7 ms·

In my experience (Belgian guy that dabbled a bit with EU VCs for my SaaS) Europe is very risk-adverse, and you either have to give up ridiculous amounts of equi

by ToJans 5y ago

In my experience (Belgian guy that dabbled a bit with EU VCs for my SaaS) Europe is very risk-adverse, and you either have to give up ridiculous amounts of equity for a little amount (i.e. 50k€ for a 25% to +50% stake) when not established yet, or have a recurring revenue of at least 50k€/month to get reasonable propositions. Also, European culture is slightly different: most people consider a startup failure as something bad that you drag along for the rest of your career. I've talked to some European VCs, and while they have big ambitions and are starting to gain momentum, it might take a while before the shift in the European mentality happens, and we end up with a thriving ecosystem. Some hubs (Switzerland and Berlin for example) seem to be doing quite good. I also assume a big difference with the US is the fragmented market: different languages, cultural differences, legislative constraints, market demands, ... For example, in my experience high touch B2B sales are highly impacted by the language gap, in fact some countries (France, Spain, Italy, ...) are notoriously against working with people who don't speak their mother tongue. (On the bright side most of us Belgians do speak at least 3 languages, so it is still somewhat doable.) As an alternative to VCs in Europe, you could look at some of the national and European subsidized tracks, although they tend to be mostly coupled to the trend-of-the-decade (sustainability is hot right now), and also require quite some effort to enter with no guarantees of success. (Disclaimer: it's on my to-do list, so no real experience with this.) I would presume the combination of all of these factors results in people looking on other continents for better opportunities. (I personally think Africa might offer huge opportunities in the coming decades, but that's for another time.)

stevoski 5y ago
> “European culture is slightly different: most people consider a startup failure as something bad that you drag along for the rest of your career.” I hear this over and over, but in my 20 years of living in Europe, I haven’t found this to be the case. Perhaps it is only in some European countries or cultures?
- agd 5y ago
  Certainly not the case in the UK from my experience.
- ToJans 5y ago
  We're probably about the same age, so let me ask you this: have you ever heard or seen a European person (who failed a business he or she depended on) carrying his or her failure like a badge of honor? In my experience with job interviews (from both sides of the table) people tend to be ashamed, or they assume you should be ashamed about it. As for me personally, I like sharing both my failures and my successes, and receive a lot of positive feedback about this. But when I ask them to do the same, I usually get a "I wouldn't want to ruin my reputation.". YMMV.
  - stevoski 5y ago
    > We're probably about the same age, so let me ask you this: have you ever heard or seen a European person (who failed a business he or she depended on) carrying his or her failure like a badge of honor? Yes, I have.
    - ToJans 5y ago
      Ok; point taken. Would you tend to agree that the majority is or expects you to be ashamed about it, or is that not what you experience?
      - peoplefromibiza 5y ago
        The majority of them have experienced failure, just like everybody else. What they are (require to be) ashamed of is tricking the system or running illegal businesses that lead to the aforementioned failure.
        filoleg 5y ago
        > What they are (require to be) ashamed of is tricking the system or running illegal businesses that lead to the aforementioned failure. Are you trying to say that most startup failures are due to their illegal nature? If that's the case for majority of failed startups in Europe that you are familiar with, that's kind of telling (whether it is in regards to startups in Europe in general or just the European startups that you are personally familiar with, that's a different question).
- tluyben2 5y ago
  Not my experience either; I see it usually met with 'at least they tried while I did nothing'. But may depend where in the EU you ask.
- libertine 5y ago
  Well the question that might be cynical is: do they actually mean it? Like saying, "oh at least you tried!"/"good for you!"/"you learning something right!"?, this is something I get. No one ever asked, "What went wrong, what went right?" / "What did you learn, what would you do differently?" / "Next time you'll try something hit me up!" / "I have something I'm working on, check this out, are you interested?" / "We should talk more about this" You may say, those are different types of persons, one shows support the other shows curiosity and drive - but in the case of the latter they actually care and are "invested" in your failure as well to the point they'll give up some of their time and attention to ask about it, so they can learn something from your experience as well. What we lack in Europe aren't patting on the back, it's actually to value the experience of failure. It's "easy" to say nice words.
  - volta83 5y ago
    +1. Having worked at both, the main difference between SV and Europe is "share your failures so that everybody can learn" vs "downplay your failures so that you look better".
    - moonchrome 5y ago
      Maybe related but as a contractor I've noticed that working with EU clients there's so much posturing, pretend professionalism, suit and tie kind of guys throwing around titles, red tape etc. US clients are way more casual and to the point.
- Mvandenbergh 5y ago
  Definitely not true in the UK, definitely not true in The Netherlands. Not true among my Paris based friends, had dinner with some of the latter which included someone who was on their third startup and a few Sciences Po / X types who have the kinds of jobs you would expect and the latter were extremely interested in the what the former was up to and how the startup ecosystem worked. Definitely not a sense that they thought having tried and failed to start a tech company was somehow a bad mark - and realistically grande école types tend to be very status conscious so would have picked it up if it was there. I can't speak to what older people, people outside of Paris would think of it. I would guess much more conservative.
dukeyukey 5y ago
Keep in mind a unified "European" VC and startup market doesn't really exists, it's dozens of smaller ones instead. Only a handful are large enough to support a world-class ecosystem (France, Germany, and the UK) and out of those only the UK is really culturally friendly towards startups.
dmichulke 5y ago
> Europe is very risk-adverse I'd say it depends. I lived in several places and my feeling is that the bigger and more cosmopolitan the city is, the less it is risk adverse. So the worst is usually the countryside or towns and cities far away from any border and with no particular significance. > big difference with the US is the fragmented market: different languages, cultural differences, legislative constraints, market demands The Germans tried to address this in the 1940s, but no one seemed interested. /s
yaseer 5y ago
My experience also correlates with this, raising in Europe and from YC. The European ecosystem is focused on well-understood business models, and is less likely to fund something disruptive and novel. It's probably epitomised by the Samwer brothers' cloning American businesses like eBay. If you want to build a well-understood Enterprise SaaS company, I think the European ecosystem will suite you fine. If you want to try a crazy idea, like renting out Air beds to people in your living room, you're better off in SF.
robinhouston 5y ago
I suspect it’s a mistake to treat Europe as homogeneous in this respect. As a startup founder in the UK, this does not match my experience in any way at all.
- yaseer 5y ago
  Also UK-based. The UK is culturally somewhere between the US and the EU in my experience. UK investors are less risk-averse than Germans, but still not quite the same as SF.
IAmEveryone 5y ago
Let's not overlook that about 98% of US states have also been trying to replicate the success of California, with decidedly mixed results. And the successes are all connected to giant economies like New York or research clusters as in MA.
pembrook 5y ago
Europe’s lack of competitiveness in tech has been true pretty much since the birth of Silicon Valley. It was the same with the PC business back in the 80s and 90s. Here’s an article from the New York Times in 1996, struggling to understand why European PC manufacturers were all failing to expand outside their home markets: https://www.nytimes.com/1996/10/07/business/why-european-computer-makers-flop.html https://www.nytimes.com/1996/10/07/business/why-european-com... 25 years later, the story is the same. Europe missed out on most of the big business opportunities of the internet, fell behind and lost the smartphone revolution, is largely missing from the top names in the app store, failed to create an internationally relevant social media company, etc. etc. However, I wonder if this could be an inflection point. Covid has dragged everyone into the future kicking and screaming. Meanwhile Europe is looking grossly undervalued due to a lack of tech exposure. European stock markets have been essentially flat since 2009 while American stock markets have 3X’d (pre-2009, European returns basically tracked American ones). Tech salaries in Europe are now just 1/5th of what they are in Silicon Valley. It seems like the pendulum has swung a little too far in the American direction. It took Europe 40+ years to become internationally competitive with Detroit in auto manufacturing during the 1900s. Maybe this is the natural cycle (of course, this time there’s no wars to use as an excuse). If I were ever going to place a bet on Europe in the last 40 years, now would be the time.
- IdiocyInAction 5y ago
  > European stock markets have been essentially flat since 2009 while American stock markets have 3X’d. The DAX30 (German Index) tripled since 2009. The British and French indices did pretty much move sideways though. The growth of the S&P 500 is pretty amazing though.
  - spaniard89277 5y ago
    Go and watch Spanish indices. It's a sad history.
- tester34 5y ago
  >failed to create an internationally relevant social media company Those are pros or cons? >Tech salaries in Europe are now just 1/5th of what they are in Silicon Valley. Are SV salaries 5 times higher than in Zurich or London? seriously? or you're talking about peak of peak of peak?
eyko 5y ago
You can't paint all of Europe with the same brush, and whilst most of Europe may be in the single market, they're not the "same" market. In my experience, there is a high variance amongst European countries (Eurozone or not) in risk-aversion vs risk-tolerance, which seems to be echoed in some studies/observations[1]. I've never really been able to see what the main factors that determine this may be -- I used to think it was correlated to how much each country participates in the global economy, but that would explain UK and Spain, but not Germany. I also find it a bit narrow-minded to think of Europe as risk-averse simply by judging their attitudes towards tech investments. Spain (where I'm from) definitely appears to be one of the most risk-tolerant EU countries when you look at certain sectors and our foreign investments in infrastructure and other types of construction, but one of the most risk-averse when it comes to tech. If I were to speculate (and I stress, speculate), it seems to be influenced by the type of markets with capital that we have access to: the Middle East, Africa, and Latin America. This is also the case when you think of partially publicly funded projects that are quite risky -- especially in countries that are politically unstable like ours. A perfect example would be renewable energies, which would have been the great success story in Spain until new legislation practically killed any hopes of it being eventually profitable. Germany, on the other hand, seems risk-averse _even_ within their own main domains (industrial engineering, automotive, etc). They also have a big global presence and prestige/reputation, but I have never lived or worked in Germany so I wouldn't even dare speculate why this is the case. I've often seen the finger pointed at bureaucracy, but other countries with similar levels of bureaucracy and hurdles don't seem to be as risk-averse. Different cultures, I reckon. The UK (where I now live) on the other hand was one of the most risk-tolerant countries in the EU (until their departure) when you think of tech investments. The fact that they speak in English and have a strong services economy helps in that respect, I would guess. I'm definitely not an expert. 1. https://voxeu.org/article/cross-country-differences-risk-attitudes-towards-financial-investment https://voxeu.org/article/cross-country-differences-risk-att...
- ToJans 5y ago
  Interesting line of thought; another POV that emerged during a late-night discussion a while ago, was to look at the percentage of people that work in public service in each country. We assumed that, the closer the percentage was to the median, the more risk-averse people would be (assuming the median represents some optimal size for the government). We never validated the idea though; I'm quite curious to see how that would hold up after verification.
deleted 5y ago
[deleted]
api 5y ago
> Also, European culture is slightly different: most people consider a startup failure as something bad that you drag along for the rest of your career. This is a major issue in Japan too AFAIK. Working for a big corporation or the government is still considered superior to entrepreneurship, and failing at a company brings a lot of shame. Without permission to fail, it's impossible to succeed. As Elon Musk put it: "we're gonna have to blow up some rockets." I've wondered if the most significant innovation of the past 500 years and the one that led to our historic technological and economic explosion of progress wasn't just limited liability companies. In the past to do anything big you had to either be already rich (vastly limiting the pool), find a patron (again a small pool), or borrow money. In the old days borrowing was basically loan sharking. You'd end in prison, dead, or at best shamed and broken for the rest of your life if you failed to repay with interest. All that meant very few people could take risks, so very little innovation. Limited liability allows vastly more people to take risks. Yes it does lead to abuse, fraud, and waste, but it also leads to a huge amount of innovation since people have permission to take risks and fail and then recover. Failure at something like a startup still comes with costs. If you (the founder) are not a narcissist or a psychopath it will probably come with emotional costs like a feeling of failure and a feeling of having let people down. But it doesn't ruin your life, blackball you from your career, or land you in prison.
mountainriver 5y ago
They also pay a fraction of US jobs so tech talent doesn’t hang around those areas
ithinkso 5y ago
Also success means something different here for the most part, maybe as a result of what you said above. It's more of a 'business' than 'startup' and if you're profitable that means you have a successful business. I think that big acquisition exit/IPO is a more of a wish/dream rather than a goal here
daanlo 5y ago
Founder from Berlin here. €50k for 25% is really off-market, even if you are a first time founder (at least in Berlin, Paris, London and hopefully all across Europe). And IMHO having worked in a startup (even if you aren‘t the founder) is seen as a BIG career plus if you join any corporate afterwards. I would say we have a thriving eco-system across Europe. Not at the level of SV, but still many big and meaningful companies with global foot prints being built every year.

by ToJans 5y ago

stevoski 5y ago

> “European culture is slightly different: most people consider a startup failure as something bad that you drag along for the rest of your career.” I hear this over and over, but in my 20 years of living in Europe, I haven’t found this to be the case. Perhaps it is only in some European countries or cultures?

agd 5y ago
Certainly not the case in the UK from my experience.
ToJans 5y ago
We're probably about the same age, so let me ask you this: have you ever heard or seen a European person (who failed a business he or she depended on) carrying his or her failure like a badge of honor? In my experience with job interviews (from both sides of the table) people tend to be ashamed, or they assume you should be ashamed about it. As for me personally, I like sharing both my failures and my successes, and receive a lot of positive feedback about this. But when I ask them to do the same, I usually get a "I wouldn't want to ruin my reputation.". YMMV.
- stevoski 5y ago
  > We're probably about the same age, so let me ask you this: have you ever heard or seen a European person (who failed a business he or she depended on) carrying his or her failure like a badge of honor? Yes, I have.
  - ToJans 5y ago
    Ok; point taken. Would you tend to agree that the majority is or expects you to be ashamed about it, or is that not what you experience?
    - peoplefromibiza 5y ago
      The majority of them have experienced failure, just like everybody else. What they are (require to be) ashamed of is tricking the system or running illegal businesses that lead to the aforementioned failure.
      - filoleg 5y ago
        > What they are (require to be) ashamed of is tricking the system or running illegal businesses that lead to the aforementioned failure. Are you trying to say that most startup failures are due to their illegal nature? If that's the case for majority of failed startups in Europe that you are familiar with, that's kind of telling (whether it is in regards to startups in Europe in general or just the European startups that you are personally familiar with, that's a different question).
tluyben2 5y ago
Not my experience either; I see it usually met with 'at least they tried while I did nothing'. But may depend where in the EU you ask.
libertine 5y ago
Well the question that might be cynical is: do they actually mean it? Like saying, "oh at least you tried!"/"good for you!"/"you learning something right!"?, this is something I get. No one ever asked, "What went wrong, what went right?" / "What did you learn, what would you do differently?" / "Next time you'll try something hit me up!" / "I have something I'm working on, check this out, are you interested?" / "We should talk more about this" You may say, those are different types of persons, one shows support the other shows curiosity and drive - but in the case of the latter they actually care and are "invested" in your failure as well to the point they'll give up some of their time and attention to ask about it, so they can learn something from your experience as well. What we lack in Europe aren't patting on the back, it's actually to value the experience of failure. It's "easy" to say nice words.
- volta83 5y ago
  +1. Having worked at both, the main difference between SV and Europe is "share your failures so that everybody can learn" vs "downplay your failures so that you look better".
  - moonchrome 5y ago
    Maybe related but as a contractor I've noticed that working with EU clients there's so much posturing, pretend professionalism, suit and tie kind of guys throwing around titles, red tape etc. US clients are way more casual and to the point.
Mvandenbergh 5y ago
Definitely not true in the UK, definitely not true in The Netherlands. Not true among my Paris based friends, had dinner with some of the latter which included someone who was on their third startup and a few Sciences Po / X types who have the kinds of jobs you would expect and the latter were extremely interested in the what the former was up to and how the startup ecosystem worked. Definitely not a sense that they thought having tried and failed to start a tech company was somehow a bad mark - and realistically grande école types tend to be very status conscious so would have picked it up if it was there. I can't speak to what older people, people outside of Paris would think of it. I would guess much more conservative.

dukeyukey 5y ago

Keep in mind a unified "European" VC and startup market doesn't really exists, it's dozens of smaller ones instead. Only a handful are large enough to support a world-class ecosystem (France, Germany, and the UK) and out of those only the UK is really culturally friendly towards startups.

dmichulke 5y ago

> Europe is very risk-adverse I'd say it depends. I lived in several places and my feeling is that the bigger and more cosmopolitan the city is, the less it is risk adverse. So the worst is usually the countryside or towns and cities far away from any border and with no particular significance. > big difference with the US is the fragmented market: different languages, cultural differences, legislative constraints, market demands The Germans tried to address this in the 1940s, but no one seemed interested. /s

yaseer 5y ago

My experience also correlates with this, raising in Europe and from YC. The European ecosystem is focused on well-understood business models, and is less likely to fund something disruptive and novel. It's probably epitomised by the Samwer brothers' cloning American businesses like eBay. If you want to build a well-understood Enterprise SaaS company, I think the European ecosystem will suite you fine. If you want to try a crazy idea, like renting out Air beds to people in your living room, you're better off in SF.

robinhouston 5y ago

I suspect it’s a mistake to treat Europe as homogeneous in this respect. As a startup founder in the UK, this does not match my experience in any way at all.

yaseer 5y ago
Also UK-based. The UK is culturally somewhere between the US and the EU in my experience. UK investors are less risk-averse than Germans, but still not quite the same as SF.

IAmEveryone 5y ago

Let's not overlook that about 98% of US states have also been trying to replicate the success of California, with decidedly mixed results. And the successes are all connected to giant economies like New York or research clusters as in MA.

pembrook 5y ago

Europe’s lack of competitiveness in tech has been true pretty much since the birth of Silicon Valley. It was the same with the PC business back in the 80s and 90s. Here’s an article from the New York Times in 1996, struggling to understand why European PC manufacturers were all failing to expand outside their home markets: https://www.nytimes.com/1996/10/07/business/why-european-computer-makers-flop.html https://www.nytimes.com/1996/10/07/business/why-european-com... 25 years later, the story is the same. Europe missed out on most of the big business opportunities of the internet, fell behind and lost the smartphone revolution, is largely missing from the top names in the app store, failed to create an internationally relevant social media company, etc. etc. However, I wonder if this could be an inflection point. Covid has dragged everyone into the future kicking and screaming. Meanwhile Europe is looking grossly undervalued due to a lack of tech exposure. European stock markets have been essentially flat since 2009 while American stock markets have 3X’d (pre-2009, European returns basically tracked American ones). Tech salaries in Europe are now just 1/5th of what they are in Silicon Valley. It seems like the pendulum has swung a little too far in the American direction. It took Europe 40+ years to become internationally competitive with Detroit in auto manufacturing during the 1900s. Maybe this is the natural cycle (of course, this time there’s no wars to use as an excuse). If I were ever going to place a bet on Europe in the last 40 years, now would be the time.

IdiocyInAction 5y ago
> European stock markets have been essentially flat since 2009 while American stock markets have 3X’d. The DAX30 (German Index) tripled since 2009. The British and French indices did pretty much move sideways though. The growth of the S&P 500 is pretty amazing though.
- spaniard89277 5y ago
  Go and watch Spanish indices. It's a sad history.
tester34 5y ago
>failed to create an internationally relevant social media company Those are pros or cons? >Tech salaries in Europe are now just 1/5th of what they are in Silicon Valley. Are SV salaries 5 times higher than in Zurich or London? seriously? or you're talking about peak of peak of peak?

eyko 5y ago

You can't paint all of Europe with the same brush, and whilst most of Europe may be in the single market, they're not the "same" market. In my experience, there is a high variance amongst European countries (Eurozone or not) in risk-aversion vs risk-tolerance, which seems to be echoed in some studies/observations[1]. I've never really been able to see what the main factors that determine this may be -- I used to think it was correlated to how much each country participates in the global economy, but that would explain UK and Spain, but not Germany. I also find it a bit narrow-minded to think of Europe as risk-averse simply by judging their attitudes towards tech investments. Spain (where I'm from) definitely appears to be one of the most risk-tolerant EU countries when you look at certain sectors and our foreign investments in infrastructure and other types of construction, but one of the most risk-averse when it comes to tech. If I were to speculate (and I stress, speculate), it seems to be influenced by the type of markets with capital that we have access to: the Middle East, Africa, and Latin America. This is also the case when you think of partially publicly funded projects that are quite risky -- especially in countries that are politically unstable like ours. A perfect example would be renewable energies, which would have been the great success story in Spain until new legislation practically killed any hopes of it being eventually profitable. Germany, on the other hand, seems risk-averse _even_ within their own main domains (industrial engineering, automotive, etc). They also have a big global presence and prestige/reputation, but I have never lived or worked in Germany so I wouldn't even dare speculate why this is the case. I've often seen the finger pointed at bureaucracy, but other countries with similar levels of bureaucracy and hurdles don't seem to be as risk-averse. Different cultures, I reckon. The UK (where I now live) on the other hand was one of the most risk-tolerant countries in the EU (until their departure) when you think of tech investments. The fact that they speak in English and have a strong services economy helps in that respect, I would guess. I'm definitely not an expert. 1. https://voxeu.org/article/cross-country-differences-risk-attitudes-towards-financial-investment https://voxeu.org/article/cross-country-differences-risk-att...

ToJans 5y ago
Interesting line of thought; another POV that emerged during a late-night discussion a while ago, was to look at the percentage of people that work in public service in each country. We assumed that, the closer the percentage was to the median, the more risk-averse people would be (assuming the median represents some optimal size for the government). We never validated the idea though; I'm quite curious to see how that would hold up after verification.

deleted 5y ago

[deleted]

api 5y ago

> Also, European culture is slightly different: most people consider a startup failure as something bad that you drag along for the rest of your career. This is a major issue in Japan too AFAIK. Working for a big corporation or the government is still considered superior to entrepreneurship, and failing at a company brings a lot of shame. Without permission to fail, it's impossible to succeed. As Elon Musk put it: "we're gonna have to blow up some rockets." I've wondered if the most significant innovation of the past 500 years and the one that led to our historic technological and economic explosion of progress wasn't just limited liability companies. In the past to do anything big you had to either be already rich (vastly limiting the pool), find a patron (again a small pool), or borrow money. In the old days borrowing was basically loan sharking. You'd end in prison, dead, or at best shamed and broken for the rest of your life if you failed to repay with interest. All that meant very few people could take risks, so very little innovation. Limited liability allows vastly more people to take risks. Yes it does lead to abuse, fraud, and waste, but it also leads to a huge amount of innovation since people have permission to take risks and fail and then recover. Failure at something like a startup still comes with costs. If you (the founder) are not a narcissist or a psychopath it will probably come with emotional costs like a feeling of failure and a feeling of having let people down. But it doesn't ruin your life, blackball you from your career, or land you in prison.

mountainriver 5y ago

They also pay a fraction of US jobs so tech talent doesn’t hang around those areas

ithinkso 5y ago

Also success means something different here for the most part, maybe as a result of what you said above. It's more of a 'business' than 'startup' and if you're profitable that means you have a successful business. I think that big acquisition exit/IPO is a more of a wish/dream rather than a goal here

daanlo 5y ago

Founder from Berlin here. €50k for 25% is really off-market, even if you are a first time founder (at least in Berlin, Paris, London and hopefully all across Europe). And IMHO having worked in a startup (even if you aren‘t the founder) is seen as a BIG career plus if you join any corporate afterwards. I would say we have a thriving eco-system across Europe. Not at the level of SV, but still many big and meaningful companies with global foot prints being built every year.