe's "native" companies? It seems that there are some massive sources of wealth for tech companies, such as search, social networks, and e-commerce companies. In Europe, these have all been supplanted by Google, Facebook, and Amazon respectively. In China, on the other hand, these companies were free to grow and establish their own nexuses of tech talent. As a result, China is the closest to having the Silicon Valley of <x>. Perhaps Europe should take a page from China's (and the US now, I suppose) playbook?

boc 6y ago
Don't mistake government-sponsored protectionism and corporate espionage for innovation. I don't think Europe can copy China's playbook without also banning all American tech from their economy.
- tonyedgecombe 6y ago
  I expect you will see barriers come up over time that make it more difficult for American tech companies in Europe. It makes no sense for the EU to outsource such a valuable part of the economy.
  - boc 6y ago
    Again, protectionism is a dangerous road. If the EU blocked American tech companies, the US would retaliate in kind. While it's possible that Europe could eventually become self-sustaining if given a friendly environment to grow indigenous tech companies, losing access to every major OS overnight (as just a small example of the potential retaliation) would be a pretty devastating experience for Europe. You can't replace Microsoft, Apple, and Google overnight.
    - tonyedgecombe 6y ago
      It already exists, there are tariffs for American vehicles entering Europe and the US for instance. >losing access to every major OS overnight That wouldn't really be in America's interest would it?