6 ms·

Why European startup had to move to USA to fulfill its vision

13 points by pjsullivan3 15y ago

paulhauggis 15y ago
"Sweden wasn’t a very hospitable place to do this. “Most early stage investors were not interested in investing in a Swedish company, due to local law, structure, and communication,” Sullivan says." I would imagine high taxes and government regulation had something to do with this.
- pjsullivan3 15y ago
  it actually not so much the taxation that costs much for a company, its the "social fees". We will still keep a development team over there, but social fees can add 31% to an employees gross salary. Then the employee still has to have around 30% of tax removed as well.
  - maukdaddy 15y ago
    I hate to tell you, but by the time you take federal, FICA, state, and local taxes out, the average American pays damn close to 30% too. And that's not counting the employee portion of healthcare that adds another percent or two.
    - paulhauggis 15y ago
      30% is not bad. In Norway it's over 50% after everything is said and done..and this isn't include the 20% VAT that is paid on almost everything, the 1% "net wealth tax" (which includes real estate, cars, etc), and any other tax you might have to pay.
      - pg 15y ago
        Do you have to pay this 1% tax on stock you own in companies you've founded? I.e. would the founder of a successful new startup that had such a high valuation in its last round that his stock was worth $50 million on paper have to somehow come up with half a million dollars every year to pay taxes?
        drx 15y ago
        Out of curiosity I researched this a little. Sweden abandoned the wealth tax in 2007. However, the neighboring Norway has a 1.1% combined wealth tax on income above about $350k. And according to [1] "from the income year 2008 the full market value of shares reg- istered on the stock exchange are in the shareholder’s wealth, whereas unlisted shares are valued based on the company’s taxable wealth". Other countries that have the wealth tax are France, Switzerland, Liechtenstein, Netherlands and India. Some of them have limits on the wealth tax in place, e.g. in France the amount cannot exceed 50% of annual revenues. [1] http://www.kpmg.no/arch/_img/9585751.pdf http://www.kpmg.no/arch/_img/9585751.pdf
        pg 15y ago
        I realize this isn't your fault, but KPMG's explanation is pretty question-begging. Anyone happen to know how the "taxable wealth" of a startup would be calculated?
        drx 15y ago
        "10.02 - Business taxes" at the Official Statistics Office of Norway: http://www.ssb.no/metadata/conceptvariable/vardok/1441/en http://www.ssb.no/metadata/conceptvariable/vardok/1441/en "Taxable wealth is the value of the company's assets reduced by debt, as of 1 January in the assessment year." This doesn't necessarily mean that the same definition applies at the tax office and/or that it applies to startups, though.
        mbesto 15y ago
        pg- If you're interested in tax laws for startups in Sweden, let me know. I have a good friend who is in the process of IPO'n his startup and is very "money conscious".
- pavlov 15y ago
  That is an old cliché that doesn't hold true anymore. The US doesn't have substantially lower taxes or less government regulation than Nordic countries. (If anything, the regulations for private stock investments in the US are much more restrictive and complicated.) The difference between the countries' investment and startup growth environments goes much deeper and can't be easily summarized by simple political sloganry.
  - pjsullivan3 15y ago
    You are right. Corporate taxes are no worse off. However, US investors don't want to touch stuff there because they don't completely understand local law...
    - niklas_a 15y ago
      That didn't stop Sequoia from investing $155M in Klarna :)
      - pjsullivan3 15y ago
        What a sick ass round that was....
  - paulhauggis 15y ago
    "That is an old cliché that doesn't hold true anymore. The US doesn't have substantially lower taxes or less government regulation than Nordic countries. (If anything, the regulations for private stock investments in the US are much more restrictive and complicated.)" Since you mentioned Nordic countries in general, let's look at Norway: 1) 28% flat tax on income (additional 9% on gross income if you earn between $73,641 - $119,662 and 12% on anything larger than this. 2) VAT on most things you purchase (25%) 3) 1% wealth tax, including your assets. 4) All tax returns are publicized. So everyone knows how much you make. This is a violation of privacy. source: http://www.davemanuel.com/2009/09/08/the-norwegian-tax-system/ http://www.davemanuel.com/2009/09/08/the-norwegian-tax-syste... It's not just corporate taxes that need to be factored in here. If I'm a VC, why would I invest where everything is going to cost 3X or 4X as much. There also has to be a reason why there is almost no startup scene in Nordic countries. If taxes were great and the government made it really easy for businesses to startup and flourish, VC would be flocking there. another article: http://www.inc.com/magazine/20110201/in-norway-start-ups-say-ja-to-socialism.html http://www.inc.com/magazine/20110201/in-norway-start-ups-say... "As a Norwegian, he pays nearly 50 percent of his income to the federal government, along with a substantial additional tax that works out to roughly 1 percent of his total net worth." "And that's just what he pays directly. Payroll taxes in Norway are double those in the U.S. Sales taxes, at 25 percent, are roughly triple." This article is filled with reasons why I would never want to start a business here.
- patrickgzill 15y ago
  If you are looking for outside investment, you either have to completely forgo American funds, or, you have to do everything the way the SEC wants anyways - the SEC claims jurisdiction anytime American-sourced money goes into any kind of investment. So either you are in USA, where lawyers and accountants deal with SEC requirements everyday; or, you are in Sweden, and have to do things the way Sweden wants you, then, also, do things the way the SEC wants as well. Simply easier and possibly cheaper to be in the USA.
maukdaddy 15y ago
Full disclosure: I just moved from the US to Stockholm. Sounds more like the founders of a travel-related site got enamored with the travel lifestyle, culture, and all that goes with it in NYC. Much like a new CS grad thinks that the valley is the only possible place a startup can work, I imagine that the same holds for travel companies in NYC. From what I've seen/learned so far (and a native Swede please correct me if I'm wrong) people here seem MUCH more likely to run a lifestyle type of business vs. one that chases VC funding.
- mbesto 15y ago
  Whoa! Fellow Chicagoian/hacker living in stockholm? Nice. I've got quite a few entrepreneurial friends in Stockholm in case you're looking for a network. Feel free to get in touch (email in profile)
- fellowshipofone 15y ago
  (I work for Tripl) What the article does not really say much is that Tripl keeping an office in Stockholm where we do have connections, but we have trouble finding fundings for a large engineering project, we have still not found a new office (co-working space) and we have huge difficulties hiring (mobile and web developers). I would love to be proven wrong and keep a larger presence in Stockholm, but NYC has proven easier on these three topics so far.
SammyRulez 15y ago
In Italy is even worst. Local Laws are a jibberish with regulations from the roman empire and the Napoleon invasion ( not joking). Build an equity based company requires huge amount of work and capital. But the saddest part is that investors prefer "stock game" on real company investment. We are used to say that a young founder is the son of an old founder. It means that in Italy capital passes as legacy from father to son and never goes to the market, and often when it does is burnt.
mbesto 15y ago
Great for them, but these Swedes now have to give up a few things that make Sweden "such a great place to live", such as long period of maternity leave, affordable healthcare, low crime, etc. America isn't for everybody, but it is for people who are hungry (metaphorically). Sweden isn't for everybody, but it is for people who want stability. Does this mean Europe needs to "adapt" to be more like the US? In my opinion, no. Many people are very happy with their lifestyles in Europe. Especially Swedes, no doubt, who rank very high in the so called "Quality of Life" Index. [1] p.s. Very cool app idea. finding someone who knows travel is much better than trying to sell travel advice. I know this from experience. [1]- http://nationranking.wordpress.com/2011/03/06/2011-qli/ http://nationranking.wordpress.com/2011/03/06/2011-qli/
- yummyfajitas 15y ago
  ...such as long period of maternity leave... This is really bad for startups. It would really suck if my crucial employees (and not just female employees) were to vanish for 14 months while continuing to be paid and still have the right (but not the responsibility) to come back at the end of it. Even if I replace the missing employee, I might be stuck with an extra employee a year down the line, and I'd have less money to pay the replacement with in the meantime.
  - mbesto 15y ago
    I don't know how German or Swedish employers do it honestly. Boot strapping must be 100x harder with women.
    - niklas_a 15y ago
      44% of Swedish men go on paternity leave, so it's not just the women :) And we are talking REAL swedish paternity leaves here of several months/a year, not the american weeks.
  - niklas_a 15y ago
    (Swedish citizen here, so can't speak for Germany) I'm not gonna tell you it's easy. But it's not as bad as it sounds. The state takes the biggest hit. The employee does not receive full salary and the employer only pay a small part of that salary. Swedish blue-chip companies (read: Ericsson, Volvo, H&M, AstraZeneca etc) will typically go above and beyond the standard benefits and provide full salary while the employee is on maternity/paternity leave. But that is a decision they have made themselves, just like large US companies have all sorts of fringe benefits not mandated by law. There are also morals in play here, you wouldn't join a startup if you are planning to have kids. And besides, most parents would prefer working at a large company while getting kids just because of the risk of a small company. All in all, the situation is not that bad. I think it's a small price to pay to ensure we have growth in the future workforce :)
adman65 15y ago
so, follow the money?
- pjsullivan3 15y ago
  exactly :)
untog 15y ago
From the article it sounds like this should be entitled: "Why Swedish startup had to leave Sweden to fulfill its vision" No offense intended to the US (I moved here from Europe and love it) but they probably could have been successful somewhere like London or Berlin, too.
- yummyfajitas 15y ago
  If your current location is 90% as good as the best possible location, you probably won't move. So if they started in London or Berlin, they might still be there. But once you decide to move, you have no reason not to go to the best possible location.
ed209 15y ago
I'm confused. I thought you couldn't just pop over to the US and carry on with your startup there. How did they manage to do that?
- wantrepreneur 15y ago
  bribe anyone
stevoski 15y ago
I run my own company. I lived in Germany for 8 years. Now I live in Spain. In both countries I encounter many free-lancers and young entrepreneurs in numerous industries. In both countries, with the right professional advice, I've had little trouble getting things going. I just don't think the conventional wisdom that "In Europe it is hard to start a business" holds true.
- pjsullivan3 15y ago
  I will tell what is hard, multiple country legislation, different cultures, and different languages. Its too segregated.
- davidw 15y ago
  > "In Europe it is hard to start a business" Freelancing is easy, but actually starting a business is difficult, at least here in Italy. It costs several thousand Euros, and takes lots of time, and is a fairly rigid entity: if you want to, say, give someone some shares, its going to cost you more thousands of Euros to do so. In the US, you can spend thousands of dollars creating a business, in lawyer fees, but you can also start an LLC on the cheap, if you're not aiming for a high-growth, VC backed, option-disbursing startup. You are 'free to choose'.

13 points by pjsullivan3 15y ago

"Sweden wasn’t a very hospitable place to do this. “Most early stage investors were not interested in investing in a Swedish company, due to local law, structure, and communication,” Sullivan says." I would imagine high taxes and government regulation had something to do with this.

pjsullivan3 15y ago
it actually not so much the taxation that costs much for a company, its the "social fees". We will still keep a development team over there, but social fees can add 31% to an employees gross salary. Then the employee still has to have around 30% of tax removed as well.
- maukdaddy 15y ago
  I hate to tell you, but by the time you take federal, FICA, state, and local taxes out, the average American pays damn close to 30% too. And that's not counting the employee portion of healthcare that adds another percent or two.
  - paulhauggis 15y ago
    30% is not bad. In Norway it's over 50% after everything is said and done..and this isn't include the 20% VAT that is paid on almost everything, the 1% "net wealth tax" (which includes real estate, cars, etc), and any other tax you might have to pay.
    - pg 15y ago
      Do you have to pay this 1% tax on stock you own in companies you've founded? I.e. would the founder of a successful new startup that had such a high valuation in its last round that his stock was worth $50 million on paper have to somehow come up with half a million dollars every year to pay taxes?
      - drx 15y ago
        Out of curiosity I researched this a little. Sweden abandoned the wealth tax in 2007. However, the neighboring Norway has a 1.1% combined wealth tax on income above about $350k. And according to [1] "from the income year 2008 the full market value of shares reg- istered on the stock exchange are in the shareholder’s wealth, whereas unlisted shares are valued based on the company’s taxable wealth". Other countries that have the wealth tax are France, Switzerland, Liechtenstein, Netherlands and India. Some of them have limits on the wealth tax in place, e.g. in France the amount cannot exceed 50% of annual revenues. [1] http://www.kpmg.no/arch/_img/9585751.pdf http://www.kpmg.no/arch/_img/9585751.pdf
        pg 15y ago
        I realize this isn't your fault, but KPMG's explanation is pretty question-begging. Anyone happen to know how the "taxable wealth" of a startup would be calculated?
        drx 15y ago
        "10.02 - Business taxes" at the Official Statistics Office of Norway: http://www.ssb.no/metadata/conceptvariable/vardok/1441/en http://www.ssb.no/metadata/conceptvariable/vardok/1441/en "Taxable wealth is the value of the company's assets reduced by debt, as of 1 January in the assessment year." This doesn't necessarily mean that the same definition applies at the tax office and/or that it applies to startups, though.
        mbesto 15y ago
        pg- If you're interested in tax laws for startups in Sweden, let me know. I have a good friend who is in the process of IPO'n his startup and is very "money conscious".
pavlov 15y ago
That is an old cliché that doesn't hold true anymore. The US doesn't have substantially lower taxes or less government regulation than Nordic countries. (If anything, the regulations for private stock investments in the US are much more restrictive and complicated.) The difference between the countries' investment and startup growth environments goes much deeper and can't be easily summarized by simple political sloganry.
- pjsullivan3 15y ago
  You are right. Corporate taxes are no worse off. However, US investors don't want to touch stuff there because they don't completely understand local law...
  - niklas_a 15y ago
    That didn't stop Sequoia from investing $155M in Klarna :)
    - pjsullivan3 15y ago
      What a sick ass round that was....
- paulhauggis 15y ago
  "That is an old cliché that doesn't hold true anymore. The US doesn't have substantially lower taxes or less government regulation than Nordic countries. (If anything, the regulations for private stock investments in the US are much more restrictive and complicated.)" Since you mentioned Nordic countries in general, let's look at Norway: 1) 28% flat tax on income (additional 9% on gross income if you earn between $73,641 - $119,662 and 12% on anything larger than this. 2) VAT on most things you purchase (25%) 3) 1% wealth tax, including your assets. 4) All tax returns are publicized. So everyone knows how much you make. This is a violation of privacy. source: http://www.davemanuel.com/2009/09/08/the-norwegian-tax-system/ http://www.davemanuel.com/2009/09/08/the-norwegian-tax-syste... It's not just corporate taxes that need to be factored in here. If I'm a VC, why would I invest where everything is going to cost 3X or 4X as much. There also has to be a reason why there is almost no startup scene in Nordic countries. If taxes were great and the government made it really easy for businesses to startup and flourish, VC would be flocking there. another article: http://www.inc.com/magazine/20110201/in-norway-start-ups-say-ja-to-socialism.html http://www.inc.com/magazine/20110201/in-norway-start-ups-say... "As a Norwegian, he pays nearly 50 percent of his income to the federal government, along with a substantial additional tax that works out to roughly 1 percent of his total net worth." "And that's just what he pays directly. Payroll taxes in Norway are double those in the U.S. Sales taxes, at 25 percent, are roughly triple." This article is filled with reasons why I would never want to start a business here.
patrickgzill 15y ago
If you are looking for outside investment, you either have to completely forgo American funds, or, you have to do everything the way the SEC wants anyways - the SEC claims jurisdiction anytime American-sourced money goes into any kind of investment. So either you are in USA, where lawyers and accountants deal with SEC requirements everyday; or, you are in Sweden, and have to do things the way Sweden wants you, then, also, do things the way the SEC wants as well. Simply easier and possibly cheaper to be in the USA.

maukdaddy 15y ago

Full disclosure: I just moved from the US to Stockholm. Sounds more like the founders of a travel-related site got enamored with the travel lifestyle, culture, and all that goes with it in NYC. Much like a new CS grad thinks that the valley is the only possible place a startup can work, I imagine that the same holds for travel companies in NYC. From what I've seen/learned so far (and a native Swede please correct me if I'm wrong) people here seem MUCH more likely to run a lifestyle type of business vs. one that chases VC funding.

mbesto 15y ago
Whoa! Fellow Chicagoian/hacker living in stockholm? Nice. I've got quite a few entrepreneurial friends in Stockholm in case you're looking for a network. Feel free to get in touch (email in profile)
fellowshipofone 15y ago
(I work for Tripl) What the article does not really say much is that Tripl keeping an office in Stockholm where we do have connections, but we have trouble finding fundings for a large engineering project, we have still not found a new office (co-working space) and we have huge difficulties hiring (mobile and web developers). I would love to be proven wrong and keep a larger presence in Stockholm, but NYC has proven easier on these three topics so far.

SammyRulez 15y ago

In Italy is even worst. Local Laws are a jibberish with regulations from the roman empire and the Napoleon invasion ( not joking). Build an equity based company requires huge amount of work and capital. But the saddest part is that investors prefer "stock game" on real company investment. We are used to say that a young founder is the son of an old founder. It means that in Italy capital passes as legacy from father to son and never goes to the market, and often when it does is burnt.

mbesto 15y ago

Great for them, but these Swedes now have to give up a few things that make Sweden "such a great place to live", such as long period of maternity leave, affordable healthcare, low crime, etc. America isn't for everybody, but it is for people who are hungry (metaphorically). Sweden isn't for everybody, but it is for people who want stability. Does this mean Europe needs to "adapt" to be more like the US? In my opinion, no. Many people are very happy with their lifestyles in Europe. Especially Swedes, no doubt, who rank very high in the so called "Quality of Life" Index. [1] p.s. Very cool app idea. finding someone who knows travel is much better than trying to sell travel advice. I know this from experience. [1]- http://nationranking.wordpress.com/2011/03/06/2011-qli/ http://nationranking.wordpress.com/2011/03/06/2011-qli/

yummyfajitas 15y ago
...such as long period of maternity leave... This is really bad for startups. It would really suck if my crucial employees (and not just female employees) were to vanish for 14 months while continuing to be paid and still have the right (but not the responsibility) to come back at the end of it. Even if I replace the missing employee, I might be stuck with an extra employee a year down the line, and I'd have less money to pay the replacement with in the meantime.
- mbesto 15y ago
  I don't know how German or Swedish employers do it honestly. Boot strapping must be 100x harder with women.
  - niklas_a 15y ago
    44% of Swedish men go on paternity leave, so it's not just the women :) And we are talking REAL swedish paternity leaves here of several months/a year, not the american weeks.
- niklas_a 15y ago
  (Swedish citizen here, so can't speak for Germany) I'm not gonna tell you it's easy. But it's not as bad as it sounds. The state takes the biggest hit. The employee does not receive full salary and the employer only pay a small part of that salary. Swedish blue-chip companies (read: Ericsson, Volvo, H&M, AstraZeneca etc) will typically go above and beyond the standard benefits and provide full salary while the employee is on maternity/paternity leave. But that is a decision they have made themselves, just like large US companies have all sorts of fringe benefits not mandated by law. There are also morals in play here, you wouldn't join a startup if you are planning to have kids. And besides, most parents would prefer working at a large company while getting kids just because of the risk of a small company. All in all, the situation is not that bad. I think it's a small price to pay to ensure we have growth in the future workforce :)

adman65 15y ago

so, follow the money?

pjsullivan3 15y ago
exactly :)

untog 15y ago

From the article it sounds like this should be entitled: "Why Swedish startup had to leave Sweden to fulfill its vision" No offense intended to the US (I moved here from Europe and love it) but they probably could have been successful somewhere like London or Berlin, too.

yummyfajitas 15y ago
If your current location is 90% as good as the best possible location, you probably won't move. So if they started in London or Berlin, they might still be there. But once you decide to move, you have no reason not to go to the best possible location.

ed209 15y ago

I'm confused. I thought you couldn't just pop over to the US and carry on with your startup there. How did they manage to do that?

wantrepreneur 15y ago
bribe anyone

stevoski 15y ago

I run my own company. I lived in Germany for 8 years. Now I live in Spain. In both countries I encounter many free-lancers and young entrepreneurs in numerous industries. In both countries, with the right professional advice, I've had little trouble getting things going. I just don't think the conventional wisdom that "In Europe it is hard to start a business" holds true.

pjsullivan3 15y ago
I will tell what is hard, multiple country legislation, different cultures, and different languages. Its too segregated.
davidw 15y ago
> "In Europe it is hard to start a business" Freelancing is easy, but actually starting a business is difficult, at least here in Italy. It costs several thousand Euros, and takes lots of time, and is a fairly rigid entity: if you want to, say, give someone some shares, its going to cost you more thousands of Euros to do so. In the US, you can spend thousands of dollars creating a business, in lawyer fees, but you can also start an LLC on the cheap, if you're not aiming for a high-growth, VC backed, option-disbursing startup. You are 'free to choose'.