
Why I’m giving up on Europe and moving my startup to China - jmillerinc
http://maxkle.in/giving-up-on-europe/
======
9oliYQjP
China's great until you have to go to court there and realize you're being
totally screwed over because your opponent has an "in" with the government.
There are countries like Australia and Canada that strike a nice middle ground
between too much and too little regulation, have decent, stable economies
right now, and solid relationships with China in the case you want to partner
with a company there. But I've heard too many horror stories from
entrepreneurs getting burned in China to want to put all my chips in that
stack.

~~~
3pt14159
Canada is a clear win. Set up a corporation in a single day. Fairly
straightforward taxes (not the lowest around, but still fairly simple).
Technical cities (Waterloo, Toronto, Vancouver, Ottawa). Zero corruption,
unless you're in the construction industry, but effectively nothing. Easy
employee termination (2 weeks pay without cause, 0 weeks pay with cause). Low
occurrence of lawsuits, especially medical, and much smaller settlements
(highest medical suit I've heard of in my personal circle was $100k, and it
was clearly deserving). Technocratic politicians usually win elections. Only
about 1% of GDP on the military (vs 2+% for most of the developed world, and
5% for the US). Easy access to American products and markets.

~~~
muhfuhkuh
To add to the win (and part of the reason why I'm planning to leave the US for
Vancouver ASAP):

* Tax breaks (such as the federal SR&ED[1]) for high-tech businesses. I believe Vancouver has the largest by province, especially if you're in entertainment technology (like special effects) or video games.

* They consider themselves not a melting pot but a mosaic of people; i.e., there is no jingoistic pressure from the bumper-sticker patriots for foreigners to join the suburban zombie horde and conform conform conform, aside from at least learning english or french. Plus, you can sort of feel a fondness (rather than a passing, almost aloof acknowledgement) of their natives (deferentially called "First Nations"). The culture is one of acceptance, rather than impatient urgence to adapt.

* There is an odd reluctance to trusting outsized corporations, especially from what I've seen in Vancouver. Maybe it's just me, or perhaps it's their culture, but where I am now in the US, there are miles upon miles of strip malls with the same 30-40 chains and/or big box stores (Best Buy, Wal-Mart, Bed Bath Beyond, TJ Maxx/HomeGoods, Olive Garden, Dollar Tree, etc.) and small business storefronts (aside from family-run ethnic restaurants) are almost non-existent. I see alot better mix of corporate behemoth vs. mom-and-pop shop in Vancouver. Could just be a big city thing (although, last I checked, NYC was looking more like a concrete version of a big-box store suburb rather than its "if I can make it here..." bootstrappy romantic past).

[1]Strategic Research and Experimental Development - <http://www.cra-
arc.gc.ca/sred/>

~~~
jarek
Re: third bullet point, it is definitely a big city thing. I haven't seen
Vancouver suburbs, but those of Toronto are not substantially different from
you would see in rest of North America, though perhaps not as bad as the worst
examples.

Hope you enjoy Vancouver!

------
yardie
Is it at all possible to change the title from Europe to Germany. Most of his
complaints are German specific and don't apply to everywhere in Europe.

Bureaucracy: I've heard regularly bad things about the German bundes. I've
heard good things about UK, Sweden, Romania, Hungary.

Labor: Whether you get it here or there the price of labor is only going up,
but in China it's going up faster. Programmers are expensive. I'm expensive.
If a better offer comes along that you can't match or even come close to I'll
be out the door faster than the computer can shutdown. (Of course with my 2
weeks-1 month notice first). Don't expect anything less from the chinese. I
don't know what you are working but have you ever hired anyone straight out of
college? Experience costs money and mistakes costs money. Just make sure the
latter costs less than the former.

Costs and Taxes: Depending on the European country you may not pay any taxes
on revenue while in the startup phase (generally 2 years). After that it's
country specific, the rules that apply in Germany don't apply in the UK.

Travel: Maybe as a German these things don't matter to you, but, as an
American, I find Europe to be fascinating, so many different cultures, so much
history, and its all packed in one half continent. When I speak to other
french or english friends about SE Asia it's generally "which beach should I
visit this week?". Little interest in the culture, history, or the language (I
love ordering food in thai, but that's all the thai I know). I think a lot of
people have a very romantic idea of what SE Asia is about but that's it. Plus
it's huge region, you need a plane to do all that traveling and those flights
aren't short.

It looks like you've traded one set of problems for another. I don't know what
the startup will ultimately be about but I wish you luck. Also be careful,
lots of people have startup ideas that fizzle out, can't get funding, or can't
get any promotion because it's not from the right place. One thing I've
learned about a company is that it's the people you know as well as the idea
that make it a success. If you are doing it in China, then have a chinese
focus because no one in San Francisco is going to care about it, until it's
too big to ignore.

~~~
rxin
While I agree with you for Labor and Costs and Taxes, I beg to differ about
the travel part. With all due respect, the knowledge you and your "french or
english friends" have about Asia is obviously limited, and equating them to
the culture and history of many Asian countries is ridiculous. It is like
saying "what does Europe offer other than museums?"

~~~
yardie
I don't think you read my comment correctly. The author was saying there were
more interesting places to see in Asia than Europe, then proceeded to list the
same asia-pacific beach circuit everyone else wants to go see. Maybe he really
is interested in those countries, maybe he is only interested in those
beaches. Most of my friends when they come back from SE Asia only talk about
the beaches and how cheap everything is. It's hard to make a meaningful
connection to a place on 1-2 weeks vacation.

------
sdfx
I really applaud your bold move and wish you the best of luck. But there is a
lot of "the grass is always greener on the other side" mentality in this post,
especially regarding personal freedoms and the bureaucracy/legal-system. I
wonder how the example of your friend (getting sued for defamation) would have
played out in China. How hard is it to hire good programmers in China? Does
anyone have experience about what to expect for 600$ a month?

~~~
patio11
_Does anyone have experience about what to expect for 600$ a month?_

I am in favor of hiring outsourced Chinese programmers over Indian ones: it is
possible to find ones with decent Japanese proficiency, which means that when
Tokyo discovers the latest... curious engineering choice I don't have to spend
a day doing the needful to communicate our displeasure about it.

We told our outsourced team to write four functions to be accessible via a
REST service, using RestEasy. I anticipated this to be approximately a 20 ~ 30
line job. Two weeks later, we received a scratch-built HTTP client which
supported precisely one verb and two handwritten serialization schemes, with
half the code containing precisely one comment in English by way of Babelfish
and the other half containing very literate English comments like you would
expect from code developed at a multinational with a legal department better
funded than the armed forces of of most NATO countries.

I pray your mileage varies.

------
drinian
I find your single example of "unfreedom" in Europe to be entirely
nonsensical.

Your friend was sued for defamation, and folded rather than take it to court,
in one of the fairest court systems in the world, where she likely could have
won cost plus damages if she had any evidence for her claims.

In China, someone might have shown up at her front door with a club -- and
that someone might have a police badge or work for the mayor.

Also, the Chinese legal system is likely more Byzantine than that of Germany;
it's just that it's not enforced. You're going to be in for a world of hurt
when the government shuts you down for not having some kind of license you've
never heard of.

------
stefanp
Dude, seriously... I can't believe it. Talking about freedom, comparing europe
and china ... Come on ! Is this a joke ?

Your friend is getting sued, so you move to a country where people are put in
jail for their political opinions ?

Don't invent stupid excuses, there's no need to. You're 24 years old and are
looking for opportunity, and China, despite being a bloody dictatorship were a
billion people work in slave-like conditions, is the new land of opportunity,
so you're giving it a try. Good for you.

But cut the ridiculous crap. You sound like a spoiled brat.

------
ww520
The taxes that German paid go toward the social benefits that the German
enjoy. What if you get sick in China? Who pay for the medical cost? When you
are out of work in China, who pay for the unemployment benefit? The statement
that students graduated from university being competent engineers is not
truth. You will find turnovers to be very high.

You are just trading one set of problems with another. I'm sure it will be a
fun adventure. Good luck.

------
jacquesm
When in China, do as the Chinese do. If you want to really get off the ground
there you'll need to partner with a local that knows the ways things are done,
which is not always intuitive from a 'westerner' point of view.

A friend of mine is currently going this route and there are a few other
HN'ers that are doing this, maybe you guys should get together somehow and
compare notes. That might save everybody both hardship and time.

~~~
maxklein
I would certainly love to meet other HNers that are going this route, perhaps
you could set me up. I've got two close and old friends of mine that are
locals and are collaborating with me, so that's good.

~~~
joshwa
I'm moving to Kunming in Jan 2010-- will be contracting for my former employer
but also working on startup projects, and hoping to employ some local
university grads to do some grunt work...

~~~
joshwa
(oh, just realized that it was you, max, who asked that q. ;) )

------
varjag
It reads incredibly naive, but I wish the author the best of luck. He should
however be prepared that drawbacks of Chinese way of doing business sometimes
outweigh its advantages.

~~~
freshfey
I don't think it's that naive. He mentioned several times that he has Chinese
friends and locals who will help him. A lot of the replies here have been
"don't do anything without a local" - that's exactly what he's not doing,
because he knows some persons.

~~~
natch
Oh, he has "friends." Well then, they must be perfectly trustworthy and
competent, and they no doubt play by his own ethical rules, and he has nothing
to worry about.

Yes, it is naive. But he'll have fun and learn a lot, so he should do it.

------
patrickg
"These rules are also very difficult to discover and very difficult to
implement correctly. From the situation with healthcare for your employees
through to filing your taxes correctly, the amount of paperwork is insane and
complex."

Sorry, but reading this is raising a question if the author of this blog
article has experienced this himself or just hearing about it. The bigger your
company is, the more complex tax forms and other things will become. But as a
small startup company it is very easy to do taxes etc. You don't even have to
fill out a standardized form for declaring your business income if you are a
small company (EÜR in Germany). I was afraid of all this as well, but starting
the company here is really easy, there are a lot of government/local
institutions that help you with everything, even the IRS answers your
questions if you have any.

I cannot judge on the other things, but they sound - as other said here - like
the other grass is always greener.

------
aaronkaplan
When you were growing up, the previous generation of German businessmen gave
up some of their profits to pay for your education and health care, and to
ensure that you grew up in a relatively safe and pleasant environment. They
did this with the expectation that you would in turn pay for the following
generation.

I wouldn't go so far as to say that you should be forced to perpetuate the
system. You didn't choose where you were born, and if you think the system in
place there is wrong you should be free to leave. But you've benefited from
the generosity of others, and now by moving to a country where it's cheaper to
do business precisely because it doesn't offer its people the same advantages
that Germany does, you're ducking out of repaying that debt. Have you thought
about other ways to pay it back? Or do you consider the previous generation to
be suckers for paying your way without making you sign a contract first?

~~~
fgf
Odds are his parents are net tax contributors, including whatever the state
spent on him. Only people with poor parents really owe what they got to the
state, as opposed to productive people like their parents.

------
eklitzke
There was recently an article on HN (sorry, can't find it ATM) about how to
create a startup in China. The typical route is to create a business entity
called a WFOE[1], which lets you operate your business in China as a
foreigner, and has some tax/legal advantages. The gist I got out of the
article and HN comments was that this can actually be very expensive and
difficult; the application fee is inconsistent, and especially if you try to
base the WFOE in a city like Beijing or Shanghai, in practice the cost can be
in excess of $100k USD (of course the alleged nominal cost is lower).

This is from memory, so it might not be entirely accurate, but if you're
considering starting a business in China you should definitely do some
research into how much it will really cost to create and operate your
business. There are some good resources on chinalawblog.com, and of course in
the comments of HN articles about the topic.

[1] <http://en.wikipedia.org/wiki/Wholly_Foreign_Owned_Enterprise>

------
zatara
My experience with surfing tells me that you don't paddle towards where the
wave has been, you wait and position yourself for the next one. The basic
assumption is very sound, in a global world economy repositioning may be very
interesting. I too agree that Europe is mostly dead for innovation and
startups, but China is probably over-rated and too much bubble-prone at the
moment (not to mention corruption, cultural shock, state bullying, etc).

From the big countries that will probably fuel the world economy for the next
50 years (China, India, Brazil and Russia), I would bet my horse in Brazil.
There are problems as well (education, poverty, corruption), but none of the
BIG ones (terrorism, crazy state rules, dictatorship). There is definitely a
trend (World Cup, Olympiads) and I am considering it as well, but timing is
paramount: you don't wanna be the first to jump ship and deal with all the
crap, but you definitely don't wanna be too late.

~~~
fauigerzigerk
I don't know much about Brazil but it would be the the first latin american
country without crazy excessive regulation.

------
mattm
I lived in China in 2008 and while I'm no expert on China, you will learn
quite quickly that some of your perceptions about China are not true:

\- In china, you can pay a programmer 600€ a month

Sure, for average programmers. For good ones, you are going to be paying the
same as elsewhere. A friend of mine there told me her brother was earning
nearly $500 US/day working as a programmer for a company and they even gave
him one week off per month. That would be a monthly salary of $500 x 5 days x
3 weeks = $7500

\- you have a wide pool of qualified people leaving university which you can
always pick from.

True but the Chinese educational system is very different from the "West".
Their educational system focuses more on memorization. Creativity and problem
solving are not taught very much. This is going to be a huge problem when
hiring programmers right out of university. They will be looking to you to
tell them everything they should be doing.

\- Also, in china people are more willing to travel around to find an
appropriate job than in Europe

Yes, I would say this is generally true amongst all classes.

\- Quite apart from the chinese programmers, it’s also easier to get foreign
programmers to work for you in china than in europe

Are you talking legally or just by the candidate's motivation?

When I was looking for a job as an English teacher, I went to one place and
they told me they were only one of two officially registered English schools
in the city. They told me that I would need a TESL (Teaching English as a
Second Language) degree, which I did not have, in order for them to arrange
the work visa. At the place I was hired, I still did not have a TESL degree
but they arranged the work visa for me no problem.

Yes, it is more of the wild, wild west but as a foreigner, you are not going
to be able to figure out the system very fast and it will cause you a lot of
frustration and wasted energy.

\- Important is that there are very low additional costs paid to the
government. In Europe, you could pay 1/3 – 1/2 of your profits as a small
company just servicing the goverment, China does not require this.

To be blunt, this is a very naive statement. Official costs might be low but
you're not factoring bribes and other unofficial costs into the mix.

While teaching English, most of my students were in their 20s and 30s so I
would often try to bring up topics of conversation for me to understand the
way business works there. Many students would tell me that they would hate
when government inspectors would come by as that would mean they would need to
pay bribes to them. It is also expected that companies need to lavishly
entertain these visitors, so in addition to the bribes, you are expected to
drop hundreds/thousands of dollars on dinners and drinks.

Many students would also tell me that their dream job was to be a purchaser
for a company. Some explicitly told me that this is because then they could
receive kickbacks. I also heard quite a few stories about people stealing from
their own companies. In fact, one story came from a guy who was just hired at
a company and the manager encouraged him to "take a little for himself." The
guy was uncomfortable doing this but he later found out that pretty much
everyone in the company was doing this and only the owners were unaware of it.

This is the mindset that you need to adjust to. Many people do not think there
is anything wrong with bribes and stealing from the company. If you are going
to pay them low salaries, they will find a way to make it up from you.

Anyways, I wish you the best of luck. You'll sure learn a lot. It would be
great to see a follow-up post from you in 6 months with your experiences.

~~~
yummyfajitas
_Their educational system focuses more on memorization. Creativity and problem
solving are not taught very much. This is going to be a huge problem when
hiring programmers right out of university. They will be looking to you to
tell them everything they should be doing._

Why do you believe this is different than in the US? While I've never hired
programmers right out of university, most of the students I taught in
university strongly objected when I demanded independent thought from them.

~~~
mattm
Sure, it happens in the US too. It's just more prevalent in China. When it
comes to cultural differences, you can find the same examples in every
culture. People steal from their companies in the US too. It's a matter of if
these aspects appear more or less than in your culture.

At least you were trying to teach them independent thought. Teachers and
parents do not do this much in China. The sense of hierarchy and obedience to
authority appears more in China so the teachers/bosses/parents take advantage
of this and just tell students what to do while students do not question them.
Again, this is all on a general level.

My opinions were formed by talking to people about it, not from my own
experience in the Chinese educational system.

~~~
shadowfox
> People steal from their companies in the US too. It's a matter of if these
> aspects appear more or less than in your culture

Is stealing from companies so prevalent in china? Has there been studies on
this?

------
charleso
Premature optimization is the root of all evil.

Your company is young and your period of profitability is relatively short-
lived to date. It seems unwise to have taken a business which appeared to be
working well and overhauling it completely to (possibly) reduce costs which
did not need to be reduced.

Do you have a 'plan-b' to allow you to quickly revert your company to its
previous state if things do not go as planned?

------
jerf
Make plans for when the Chinese bubble pops. I'm quite confident they are in
one, but regardless of your own feelings on that topic you can't rationally
put the probability of that at 0%. When it pops, I don't know what would
happen and there is another non-0% (and IMHO significant) chance that it might
not be pleasant to be a foreigner at the time, especially a Westerner. If
something looks to be popping I would make sure I could get the hell out of
there.

~~~
yardie
I don't think they are in a bubble. Atleast not one that's going to pop. They
have the advantage of developed and undeveloped markets. At the moment more of
their money is going to fund internal investments since foreign investments
have dried up. They have billions/trillions in soveriegn wealth funds so if
they need capital they can break open a piggy bank.

Hopefully, if they've learned anything is overinvestment can be just as bad as
underinvesting. If controlled properly they can coast on internal projects
until the US and Europe exit their recessions. Then things can go back to
business as usual.

------
adamsmith
having been in all three places, you should leave europe to start your
company. but move to silicon valley instead.

~~~
maxklein
I wish this were possible, but the difficulty in doing this is massive. If you
are not U.S born, it's QUITE difficult to simply walk in and start a company
in the U.S. And you'd spend a lot of time just solving those problems, and
have a lot less time to setup your company.

In comparison, I landed in china on thursday. Today is monday, and I have a
fully furnished office (with furniture I selected myself), an assistant and 25
interviews with programmers scheduled for this week. The business papers have
been submitted, bank accounts have been setup.

This all goes really, really fast.

~~~
starkfist
_I wish this were possible, but the difficulty in doing this is massive. If
you are not U.S born, it's QUITE difficult to simply walk in and start a
company in the U.S._

How do all the Chinese/Korean/Indian people in the US do it?

I often read on Hacker News about how difficult it is to start a software
company in the US. But then I live in Brooklyn and people who don't speak
english are always starting laundromats, bodegas, fruit stands, hardware
shops, restaurants, and so forth. 3 out of the 4 businesses on my block were
started by FOB immigrants. The only one that wasn't is a bar.

~~~
desigooner
I don't know about Chinese or Korean communities but a lot of the indians that
you mention primarily come through via family ties.

One person gets here (alone or family) and files for immigration papers for
their immediate relatives, starts working here (usually at an establishment of
a relative or a person from the same community), makes enough money,
transitions to setting up a new business and the someone else takes their
place at the previous establishment. That's how the motels and 7/11,Dunkin
etc. chains are run ..

This book had a nice description of this phenomenon.
[http://www.amazon.com/Dhandho-Investor-Value-Method-
Returns/...](http://www.amazon.com/Dhandho-Investor-Value-Method-
Returns/dp/047004389X)

~~~
prototype56
That's usually the case for DDonuts and Subways but Indians who create high
tech startups are usually the ones who stood in line for a greencard (
sometimes for decades ).

------
Tichy
"There are so many little ‘unfreedoms’ in Europe"

I must admit, China would have never crossed my mind as the country of
freedoms. But then, I've never been there. Also, I weigh some freedoms higher
than others - I don't like that the Chinese government has the freedom to
shoot me...

~~~
albahk
The odds of being shot by _anyone_ in China unless you are comitting a violent
crime is far less IMO than in the US.

~~~
Tichy
So all the death sentences are just for violent crimes? What about free
speech?

------
chrischen
Actually to maintain a western standard of living your costs will probably be
more in china, since many western brand name products are imported (despite
being made in china). For example an apartment in shanghai can cost more than
one in NYC, iPhone costs more, etc.

Whatever you do, avoid street food.

~~~
mattm
Agreed with the cost of living. No matter where you go in the world, if you
want to live an American lifestyle - car, big house/apartment, western
products - you will pay just about the same as living in the US. However, if
you can live like a local, your cost of living will drop dramatically.

I never had a problem with street food.

~~~
chrischen
[http://www.chinasmack.com/2009/pictures/recycled-slop-
swill-...](http://www.chinasmack.com/2009/pictures/recycled-slop-swill-
cooking-oil.html)

Even my relatives stopped buying street food for me there. Generally it's
really unsanitary. Even street food in NYC is unsanitary, china is definitely
worse.

~~~
mattm
I've definitely seen horror stories like that before. Maybe I was just lucky.

------
mhd
Is the speed of hiring and firing programmers really that much of an option? I
know that Germany has some rather old-fashioned laws about that, so it's hard
to get rid of someone fast. But when we're talking about the usual startup
fare, the legal ramifications and a few months of pay are probably the least
of your problems.

Or to put it another way, if it isn't a problem, it's likely that your product
sucks.

------
patrickg
I wonder why almost nobody mentioned "ethics". Besides the arguments in the
blog post, is it morally OK to start a business in a dictatorship? I am not so
sure about it.

~~~
orborde
I don't know about anyone else, but I tend to make arguments on rational
grounds before I try ethical ones. Ethical arguments are less reliably
convincing because not everyone is in agreement about what is ethical, and
some people don't have any ethics at all.

------
sirrocco
What I don't like in the article is the accent that is put on the advantages
of the entrepreneur and little accent on the employee.

It's great that you can fire people when you want, but it sucks if you're the
one getting fired.

~~~
yummyfajitas
Create value and it will suck to fire you.

~~~
sirrocco
Yes, I know this - but life's not always fair now is it ?

In this particular case it might not be a problem since Max can keep an eye on
his employees , but as soon as you have a manager - you might be very afraid
to get on his bad side (maybe in an argument over something technical or a
complaint about your chair) for fear of getting fired.

~~~
hnal943
Life may not be fair in every situation, but if you were really creating value
for the company it shouldn't be too hard for you to find another job that may
even furnish you with a proper chair.

------
patrickgzill
I am assuming that the business Max Klein is in, is web-based? In such a case
it may not matter very much where in the world he is physically located.

------
johnconroy
he mad.

