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There's many factors that make Europe less competitive than the US: small fractured markets, low salaries, high cost of living relative to wages, Brexit costs,

There's many factors that make Europe less competitive than the US: small fractured markets, low salaries, high cost of living relative to wages, Brexit costs, fear of being labeled a failure, working to live, focus on worker's rights, stability, and pensions, general risk aversion etc. A big issue is there's a lack of mega successes high margin software businesses that pump knowledge and money back into the startup ecosystem. From a cultural standpoint, some countries like France are also obsessed with credentials and what you could call a notion of 'innate superiority'. The end results is a VC ecosystem filled with young finance types that went to locally famous schools with little experience in startups that deploy small amounts with deal terms that would be considered absurd in the US.

somethoughts 2y ago
"There's many factors that make Europe less competitive than the US: small fractured markets" This first one seems the largest hurdle w.r.t. startups. If you are a startup founder of say a ride hailing app - the total addressable market is much larger in the US for the same level of effort. If you want to scale beyond your home state (i.e. California) in the US, there are probably just a handful of different state/city taxes/regulations that need to be accounted for. If you start in a country in Europe, you need to factor in: - language translation of the entire app - different country cultures/customs (i.e. tipping, wording of prompts and promotions) - even down to the naming of the app which might have a negative connotation in a different language - prior to the Euro - differences with respect to currency, trademarks, patents, etc. - entirely new country regulations and politicians that need to be "handled" - each in their own separate language which means a separate lawyer and lobbyist needs to be on staff for each country - home court advantage - French probably prefer to support LeCab while Spaniards probably prefer to support Cabify
- nextos 2y ago
  You are right in terms of the addressable market. Except in some niches, like pharma, it is too fractured. But IMHO, the biggest problem here is mentality. Starting a business and taking risks is not something the society encourages. That is what we have from centuries of rent-seeking aristocrats. A good counterexample is Sweden, where class structure is flatter and imitating American trends is seen as cool. Unsurprisingly, Stockholm punches above its weight class in terms of startups, despite Sweden being a tiny market.
jltsiren 2y ago
Low salaries increase competitiveness, while high salaries decrease it. That's one of the things you already learn as a kid when you live in an export-driven economy. Even if your country is not particularly export-driven but you participate in competitive markets, the same effect may apply. For example, the US lost many manufacturing jobs to China, because American salaries were not competitive (low) enough. Finland is sometimes said to be a country of engineers, for historical and cultural reasons. That doesn't mean engineers are paid well. On the contrary, engineer salaries are low and Finnish engineers like to complain how much more they would earn in Germany. What it does mean is that engineers have a higher social status than in most Western countries, and a lot of people want to be engineers. Finnish companies can hire good engineers with little money. Finnish companies have traditionally been good at developing technology and bad at commercializing it. Explanations vary, from the low quality of business leadership to the lack of domestic capital; from the small size of the domestic market to foreign companies buying successful startups; from the cultural dominance of heavy industry to the culture of respecting laws and regulations.
- throwaway2037 2y ago
  This is an interesting post. Thank you to share your thoughts. > Finnish companies have traditionally been good at developing technology and bad at commercializing it. Can anyone provide some concrete examples?
  - nextos 2y ago
    Polar and Suunto. Excellent technology, but they were never marketed very well and achieved only moderate success. One was acquired by a Chinese corporation, the other is in financial trouble.
    - hiAndrewQuinn 2y ago
      Suunto was a phenomenal company. We just got a guy from Suunto recently at my current workplace and he's incredibly sharp.
- 2y ago
creamyhorror 2y ago
> small fractured markets, low salaries, high cost of living relative to wages...A big issue is there's a lack of mega successes high margin software businesses that pump knowledge and money back into the startup ecosystem. Honestly, these factors apply to many countries outside of the US and stops them from being startup hubs as well. Singapore is in a similar position; despite its wealth and apparent connectedness as Southeast Asia's preferred location for company HQ, it didn't really succeed in kicking off a virtuous circle of winners helping fund new startups. It's pretty hard/costly to acquire customers in disparate small/nonwealthy markets, especially if they stick to established brands. A related factor is investors' relative unwillingness to take on risk, because big payouts haven't been observed. So VCs all pile into the same few existing winners that are actually looking like they'll hit a payday. At one point in 2013-2016 there was a flurry of support for new startups due to aggressive government funding grants and subsidies, but very few of these managed to cross the chasm and raise significant follow-on rounds. A few years later, the funding schemes were cut (due to a lack of observed successes) and the early-stage scene grew quiet. It feels like only very big, integrated markets can support a dynamic startup scene (the US and China). It doesn't seem to happen without easy access to similar consumers/clients and the willingness of those clients to try new services and companies.
DeathArrow 2y ago
>There's many factors that make Europe less competitive than the US: small fractured markets, low salaries, high cost of living relative to wages, Brexit costs, fear of being labeled a failure, working to live, focus on worker's rights, stability, and pensions, general risk aversion etc. In some Asian countries there is a thriving startup scene, so cost of living and working to live are not determining factors. I would say the determining factor is the mentality. Europe focuses much on safety nets, welfare. Europeans learned that they should be content with earning a wage that allows them to live while working 8 hours a day, with enough time off, decent amount of holidays, a good work-life balance. They want state backed pensions funds, free or cheap healthcare, free education. There are less Europeans willing to work on weekends than there are Americans and there are less Europeans working more than one job than there are Americans. So Europeans focus more on living their lives while Americans focus more on Entrepreneurship. Their respective societies, cultures, history kind of teach them to behave that way. It's not that a change in mentality is impossible, but it won't happen overnight.
DeathArrow 2y ago
In Romania there's a huge pool of very talented SWEs. What do they do? They either work for foreign companies, or for a local company working for foreign companies. They mostly outsource their skill. There are maybe two of three software products made by a local company known worldwide. This is the result of risk aversion and lack of capital.

somethoughts 2y ago

"There's many factors that make Europe less competitive than the US: small fractured markets" This first one seems the largest hurdle w.r.t. startups. If you are a startup founder of say a ride hailing app - the total addressable market is much larger in the US for the same level of effort. If you want to scale beyond your home state (i.e. California) in the US, there are probably just a handful of different state/city taxes/regulations that need to be accounted for. If you start in a country in Europe, you need to factor in: - language translation of the entire app - different country cultures/customs (i.e. tipping, wording of prompts and promotions) - even down to the naming of the app which might have a negative connotation in a different language - prior to the Euro - differences with respect to currency, trademarks, patents, etc. - entirely new country regulations and politicians that need to be "handled" - each in their own separate language which means a separate lawyer and lobbyist needs to be on staff for each country - home court advantage - French probably prefer to support LeCab while Spaniards probably prefer to support Cabify

nextos 2y ago
You are right in terms of the addressable market. Except in some niches, like pharma, it is too fractured. But IMHO, the biggest problem here is mentality. Starting a business and taking risks is not something the society encourages. That is what we have from centuries of rent-seeking aristocrats. A good counterexample is Sweden, where class structure is flatter and imitating American trends is seen as cool. Unsurprisingly, Stockholm punches above its weight class in terms of startups, despite Sweden being a tiny market.

jltsiren 2y ago

Low salaries increase competitiveness, while high salaries decrease it. That's one of the things you already learn as a kid when you live in an export-driven economy. Even if your country is not particularly export-driven but you participate in competitive markets, the same effect may apply. For example, the US lost many manufacturing jobs to China, because American salaries were not competitive (low) enough. Finland is sometimes said to be a country of engineers, for historical and cultural reasons. That doesn't mean engineers are paid well. On the contrary, engineer salaries are low and Finnish engineers like to complain how much more they would earn in Germany. What it does mean is that engineers have a higher social status than in most Western countries, and a lot of people want to be engineers. Finnish companies can hire good engineers with little money. Finnish companies have traditionally been good at developing technology and bad at commercializing it. Explanations vary, from the low quality of business leadership to the lack of domestic capital; from the small size of the domestic market to foreign companies buying successful startups; from the cultural dominance of heavy industry to the culture of respecting laws and regulations.

throwaway2037 2y ago
This is an interesting post. Thank you to share your thoughts. > Finnish companies have traditionally been good at developing technology and bad at commercializing it. Can anyone provide some concrete examples?
- nextos 2y ago
  Polar and Suunto. Excellent technology, but they were never marketed very well and achieved only moderate success. One was acquired by a Chinese corporation, the other is in financial trouble.
  - hiAndrewQuinn 2y ago
    Suunto was a phenomenal company. We just got a guy from Suunto recently at my current workplace and he's incredibly sharp.
2y ago

creamyhorror 2y ago

> small fractured markets, low salaries, high cost of living relative to wages...A big issue is there's a lack of mega successes high margin software businesses that pump knowledge and money back into the startup ecosystem. Honestly, these factors apply to many countries outside of the US and stops them from being startup hubs as well. Singapore is in a similar position; despite its wealth and apparent connectedness as Southeast Asia's preferred location for company HQ, it didn't really succeed in kicking off a virtuous circle of winners helping fund new startups. It's pretty hard/costly to acquire customers in disparate small/nonwealthy markets, especially if they stick to established brands. A related factor is investors' relative unwillingness to take on risk, because big payouts haven't been observed. So VCs all pile into the same few existing winners that are actually looking like they'll hit a payday. At one point in 2013-2016 there was a flurry of support for new startups due to aggressive government funding grants and subsidies, but very few of these managed to cross the chasm and raise significant follow-on rounds. A few years later, the funding schemes were cut (due to a lack of observed successes) and the early-stage scene grew quiet. It feels like only very big, integrated markets can support a dynamic startup scene (the US and China). It doesn't seem to happen without easy access to similar consumers/clients and the willingness of those clients to try new services and companies.

DeathArrow 2y ago

>There's many factors that make Europe less competitive than the US: small fractured markets, low salaries, high cost of living relative to wages, Brexit costs, fear of being labeled a failure, working to live, focus on worker's rights, stability, and pensions, general risk aversion etc. In some Asian countries there is a thriving startup scene, so cost of living and working to live are not determining factors. I would say the determining factor is the mentality. Europe focuses much on safety nets, welfare. Europeans learned that they should be content with earning a wage that allows them to live while working 8 hours a day, with enough time off, decent amount of holidays, a good work-life balance. They want state backed pensions funds, free or cheap healthcare, free education. There are less Europeans willing to work on weekends than there are Americans and there are less Europeans working more than one job than there are Americans. So Europeans focus more on living their lives while Americans focus more on Entrepreneurship. Their respective societies, cultures, history kind of teach them to behave that way. It's not that a change in mentality is impossible, but it won't happen overnight.

DeathArrow 2y ago

In Romania there's a huge pool of very talented SWEs. What do they do? They either work for foreign companies, or for a local company working for foreign companies. They mostly outsource their skill. There are maybe two of three software products made by a local company known worldwide. This is the result of risk aversion and lack of capital.