The European Union should devote some of the untold billions they rain on farming subsidies and bailouts, and provide a EU-wide venture fund. YC model, other alumni and successful tech leaders select the most promising startups in a competitive bid for a fixed share ratio. This would do more for EU tech innovation that any other bureaucratic and academically driven initiatives had thus far.
I think following any of those links and comparing them to the https://www.ycombinator.com/deal/ page is a good illustration of how these programs fail. The bureaucracy for applying is daunting. The Accelerator will not fund pure startup ideas, rather technologies that have reached TRL 6-8, so not just a proof of concept demo, but a functional system in real life environment. The European Innovation Council will fund prospective technologies but only in well specified areas of interest.
Most recent unicorns will simply not thrive in this environment, it's more catered to the professional grant seekers or already successful companies, that can absorb a financing round of 500k-2.5 mil €
Well on one hand you have public money that have to be dispensed with fairness and in an accountable manner, on the other hand you have a random guy and his friends playing bets with their spare millions of dollars.
It's clear that there has to be some bureaucracy. If anything because you might want to do some auditing in the future.
PG and friends mostly spend their own money and they're free to do as they please, follow instinct or whatever.
We've been funded by various research grants from EU as well asEU VC money.
Grants are bureaucracy, sure, but if you understand how you navigate it - and every entrepreneurial person shoud - then it's really free money with a bit of strings attached. But it's primarily used for seed purposes (vs. series A, B...) in new companies or as a suplement in existing companies.
EU also does investment matching (one of our VCs had half of his fund matched by the EU). Based on my experience, this is an even better model, since it derisks investmens for local VCs - the biggest problem in investing here is not the lack of funds, but insane risk aversion. It really feels like everybody is looking for stable and good performing businesses and not for investment opportunities that would be moon shots.
From the 1st link there is https://ec.europa.eu/easme/en/news/deep-tech-europe-report-k... which claims that companies that received EIC funding have attracted 5Bi in private funding (the program is new so this is apparently a couple of years, maybe more)
Well, comparing those grants to YC is a bit of apples to oranges. That being said, I don't think it's wrong for medium to large companies to apply for these grants, and the US also does offer grants.
The point is, that the grand-grand-parent proposed these programs AS a substitute for YC. Which they are not. Sure they may have other merit, but that is beside the point.
Deadline every 2 months, next one in four days. Support for improving existing FOSS projects as well as endeavoring new ones. Past recipients worked on Wireguard, Jitsi, NextCloud, LibreOffice, EteSync, Guix and many more: https://nlnet.nl/project/
Besides these EU projects there are also national projects within EU member states. Like for example the NIC-SE foundation that manage the .se ccTLD tend to grant money to small startups.
The Blue Brain Project belongs to EPFL and is entirely funded internally; it's about 2% of EPFL's budget.
I'm not qualified to speak of the science behind the HBP but I know that a few labs in China and in the US (like the Allen institute) see some value in it. It's a big engineering project and maybe the end goal and result isn't what's important here. Pretty much like CERN.
> Best example is that big blue brain project in Switzerland that got billions even when the science was not there.
It's the Human Brain Project, and it's 1 billion over 10 years. It is currently in year 7, and at the end, it will provide the AWS of neuroscience in Europe.
Or will build, if they are granted the additional money they ask for past 2023: “The development of high-quality brain simulators requires a long-term commitment of resources”. We shall call it Deep Thought: the sunk-cost brain.
I think it will utterly fail. Some interesting spin-offs may still happen but the whole project is a great exercise in marketing, not so much in science.
It's easy to write off as a failure, as doing so requires little to no engagement with the internal structure and struggle of the project, which is the largest in informatics and neuroscience that I am aware of. If you don't agree, please cite something else on the same scale.
I'm involved with HBP and other non-European and European national neuroscience projects (though I am neutral here, just a university-employed engineer), and the science in the recent phase (starting in April this year) is a complete break with preceding funding phase and on-par with other projects. The people leading the science subproject are actually leading PIs on the topics. For comparison, let's name Allen Institute, though Allen is more a monolith, whereas HBP is more like micro-services, with a high cost in coordination, but now a focus on "FAIR" aspects like open-ness and reusability.
The infrastructure side is also coming along, and will provide an AWS of neuroscience (6 national HPC sites, multi-zone OpenStack/OpenShift, 2 neuro-morphic platforms, neuro-robotics platform, federated IAM, metadata and object storage stack, dedicated clinical infrastructure, etc) , but the failure or success will depend a lot more on the larger community getting convinced to engage their workflows on the platform. If people collectively agree that it isn't worth using, then the infrastructure teams never get to justify the whole thing, and it will flop. In that sense, the marketing aspect is not a facade, but a necessary condition for HBP to become a EU RI.
Of course I have no chickens in the fight; if it flops I can keep writing my shitty works-on-my-computer codes for one off unreproducible research projects.
To make that claim in 2009 was complete and utter bullshit, if you've sold your project on grandiose claims like that then I don't think you are into science.
The claim is clearly idiotic, and none of scientists I work with consider it requiring rebuttal. That’s also 11 years ago, same year Python 2.7 was first released. Markram isn’t in HBP since... 4 years and I think what we have in the final phase now is the people trying to turn lemons into lemonade.
Maybe my problem is that I don’t see myself as “believing” in the project or not: it’s easier to learn from failure in fact. If the whole thing fails, it will make the EU a little more cautious about the next potential flagship project. Which is presumably what all the FUD surrounding HBP is about.
It could easily cause a kind of AI winter just when there actually is progress in the field.
The EU should have insisted on believable deliverables. At the time I was highly critical about the claim, it being 11 years ago doesn't really matter to me, it was obvious that you could not extrapolate from the state of the art+a relatively limited amount of time to such a game changing deliverable (essentially: general AI).
I sincerely hope that you will be able to come up with enough results worth applying somewhere in real-life projects and products that in the end it will all be worth it. Best of luck to you.
The scope is not to produce "unicorns" but to drive innovation and R&D for all different kinds of projects.
Those funds should not act as VC with the only purpose of growth, but it should fund sustainable innovative companies or open source foundations.
Lately I've been seeing the EU founded logo on more and more extremely useful open source programs that everyone uses and which had no funding sources because of the lack of "extreme profit" in the horizon and that should be the results that this grants achieve.
"it should fund sustainable innovative companies or open source foundations."
Show material examples of this.
Also, the EU needs 'big companies' that employ a lot of people, pay high salaries, can afford to sustain complicated projects with know-how, to acquire and integrate other projects.
A nice batch of 'open source' projects that some people might use will not move the needle.
"the EU needs 'big companies' that employ a lot of people, pay high salaries, can afford to sustain complicated projects with know-how, to acquire and integrate other projects."
Why? Funding open source projects seems just as useful to me.
Open Source is a small issue thing in the context of an entire economy.
It's nice to have some support for it, but it doesn't even lend well to that: it's very hard to know which projects to support until after the fact, of course we know that 99% of it is never even used. The kinds of people involved don't do it generally for money, and also have their own ambitions. What happens when you have a 'great piece of open source' that AirBus and Daimler really want to integrate, but the 'maintainer' just doesn't care to make the necessary changes? Or is against it? Or is only working 'now and then
? Or doesn't feel 'large corps should benefit' or whatever? It's a tricky space. Worth supporting, but it would take a very specialized team and frankly, not that much money.
Europe needs large industrial organizations because they are the lifeblood of the economy, in fact, the hallmark of advanced civilizations. You want to know the 'difference' between 'rich' and 'poor' Europe? In 'rich Europe' a far grater portion of the population works in corporations with >1K employees.
Only at a certain scale can a lot of activities be addressed: you can't make an airliner with all it's supply chain, IP, R&D, systems integration, training, support and the myriad of operational activities with 'open source' or even with 'small shops' or 'vc money'. A lot of know-how is embedded within these groups that given them competitive advantage, and of course, scale is necessary to be competitive at an international level especially in 'winner takes all' type markets.
EU investment in open source is nice, but it's a side-show. What EU needs is Googles & Salesforces etc..
I am participatingn in such a program now. Can confirm, it looks great on paper (and it's mostly about writing reports etc) but creating useful outputs is optional.
Or EU could stop ruining the market with all their current programs and deregulate. Most "startups" in the EU are nothing more than grant chasers. There's very little private VC money because of all the grants. Even legitimate projects that take these grants aren't necessarily any better for it because of all the overhead they introduce.
It's most pronounced in new EU countries that get flooded with these funds.
> There's very little private VC money because of all the grants.
That's wrong. There are four real reasons:
1) our pension systems are mostly government run and on a rolling scheme (i.e. payments from current workers fund current pensioners, in exchange for future-redeemable points). That means that there is a lot less of "dumb cash" lying around in pension funds that screams to be invested for decades... historically that cash used to be put into "safe bets" such as government bonds but their returns are at below-inflation rates, and the only thing that is "profitable" is spreading out the cash over either the big tech companies or small startups.
2) networking. Just look who's in the "angel investor" rounds: people, both founders and early employees who got lots of money in the dotcom era or in the IPOs of the last years - they are all concentrated in the SV area, and enjoy the benefits of close personal contact, and then of course there is YC and a couple of less known clones which come in later. We simply do not have such networks in Europe.
3) risk aversity. Europeans do not like risk, the most obvious example being us Germans who are notorious for being risk averse, so risk averse that our car companies, 12 years after Tesla hit the market, still believe they can make "clean ICE" cars (by investing in synth-fuel tech). A side effect of that is the infamous Wirecard scandal - they were hyped so hard by everyone including our Chancellor who went lobbying in China simply because they were the only company other than dinosaur SAP who were German, were in digital business, and had (on the paper...) good business numbers.
4) "rags to riches" mentality: us Europeans have generally decent social security networks, stable government funded education - basically, you don't have that mentality, starting with young people, to "always hustle" to survive. We live mostly generally comfortable lives, but we're not driven to exploit whatever and wherever we can, simply because we don't need to.
The end result: we don't have venture capital simply because there has been no need for it for decades, it's only a recent trend here.
I think all those investors and the tech activity in the SV area is a side effect of one big DoD's initiative: to build a world-class surveillance network with all the infra around it. They expressed this desire to spend trillions on this and a few companies who made it happen are now valued at 1-2 trillions. Attempts to replicate SV by "investing into startups" is like crafting a wooden airplane to summon goods.
Some of your points make sense but some don’t. Pension funds in the US don’t invest in startups. Also founders of most American tech companies had a pretty comfortable upbringing. Most founders like Mark Zuckerberg or Travis Kalanick come from well-to-do families. So comfortable life doesn’t explain the risk aversion of Europeans.
I think you’re correct when you say that most “innovation” grants are going to companies that are anything but, but to say that most startups are nothing but grant chasers is absolutely not true.
I don’t know where you’re located, but at least here in The Netherlands we seem to have a fairly healthy startup ecosystem, where grants seem to be more of an afterthought because there’s a fair amount of VC money or bootstrapped startups.
I don't know what the experience is like for people in the Netherlands. But a little bit of googling in English shows quite a bit of stories about Dutch funds getting major govt funding and a bunch of govt programs offering startups money.
So I'd wonder how many funds are truly private. And for those that aren't I'd like to see if any bureaucracy gets pushed onto to the startups they fund.
Say EU-funded VCs, due to the special obligations they're under will often make startups comply with many of the same stuff. So even though a startup might not be a grant recipient themselves they will ultimately have to submit to that regime too.
That’s a fair comment, and I had not considered that. I do know a VC, HollandVentures, that’s one of the VCs that works with EU funding, but I also know many other VCs that, as far as I can tell, work solely with private money.
https://nlfunding.co/ provides a list of all VCs active in The Netherlands, and while a few obvious ones are working with EU grants, I have no reason to believe most of them do.
Regardless, my response was mostly to the “EU startups are grant chasers” comment, which I still believe is an unfair depiction.
I don’t know whether they’re Unicorns, but at least we have companies like Booking.com, Adyen, you could argue Gitlab has Dutch roots, and smaller ones such as MessageBird, WeTransfer, Usabilla, etc. These are more well known names, but there are plenty and plenty of smaller ones, where “small” can still be around a hundred employees.
Again, I’m not claiming that our startup climate is anything like what your see in SV, but it’s definitely a fairly healthy scene, and it would be an insult to characterize these as grant chasers.
Booking is a wholly owned subsidiary of Priceline, a US company and has been for the majority of its existence. It was bought for its considerable IT assets after going bankrupt, IIRC.
Yes, but I was using it as an example of a healthy Dutch startup ecosystem, and I still believe it is a good argument. I wouldn’t consider Booking.com a startup anymore anyway, just like TomTom etc, but that’s missing the point: they had their roots here, and are good examples of a counter argument that they are merely “grant chasers”.
Gitlab is a remote company because of the poor health of the ecosystem.
Mollie & Adyen have had success because of the walled garden iDeal payment system of the Dutch banks. Eindhoven was a very innovative region until Philips decided to move HQ.
Even Sweden produced more unicorns with a population size a 1/3 of the Netherlands.
Maybe you have had more luck with raising money but I experienced a lot of stupidity from private investors.
> Most "startups" in the EU are nothing more than grant chasers. There's very little private VC money because of all the grants.
Potato potato. Most "startups" in the US are nothing but VC money chasers and often lose billions of infinite investor money (looking at you, Uber) for indefinite periods of time. How is this different from grants other than it's "free" government money in one case and "free" VC money in the other?
Very different. In that sense the VC money is actually "free" money.
When you get a grant you're subject to many rules. You usually have to submit a budget and money will only get disbursed in accordance with that plan. And there may be many limitations as to what the budget can contain in the first place. Say only X percent can go towards Y class of spending.
Your startup is doing poorly and you want to downsize? Well you can't because you budgeted for X people. Want to cut or increase salaries? You can't. I mean you could fire these people but you'd be forfeiting the funds. So people don't.
Then there's pressure. [Private] VC is an honor system. There are very few legal obligations but you're expected to perform. Your continued access to funds will mostly depend on how you're perceived by the VCs.
With grants you only need to follow legal requirements. No pressure to perform. The agencies only care about you following the rules. When applying for more money, again, you need to fulfill a bunch of requirements. There's not much of a reputation system.
If you get denied but meet all the formal requirements you can often sue and win.
And since there's no dilution there's no limit to how many different grants you can take.
I think both of you make interesting points. Clearly, the US market-driven model is more successful at producing companies that can internationalize. But there is little doubt the explosion in venture funds is tied to the financial climate pursued by the US government.
Lack of money is not the problem. The problem is that anything remotely successful gets acquired by a US entity or that people don't even bother to try to get off the ground in the EU but that they start in SV through YC or some other US based accelerator.
As another poster pointed out, there are plenty of billions being sloshed about. But in my experience all this does is subsidize private investment. If an investor knows that the money they are putting in will unlock 3:1 in public money, then there's a pretty good argument for the investor to only give you a quarter of what you actually need. What's less thought about is how much time is wasted chasing tiny check sizes from these government programs. And then the reporting requirements are insane, hour by hour break downs of work plus reports and presentations at the end. They also don't like to give out large amounts and would rather fund lots of small partial projects, wasting even more time.
As far as innovation in the EU goes, the governments (yes, plural, another problem) need to get out of the way. I'm usually positive when it comes to the functioning of European governments, but this is one of the major exceptions.
I argue for European federalism, but also realize that's unrealistic. One possible step in the right direction would be to have an EU wide company structure with a single set of rules that makes investment between different European countries less complicated for companies and investors. I've also thought that a high profile EU investor could force some change by making it a requrement for their portfolio companies to immediately invert ownership to a Delaware Corp. That would open them up to US capital while simultaneously pissing of a lot of the innovation people in the government.
Money will not solve the EU's pervasive problem with corruption and grift. I'm thinking of huge investments like the 1bn euro flagship fund for graphene that have done nothing except prop up existing institutions of well-connected academics
European tech ecosystem is a bit weird. I went through hundreds of job openings and pretty much all of them ask for experience with language X and framework Y for N years. I have yet to seen a description that doesn't care about what languages the candidate know. Its almost as if companies don't belive that engineers are capable of learning a new language or framework
Also I noticed there is too much focus on agile, scrum, DDD, etc.
And the pay is too low compared to living expenses. There are a lot of software engineering jobs that pay higher even in India.
Only good thing is you get to live in Europe and travel.
There is no such thing as a European tech ecosystem. It is very different depending on exactly which country you look at. Where did you focus your investigation?
Berlin is just one city, and that city only has a few million people. Population wise, it ranks behind Moscow, Istanbul, London, Paris, Madrid, Milan and the Ruhr area. All of those have at least one million more inhabitants. How is "major tech hub" measured?
Population is a poor proxy. San Francisco's metropolitan area isn't even top 10 by population in the US. Including Santa Clara (San Jose, Sunnyvale), put it at #10.
It's interesting he's jumping straight to "moonshots". Not a lot of companies come out of Europe, and I don't get the impression that's due to a lack of ambitious ideas. Rather, it's really hard to start a company in Europe – the tolerance for risk just isn't there (legally or otherwise).
As someone who has worked in both US and German-based startup, I agree that risk tolerance is a huge factor. Everyone from VC's to employees here seem to be way more hesitant to invest in an idea which hasn't been proven elsewhere in some form. That's a pretty bad recipe for moonshots, which by nature need to break the mold a bit.
People are also much more risk averse in terms of business model. For instance, the idea of loss-leading to gain market-share will play much better in the US than Germany, where it seems people would rather settle for modest revenue but stay in the black the whole time.
Another factor is the concept of work and work-life balance. In Germany holidays are sacred, and you won't generally find people putting in tons of overtime to get a product off the ground. That's great when you're a worker, but it does mean a slower pace than I saw in the US.
I don’t think it’s that Europeans don’t want to work weekends. If that were the case you would see South Korea and Japan run circles around silicon valley.
In Germany at least it’s conservatism and a failure of imagination.
The average German Engineering student doesn’t dream of flying to Mars, he dreams of buying an expensive BMW.
>The average German Engineering student doesn’t dream of flying to Mars
The German economy doesn't run on individuals going to Mars, it runs on process innovation, optimisation, and decentralised development between research facilities, a good university system, and companies.
On average the German worker productivity is very high. That's a measure of good allocation of resources, not software unicorns or Mars rockets. If German engineers would just be dreaming about holidays and luxury watches that wouldn't be the case.
If you look at the increase in total factor productivity (comparing how much aggregate outputs you get out of aggregate inputs, basically measuring technological efficiency), the last decade has been anaemic. SV venture capital software culture is good at capturing markets and shifting economic rent from markets towards centralised platforms, it's not driving innovation and we don't really need to emulate it.
> it's not driving innovation and we don't really need to emulate it.
Then don't emulate it and the US will continue to own nearly everything in tech that isn't inside of China.
I've been reading sentiment like that out of Europe for over two decades now, with predictable results that just keep going around in a circle and getting the Europeans nowhere.
SV and the US tech industry are great at creating markets as well, which you entirely ignore. What did the global cloud services market look like before AWS built it (even Alibaba's cloud offering is a mere intentional clone of AWS)? In terms of sales it barely existed. Every major tech market has been established by SV money and US tech companies, not European companies.
There's no evidence that Europe has been more innovative with their approach. It's quite the opposite given the vast majority of major technologies have come out of the US dating back to the 1950s. Europe's contributions pale by comparison, and that's why their companies pale by comparison.
Even ARM - one of Europe's few innovators in tech - had to be started by two US companies, with one of the partner companies being European. It's only fitting the US own that company again considering.
The leader in AI and quantum computing is the US, with China a close second, and Europe a distant third. And if you narrow that down to the EU, it's even worse now that Britain has left.
And when it comes to scaling, you get things like vast numbers of lucrative jobs, high paying engineering salaries from creating global giants. You get an immense virtuous cycle from it, including for seed funding start-ups and larger VC activities. Microsoft will grow its revenue more in the next two years than the total size of SAP (which is Europe's largest softare company and most valuable tech company). The revenue gap between them used to be more like 3 to 1 (circa 2001), now it's over 5 to 1 and persistently expanding.
AWS is on its way to being an $80-$100 billion sales global juggernaut, while SAP runs in slow motion. There's no reason Europe couldn't have done that, in theory; in practice, it has been two decades and Europe hasn't been able to do it.
"Innovation" is a gloriously worthless word (you can tell because Bill Gates was so very fond of throwing it around while he was at Microsoft, it's a dodge word). If something can't be supported with actual results, people jump to proclaiming things about innovation or the lack of it.
Besides, where is the supposed innovation in Europe's tech scene over the last four or five decades? What innovation? Where are the hundreds of amazing, innovative, successful European tech companies that are supposed to stand as a counter to Silicon Valley & Co.? They don't exist. Europeans will claim that's because they're all being acquired by richer US tech companies, which is false; that certainly happens occasionally, and it's happening at a small scale, because there aren't very many of those companies to purchase.
>Besides, where is the supposed innovation in Europe's tech scene over the last four or five decades? What innovation? Where are the hundreds of amazing, innovative, successful European tech companies that are supposed to stand as a counter to Silicon Valley & Co.? They don't exist
Virtually every industrial machine on this planet has made something in it build in Europe. France builds high speed rail at a third of the cost of the US. Europe has countless of pharmaceutical giants.
Again, I put it simply. The per capita income and productivity in Western Europe is roughly as high, maybe 10% lower than in the US. If Europe had 'no tech', how is Europe rich?
You have a myopic view of technology that excludes the majority of the economy, which is everything outside the world of bits as Thiel puts it, which constitutes 90% of the actual national GDP, including in the US by the way.
'AI' or 'Quantum computing' isn't some sort of economic super weapon. The German economy is 4 trillion dollars large, what is the market for quantum computing, or even 'AI'? By the way we have heard this accusation for decades. In the 70s and 80s we were accused of living in the industrial stone-age, while Britain becomes rich on being a leader in the sector of the future, finance. Where is Britain now? At a national productivity level 30% below France and Germany, turns out in the long-run finance wasn't as hip as people thought, particularly not for anyone living outside of the city of London.
I'll start to get worried about lacking in tech when software is delivering historical economic growth, rather than becoming a tool for social engineering and reshuffling money from the bottom 80% to the top 20%.
That's not to say by the way that there's not genuinely innovative aspects to software, cloud computing actually is something that Europe could catch up on if only for security and geopolitical reasons but the overwhelming majority of software giants in the US contributes nothing to innovation. Facebook and Twitter destroy democracies and heat the planet up with datacenters, nothing more. If there was a word for de-innovation, that's what I'd label those companies.
> At a national productivity level 30% below France and Germany
Where you got that number? UK has higher GDP per capita than France and it's lower than Germany but not by 30%. Also the UK is just coming out of a messy divorce. I'll give it 5-10 years to figure stuff out.
>Where you got that number? UK has higher GDP per capita than France and it's lower than Germany but not by 30%.
because you're not looking at output per hour worked. The Brits work about ~1670 hours per year. The French about ~1470, and the Germans ~1360. If you look at the output per hour, The UK comes in below Euro average, roughly on a level with Italy and Spain.
Flying people to Mars is a bit silly, as was flying people to the Moon. Yes, it can be done with insane amounts of money but to what end? It'd not like Mars will be colonised anytime soon or that anyone would like to live there. We haven't colonised Antarctica. The Russians were more pragmatic with robotic exploration.
Expensive BMWs are equally silly. The company generally produces nice vehicles, but they also make hideous atrocities like the X4 and X6. What's worse is that Daimler followed suit and that every car company is producing SUVs now, that aren't any good off road and have lots of aerodynamic drag on road.
German Engineering students work on interesting projects like swarm drones playing team games. I suspect these are quite obviously projects with military applications or space exploration.
It's not about the hours as much as the attitude toward work. The pace of work is just slower in general in Germany in my experience: when there's a conflict between a deadline and capacity in Germany, the deadline gets pushed. In US, capacity gets increased.
Don't get me wrong, I think the German way of working is way healthier and more sustainable, but everything has a trade-off, and the leave-it-all-on-the-table mentality of American startups seems more conducive to getting an innovative project with difficult technical problems off the ground in my experience.
Sweden manage to create quite a lot while keeping above average European worker protections. We say that having lots of protections makes people more willing to take risk since worst case they will have to live on state aid for a while. Likely Daniel Ek want to make the other European countries as good at creating successful companies as Sweden is.
In terms of being risk adverse, I can remember talking to a fellow student from France (yes, it’s an anecdote). We were both taking a class on private equity.
He described French risk aversion as such “In Europe, if you took investor money and your idea failed, you would be seen as a failure. It’s amazing that in the US you could raise $1M, lose it all and then go out and raise money again for another idea.”
I believe it‘s rather an issue with the size of the market. It‘s just so much easier to internationalize when you are already the dominant player in the world‘s largest market, the US. Scales matter, see China.
The EU fought hard to create a single market, but the language, cultural and market fragmentation is still strong. It exists to some degree in the US (see for example Tesla's plight with protectionist dealership laws). But at least you don't need completely separate marketing, product branding and distribution in each state. If support and language is an issue, the complexity of EU business explodes. The linguistic bureaucracy of the EU Parliament is a good example, it makes the whole process 4x more expensive and cumbersome.
The single market implementation is completely bogus. That's not anyone's fault. It's just that laws that restrict are contravariant against the interface. So European Parliament decides that everyone should have something that meets at least something, so everyone has a piece that meets that something and then more in whichever way they like. But that makes the interface useless to build against. So you meet the German version and the French version and then let all the rinkydink economies like Greece just use those.
US laws leave a lot less to the imagination, they are hyper-constrained in general, and there's a large body of work on how to bypass them. Like, Romania may use GDPR to hunt down journalists and company bosses but you know California won't use CCPA that way, so you're cool.
I see no reason a web-based product of European origin could not succeed in the US or Chinese markets. TikTok for example has done phenomenally in western markets despite the large cultural differences the development team likely has from many of their users.
I see 2 (but am not sure how problematic they really are on a larger scale): The GDPR and upcoming upload filters/required user identification due to the copyright reform.
> Rather, it's really hard to start a company in Europe
As always, depends on where. Sweden has (or used to, at least before) basically a website where you can create a company, and it's mostly free to start the company as an individual (at least the basic form) so you can't really complain that it's hard.
In Spain, it's also relatively easy, just have to go sign some papers (and depending on company type, invest some money into it), but it's hardly "really hard".
Not sure about the rest of Europe, but can't imagine it's a lot harder than these two examples (counter examples incoming surely).
Although, if you with "it's really hard to start a company" mean "it's really hard as a unknown startup to raise funds from VCs", then yes, European investors do way more due diligence and are more risk averse, compared to US investors. But there are more things than startups :)
Sure, but that's not it. I can pay a hundred bucks and start in California but that's not the end of it. I'd have to pay franchise tax till the end of time, I have to pay SF tax on that, then I have to pay Prop C. If I were in LA, I'd have to pay city tax and county tax. Just keeping all the taxes straight would cause me to kill myself before I start in California. Everyone knows you incorporate in Delaware.
It's like that. I don't know what sort of laws you guys have there but just the paperwork is going to kill me, probably. And then any time you want to do anything, the paperwork will kill you, the regulators will be on your case, and all that. And that's the way Europeans like it. It's culturally normal there to be like "Oh, well why do you think you should be allowed to do that".
For instance, they would say "Maybe it isn't right that a company can just target ads to people without a comprehensive affirmative opt-in" and that would be the dominant view. "Maybe some guy in a garage shouldn't be allowed to hold a million people's personal data". There's a trade-off there: you don't get tracked but you don't get Google. And that's fair, but it means no business models that rely on things like that which count on low transaction costs can't happen, and lots of unicorns count on that.
> It's like that. I don't know what sort of laws you guys have there but just the paperwork is going to kill me, probably. And then any time you want to do anything, the paperwork will kill you, the regulators will be on your case, and all that. And that's the way Europeans like it. It's culturally normal there to be like "Oh, well why do you think you should be allowed to do that".
Come on, really? It's hardly that much paperwork. Sure, it sucks, but compared to building a business, filling out paperwork doesn't come close to being the hardest thing.
Sounds like what you describe here is that it's more paperwork in the US than in the European countries I'm familiar with, so kind of goes against what you're arguing here.
> And that's the way Europeans like it. It's culturally normal there to be like "Oh, well why do you think you should be allowed to do that".
I'm not sure where you are from, but I hardly get the feeling you're "European". Throwing blanket statements like "that's the way Europeans like it" is impossible, it's a huge and diverse area, so you can't generalize like that. Plenty of people here wants things to improve/change and depending on the location, you're right or wrong. Rules in Sweden are seen as "must follow" while rules in Spain is mostly seen as "advised to follow but if you must, do what you want, as long as you don't harm others".
Sure, building a successful business is harder than that, but it's also harder than coping with death threats and I think I'd fail to build a business if I received death threats every day.
You don't need something to be harder than building the business. You just need it to be hard enough to interfere with the process.
Bigger companies are more efficient and more profitable on average though. You kind of have to be to grow. Fewer companies, but more efficient and profitable are more productive and lead to a higher tax take which can be used for all the things the government is good at, providing services we want to be universal and transfer payments.
Creating companies is indeed a bureaucratic nightmare in Germany (where I currently live); but its doable if you need it done.
It's easier in e.g. Finland, Sweden, Estonia (which actually have produced some nice startups like Spotify, Skype, etc.). IMHO given the relatively small populations, places like that are actually remarkably successful when it comes to startups and technology companies. Finland has a mere 5 million people. I mean, Nokia for whom I used to work came from that tiny country and dominated the smart phone market for a while.
However, the real issues are more related to securing investments and funding and the inevitable process of having to shut down a company in case it fails. Which with a startup is more likely to happen than not. Failing fast is hard in a legal system that is purposely designed to make this hard.
It's also risky. You take a personal risk when you start a company and when a company can't pay its bills, it's the managing directors who are on the line with their personal capital. Limited liability is not so limited in Germany and it prevents companies from taking risks. There are all sorts of tricks to prevent that from escalating of course but they all involve the use of accountants, lawyers, and other middle men that are costly. And given that it is hard to raise seed capital in Germany, very little gets off the ground here.
Berlin where I live is a bit unusual in the sense that despite all this, there are loads of startups here and a density of capital and talent that is hard to find elsewhere in Europe. I always joke that this is despite the German government rather than because of their policies. It's basically a weird side-effect of the place being pretty much bankrupt. Local government here is basically just moving paper around and tends to be very hands-off because they have no budget for basically anything; including going after pesky startups taking liberties with the rules and regulations. Everything in this country is regulated to death but Berlin seems to be reasonably relaxed and informal.
For better or worse, people just showed up here from all over the world and started doing stuff after the wall came down. Lately, big German corporations that are trying to look hip are opening startup accelerators all over Berlin. Like all of them: Bosch, Siemens, VW/Porsche, etc. all are present here. Silicon Valley also moved in: MS, Apple, Tesla, Google, etc. all have offices here. And of course Tesla is building a Giga factory.
It's a complicated issue. Facebook pays well but their product is toxic to society. Google, Amazon, and Apple pay well but they can because of their moats and the lax US regulatory environment. Would FAANG be able to pay as well when anti competition regulations start to kick in and chip away at their revenue streams? Euro pay is definitely much lower (and needs to rise to meet the value technologists deliver), but perhaps its unrealistic to expect US tech comp (that's likely to compress anyway with remote work normalizing).
TLDR SV pay is likely too high and unsustainable in the long term. Equity moonshots are already lottery tickets, and you can't set public policy based on lottery tickets.
The reason EU companies don't pay US tech salaries is that there aren't enough super profitable companies, and also, related, that the most profitable companies don't properly have to compete for the best engineers.
I think we would move in the direction of US tech companies if we managed to create five world-class tech behemoths, but I don't see that happening. Taxation will necessarily affect things; some places have an employer tax that approaches 100%. (Half the salary to the employee and half to the state, then tax the employee's share again afterwards).
> (Half the salary to the employee and half to the state, then tax the employee's share again afterwards)
Can't think of a single country having that. This money which you count as tax goes into retirement, healthcare and stuff like that. Would you consider US packages including healthcare to be taxed ?
I could be mistaken and/or have an incomplete picture based on my relatives' experiences of running a small business in France. My impression was that an amount corresponding to the total salary of their employees was required in tax payment from the employer, with the employee's taxes coming on top of this.
This tax could of course consist of social security or retirement benefit contribution, if so I got an incomplete picture. Are you by chance familiar with this system?
I am familiar with Norway's system. Employer pays 14% of employee's gross salary as tax and required to pay at least 2% as retirement contributions. Employee normally pays in somewhere between 30-40% tax on what's left, 8 percentage points of these being the state retirement contribution. Socialized healthcare. Company taxed 22% on all profits and owners taxed 31% on all dividends and capital gains. Most of the particularly rough parts of the tax system are in form of VAT, taxation of capital and special-purpose taxes on various sectors and activities, mostly transportation. With the 70%-ish oil producer tax being a welcome special case of this.
In this case, our modest salaries for globally in-demand skills are mostly due to a lack of very profitable companies, plus probably a degree of cultural bias against high performers.
Marginal tax rate tops out at ~46% after $110,000/year, so one isn't incentivized to work hard for salary increases.
> [...] France. My impression was that an amount corresponding to the total salary of their employees was required in tax payment from the employer, with the employee's taxes coming on top of this.
The lion's share of what the employer pays is not taxes. It is, indeed, mandatoty, but it is not a tax collected by the state, as it opens individual rights to jobless claims, health insurance and retirement schemes.
Revenue tax is also directly taken from salary since a couple years ago, but that means most people don't pay any tax besides what's on their salary.
> The lion's share of what the employer pays is not taxes. It is, indeed, mandatoty, but it is not a tax collected by the state, as it opens individual rights to jobless claims, health insurance and retirement schemes.
If it’s a state mandated by the state that you can go to prison for not paying economically it’s a tax. It functions exactly like a tax in every way. That it’s legally something else is irrelevant to economic impact.
The mandatory aspect is only half the definition of what a tax is. A tax is something collected to fund govt.
These payments are made to a mechanism that, in return, opens rights for workers, such as pensions to retire, full health insurance, or work insurance. These are very much individual benefits, not some kind of tax scheme that goes to fund roads or the army.
If you want a comparison, car insurance is mandatory in the US, but it is not considered a tax.
Almost all US software jobs come with healthcare for your family. Average student loan amount is like $30k. Even accounting for these costs EU pay is pretty bad compared to US. I was saving $100k/y my first job out of school in the US. This was at a good-but-not-great company with a standard new grad offer
The seemingly only place that’s replicable is in Switzerland at a handful of companies (Google and some small other companies) and that’s not even in the EU.
This was at a company with a very large number of employees in the Seattle area. I’m including my 401k+match (which may not be completely fair because that’s what we have instead of pensions since SS is so paltry) and signing bonus.
It depends where in Europe and where in the US. Google adjusts salaries based on the local market. Salaries in Google's Zurich office is higher than in the Bay Area.
You say that, but between federal, state and city income tax in NYC I was paying a higher rate there than when I lived in London.
The reason is that you’re competing in a much more varied market with less silly money splashing about. Cost of living in London is high, but you’re competing for jobs with competent teams in Eastern Europe. That coupled with fewer VCs funding “Uber for cats” ideas, there’s just not the appetite for paying devs US level salaries.
> That coupled with fewer VCs funding “Uber for cats” ideas, there’s just not the appetite for paying devs US level salaries.
That’s not why the salaries are so much lower. European companies are less profitable so they don’t bid up the wages of developers as much. The more money a company makes the more a productive member of staff is worth to them, so they are more willing to pay it. That drags up the market rate because everyone has to compete with the highest payers for the best devs.
I've yet to see a calculation where these factors balance the salary gap across the Atlantic. How is a European dev on 40k going to get to say $120K with tax, healthcare, and holidays?
Well it's more than that: it's also parks, public transport, nice civic infrastructure, a lot of local civic things, generous benefits when out of work, cheaper education, probably higher relative salaries for 'many others'.
The US may not average $120K for devs, it's probably lower across the board. Then you actually do have apparent inequality problems in the US and if that were taken care if, it would be even less.
It's not as wide as indicated by salaries, but it's still a gap.
Europeans don't really need to save much money. Because the government takes care of health, education and all the essential things. Why do you need a lot of money if you have everything taken care of.
On the other hand when you are living in US or anywhere else you need to have a shit ton of money in bank just to make sure that you don't go bankrupt.
For example education for your kids would be ridiculously expensive in US. And if you don't have an insurance you might get bankrupt if you have to hospital for emergency.
If I have a choice to be born again in a random country, I would be opting for Germany or some scanadanvian country for sure. US is too risky to be born randomly.
I am not saying Europeans don't need money. There is no strong reason for them to have shit ton of money like in Silicon Valley. A German who makes 60k euroes in Berlin has so much better quality of life than someone who makes 120k dollar in San Francisco. Rent is affordable, public transport is great, health care is taken care of and you don't have to save much for children's education. What else someone need money for? Or am I missing something.
But unless you make over something like 300k/year, you almost certainly get as much or more value from society than you pay in tax.
Total effective tax rate is perhaps 20-45% depending on location and salary, but education, daycare, health care, etc is very heavily subsidised instaed.
“We all know that one of the greatest challenges is access to capital. And that is why I’m sharing today that I will devote €1bn of my personal resources to enable the ecosystem of builders”
He's made his billions on the backs of builders, the musicians who can record music all day long but will be lucky to receive pennies for a million listens. The 98.6% of artists outside of Spotify's top tier are making an average of $12 per month (https://www.rollingstone.com/pro/features/spotify-million-ar...).
Why can't Ek share his largesse with the builders who make it possible for his service to exist?
Historically, artists never made much money selling music. Artists made most of their music going on tour, selling merch, or monetizing their likeness.
I see spotify more like as an audio-based customer acquisition channel, like the radio.
Maybe it could build in some kind of "donate" patreon-like feature into the app. I wish Soundcloud had this.
Historically, artists never made much money selling music. Artists made most of their music going on tour, selling merch, or monetizing their likeness.
They never made a pound touring. Their success and much of their impact was tied to European club playlists, the sales of singles, album sales, and the media.
You can talk to many other artists from that era who did depend on touring and merch, but also used distribution and sales of singles and albums (and advances on record deals) to establish themselves.
While plastic media was doomed long before Spotify, this "audio-based customer acquisition channel" is, by design, set up to benefit Spotify, record labels, and top artists, in that order.
Have societies justly and fairly treated individuals in the past? If not then there’s little reason to point to it when talking about a person in power “doing the right thing”.
SoundCloud does have a donate button. At least in the sense that an artist can setup a paypal button that shows up on their profile.
I have created something similar with SoundRat (https://soundrat.com) that connects more with the patreon-like features and makes listening of music free but gives fans an option to donate to artists and get some perks for doing so.
While artists made much more of their money on tour or selling merch, it didn’t take all that many sales of physical releases for an artist to top $12/month. Yes, the distributor and label took their share, and the royalty paid to the musicians was a minority of the sale price, but they could still make more money than they do now on streaming platforms.
> Instead of finding a singular solution to a problem we need to think about a system-wide solution, healthcare is a great example of this. There are many structural problems in healthcare and just like we did with Spotify, you need to go, piece by piece and create something that actually is a win-win for all stakeholders.
Ah, Spotify, famously a win-win for all its stakeholders, including the musicians who can no longer make a living by recording music.
It seems so misguided to ask Ek to share; if he distributed his 3 billion it would not materially change the lives of the millions of artists on the platform.
The guys who always get paid are the majors, and the majors are the one who ensure the top artists (who are signed to thos labels) are always given the majority of the share.
Because in terms of potential benefit to society, this is orders of magnitude more efficient than giving artists a few more bucks.
I don't even agree that they deserve it. The aggregate musical output is valuable, sure, but individually it's commoditized and worthless for all but the top musicians.
> He's made his billions on the backs of builders, the musicians who can record music all day long but will be lucky to receive pennies for a million listens.
Ah, you surely mean recording companies and copyright holders that take up to 70% of Spotify's revenue and pay out pennies to artists. Why don't you ask those companies where all the money is going?
> Why can't he share his largesse with the builders who make it possible for his service to exist?
Well, he is sharing it. At IPO Spotify disclosed that had paid "$9.7 billion in royalties to artists, music labels and publishers since it launched in 2006." [1] The thing is, Spotify doesn't have direct contracts with artists (and can't afford to for fear that the Big Four[2] will pull their content). So the question is: where did those billions go?
Let's read the article you're commenting on (emphasis mine):
--- start quote ---
Spotify pays the major record companies a 52% share of all net receipts attributable to streams of their artists. This was a figure the parties agreed to during negotiations in 2017, and it’s believed to have remained unchanged since.
According to Spotify’s Q2 results, the firm generated €1.89 billion ($2.05 billion) in the three months to end of June. We can therefore broadly assume that 52% of this money, or $1.07 billion, is being paid in recorded music royalties to labels and distributors, who will carry a portion of that over to their artists.
--- end quote ---
The article then continues being disingenuous pretending that 100% of the money that Spotify pays out goes to artists and that Spotify is solely responsible for that money.
So what is that "portion that labels and distributors carry over to their artists"?
Oh, look, only 12% of music revenue goes to artists [3] But obviously, it's the sole responsibility of Spotify (and Amazon, and Apple), and not of the Big Four that hold the music world hostage.
"Ek mentioned machine learning, biotechnology, materials sciences and energy as some of these areas."
Material science in particular has endless promise. With the new XFEL infrastructure there is lots of potential too. Some examples of what we could do is replace plastics with bulk metallic glass, save energy in transport with low density steel, and more broadly with eutectic systems.
Then why would you put China alongside USA? It’s not like their software has been an international success. China pretty much only have TikTok, while EU have Spotify.
You might be tempted to include WeChat and games that Tencent brought, but if we lower the bar to that then the list of EU companies would grow a lot as well, such as SoundCloud, Shazam, last.fm, Viber, King, Mojang, Rovio, Supercell, Kiloo, Dailymotion, Criteo, SAP, ASOS, Skyscanner, Wix, GoCardless, Adyen, Kaspersky Labs, Yandex, Transferwise, Badoo, etc.
Creative Cloud, 95% of social media, Google/Bing, Office, Autodesk stuff, Windows. The biggest European global(ly consumed) software is probably Spotify right?
Someone already mentioned SAP. Also Booking.com. But also ARM (though it's hardware, not software).
Europe also produces 20% of world's research in the field [1]
The big question though is: do we measure success correctly? The vast majority of "great American companies" are either vaporware with inflated valuations, or produce zero innovations [2]
Datadog founders are french and they have a big R&D presence in Paris. Europe brain drain is a known problem for its tech sector but still underestimated in my opinion.
I'm a little amazed at how little the Y Combinator model has been copied in Europe.
Now, obviously any new incubator wouldn't come even close to being able to offer what YC does right now with the extensive network etc. But hell, just offering 10-15 startups €120k every six months for ten years would be worth a shot. Maybe fly those companies to Berlin or London or Stockholm. Help them out with whatever you can, but mostly let them figure it out themselves. Maybe focus on startups from the EMEA region.
The costs would consist of the fund (€36M) plus the cost of operating the program (perhaps a €1M/year). That would still amount to below €50M.
Idk. There are probably plenty of reasons why this would be a bad idea, but if I'd ever have 50 million to spend, this is what I'd try.
The YC model has not been copied anywhere, and FYI there have been a zillion attempts at incubators in Europe. The problem is generally not money, it's a wide array of other things.
Even in other US cities with local incubators and seed funding, startups all face the prospect of needing to visit SF for serious VC rounds later. If these companies are going to need investment from SF, why not just incorporate in Delaware and walk the well-worn path from startup to the NYSE?
The problem in Europe is definitely not money, there is plenty of that. Also - 'moonshots'? They are big, failed R&D projects that may or may not pan out. Europe needs their own 'Salesforce' (i.e. 100 000 high paying jobs, massive revenues and value creation) not 'Drone Balloons'.
The issues are many and they are often at odds with other things, like 'quality of life'. From lack of large centres of innovation, not quite the right immigration system and attitudes towards migrants, a lack of hyper competitive attitude towards business (easy to see how this could be corrosive from another perspective), taxation and payroll taxes / inability to let people go (i.e. France), really closed business systems all over Europe, smaller markets, lack of risk taking everywhere from buyers, to investors, lack of big, cash-flush acquirers like Oracle, MS, etc. that eat up a lot of startups, a lack of 'flexible 1->n workforce' - ie the kinds of staffers that know how to go with a growing company and help it get established (this is a big ingredient of 'secondary domain knowledge' missing everywhere outside the Valley), to more sophisticated kinds of financing, and finally even just the right cooperative kind of attitude. Despite the competitiveness, there is definitely a 'goodwill' in the Valley that doesn't exist in most parts of the world.
Elk would be much better in trying to help Europe understand and overcome structural limitations because they already have the money.
"We all know that one of the greatest challenges is access to capital". I don't recognize this. If I look around, there's enough money looking for an investment. Being risk-averse, lots of regulations and fragmented market are way bigger issues.
As a software developer in a southern European country, the current scenario is just appalling. Salaries have receeded to the levels of the worst years of the previous decade, and we are now forced to make less money with worse conditions than at our previous jobs, because there is nothing better available.
This is good news, but we need investment two orders of magnitude higher before we think about fixing this situation.
If you are an American or Australian thinking of moving to southern Europe, consider moving to a developing country somewhere else instead. The job market will be similar and life will be much cheaper.
Positive article. Ek is correct when he states the entrepreneurial spirit in the United States is quite absent in Europe. In fact, investing in "deeptech" startups is a preferable action in relation to this net worth. On the topic of net worth, why did he remark "We all know that one of the greatest challenges is access to capital." His net worth is $ 4.5 billion. Still, it is a noble venture of his to promote entrepreneurship in Europe(quality it substantially lacks).
IMO the whole VC model is totally ass backwards. Spend money on infra (direct thing we want) or UBI, and let actual demand drive the investment.
Whether it's innovation grants or QE-driven VC, this is just supply-side bullshit making Frankenstein unprofitable hypeups.
If materially content Europeans don't wanna buy more money, that's great! Just keep on reducing working ours until it's clear what needed to be automated, and send the engineers to work on that.
Too bad there is no website yet for his European moonshots investment venture. A couple of months ago, Sam, Max, and Jack Altman built something similar, "Apollo - Funding for moonshots" (https://apolloprojects.com/).
