In my experience (Belgian guy that dabbled a bit with EU VCs for my SaaS) Europe is very risk-adverse, and you either have to give up ridiculous amounts of equity for a little amount (i.e. 50k€ for a 25% to +50% stake) when not established yet, or have a recurring revenue of at least 50k€/month to get reasonable propositions.
Also, European culture is slightly different: most people consider a startup failure as something bad that you drag along for the rest of your career.
I've talked to some European VCs, and while they have big ambitions and are starting to gain momentum, it might take a while before the shift in the European mentality happens, and we end up with a thriving ecosystem.
Some hubs (Switzerland and Berlin for example) seem to be doing quite good.
I also assume a big difference with the US is the fragmented market: different languages, cultural differences, legislative constraints, market demands, ...
For example, in my experience high touch B2B sales are highly impacted by the language gap, in fact some countries (France, Spain, Italy, ...) are notoriously against working with people who don't speak their mother tongue. (On the bright side most of us Belgians do speak at least 3 languages, so it is still somewhat doable.)
As an alternative to VCs in Europe, you could look at some of the national and European subsidized tracks, although they tend to be mostly coupled to the trend-of-the-decade (sustainability is hot right now), and also require quite some effort to enter with no guarantees of success. (Disclaimer: it's on my to-do list, so no real experience with this.)
I would presume the combination of all of these factors results in people looking on other continents for better opportunities.
(I personally think Africa might offer huge opportunities in the coming decades, but that's for another time.)
Europe’s lack of competitiveness in tech has been true pretty much since the birth of Silicon Valley.
It was the same with the PC business back in the 80s and 90s. Here’s an article from the New York Times in 1996, struggling to understand why European PC manufacturers were all failing to expand outside their home markets:
https://www.nytimes.com/1996/10/07/business/why-european-com...
25 years later, the story is the same. Europe missed out on most of the big business opportunities of the internet, fell behind and lost the smartphone revolution, is largely missing from the top names in the app store, failed to create an internationally relevant social media company, etc. etc.
However, I wonder if this could be an inflection point. Covid has dragged everyone into the future kicking and screaming. Meanwhile Europe is looking grossly undervalued due to a lack of tech exposure. European stock markets have been essentially flat since 2009 while American stock markets have 3X’d (pre-2009, European returns basically tracked American ones). Tech salaries in Europe are now just 1/5th of what they are in Silicon Valley. It seems like the pendulum has swung a little too far in the American direction.
It took Europe 40+ years to become internationally competitive with Detroit in auto manufacturing during the 1900s. Maybe this is the natural cycle (of course, this time there’s no wars to use as an excuse).
If I were ever going to place a bet on Europe in the last 40 years, now would be the time.
The challenge with any argument about SV vs Europe is that SV is so sui generis that it's actually SV vs more or less everywhere else including the rest of the US. Really, including the rest of California. What's the startup ecosystem look like in Fresno?
SV is so atypical that it's almost impossible to draw any kind of conclusions from particular factors and anyway is now probably self sustaining - VCs go there because tech talent goes there and tech talent goes there because VCs do. Very hard for anywhere else to break out in that scenario in the absence of substantial barriers to either talent or money. Barriers to employment are just high enough (not just visas, but leaving friends and family behind etc) to prevent a lot of European developers from moving for the higher salaries but not so high that a lot of top founding talent goes there.
I do wonder if the temporary barriers of Covid might have triggered something, we'll see.
While I'm no big fan of the big cities (Berlin, Munich, Hamburg) we see lots of successful* startups happening and gaining track there and in smaller towns.
University cities are often doing fine, too and are slowly but surely developing startup structures and everything else.
To me this looks more promising than concentrating all startups and money in one place and measuring everything against that.
I've also heard that the German banking system is much more geographically diverse, with many smaller banks giving business loans to businesses in their immediate geographic area. If that's still the case, it would make sense that there would be less concentration of capital and therefore entrepreneurship.
That's true, too. There are lots of so called "Volksbanken" ("peoples' banks") and "Sparkasse" ("savings bank", see this: https://en.wikipedia.org/wiki/Savings_bank) which act very local and are sometimes rather small especially in the more rural areas.
Nevertheless those banks are often the biggest lenders to local businesses and startups in need of credit (my brothers' wife is working in such a department) although that is not VC like in "burn it if you need to". German banks are more risk averse, at least the most of them.
That's exactly my thoughts recently. As it appears, American venture capital simply can't build a big social media company that doesn't end up being a surveillance-driven, ad-ladden, privacy-hostile, user-despising, fake virtue-signalling behemoth.
This is why social media ToS are typically concise and clear: "License agreement: We spy on you and sell your information to anyone that's interested, press accept to continue".
Agreed. "Selling user data" is just a nice catchphrase thrown around by people who didn't look into how FB ads really makes money and how they really work.
Just at a cursory evaluation, it makes no sense, because if Facebook sold the data directly, why would advertisers even need Facebook after that? All of those questions can be answered by simply playing around with FB Advertising UI for less than an hour. But hating on FB is fashionable now, regardless of whether the reasons are justified or not. Given how there are plenty of legitimate issues with Faceebook, it really annoys me when people throw around these types of questionable accusations against FB without even looking into the subject matter first, because it just weakens legitimate criticism of FB.
Back to the topic at hand, you are totally on point about the billboard analogy. If you are a business, you don't go to Facebook and say "give me the data of these users", you say, for example, "here is my ad, show it to users who are in this geographic area Z between ages X and Y who are into surfing and indie music". And then you get to see stats about interaction of those users with your ad, like "users who are closer to age X than age Y are more likely to click on your ad", so you draw a conclusion that your ad doesn't seem to appeal as much to the upper boundary of your target age range, maybe you need to tweak the ad or split it into 2 separate ads (one for users between ages X and (X+Y)/2, and another for ages between (X+Y)/2 and Y). At no point you get any additional info on the users, and neither do you get any individual user info, just anonymized aggregates.
Hey guys, I just wanted to say that it looks completely natural that a short sarcastic post about social media in general gets followed by two suppressing posts that very specifically defend Facebook, completely have each others backs and also delivers a little ad hominem.
If you are trying to imply that I am shilling for FB or a FB employee, you are welcome to DM me, and I can send you an email from my work address as a proof (which is another known big tech company, one of those that don't have their own ad platform, so I literally have no horse in this race).
Did you find anything factually wrong with what I said about how running FB ads works? Because you just accused me of being a shill, but you weren't able to provide a counterpoint to any factual things I've said in my original comment.
Also, I am not defending FB. I literally said they have plenty legitimate things to be criticized for. But with baseless accusations about FB like the ones higher in the thread, they just cause legitimate criticism to get washed out and get lumped along with baseless accusations.
If we’re talking Zurich specifically, the difference would probably only be 2-3X less than FANMAG/ETC. London salaries are high too (not Zurich levels from what I’ve seen), but that market is now separate from the EU.
But most places in Europe with tech scenes and outsized VC investment, eg. helsinki, stockholm, berlin, amsterdam, etc you’re talking 5X less salary than in Silicon Valley.
Given the tech talent in those cities, there must be some arbitrage opportunity there.
Is it fair to compare salaries in one specific place in USA versus the average European city ? Seems like you are comparing max salary in USA vs average salary in Europe.
Seems fair to consider max salary in Europe when comparing with SV.
There should also be arbitrage opportunities for cities outside of SV in USA.
Specially since EU has a (mostly) functional social security system, which the US doesn't. It takes money to run that system and I'll happily take a pay cut to the gov if people in need are getting "my" money.
My grandfather pays 0€ in insulin, compared to the 100s$ in the US thanks to all the kids who don't want to share their money with people that actually need it to survive.
But now I'm comparing economic systems (more community driven vs full capitalist), and this discussion can go on forever, so I'll just end it here.
> helsinki, stockholm, berlin, amsterdam, etc you’re talking 5X less salary than in Silicon Valley.
Certainly not for the same seniority level (and not considering stocks, which people in those places do get)
Or you're telling me that someone making 60kEUR in Berlin could be transferred to SV and their salary would immediately flip to $300k on the payslip? (no promotions/stock/etc)
Realistically, more like 2x, 2.5x, 3x if we're stretching it for the mentioned cities
> Given the tech talent in those cities, there must be some arbitrage opportunity there.
Absolutely ;) Though on SV salaries you're getting paid for the less PTO, the stretched hours, etc so probably not such a big arbitrage
> you're telling me that someone making 60kEUR in Berlin could be transferred to SV and their salary would immediately flip to $300k
Yes. And it’s not just FAANG anymore. That’s a totally reasonable comp at about 30-50 different companies in the US right now (and the number of companies paying this comp is increasing along with the size of fundraising rounds).
Also, in my experience nobody is working 60+ hour weeks at these companies (the bigger the company, the easier the job), so it’s not like anybody is being overworked to get this money.
And what kind of person you think we are talking about here for 60k in Amsterdam? Is that a senior Software Engineer? Or even an engineering lead (responsible for a bunch of other SEs)? Because 60k per year in Amsterdam equates around 4.6k per month + holiday pay. I can hire at most a medior - senior SE for that in AMS (let's say 4-5 years of experience) and I really don't believe a person with that kind of experience would earn 300k a year in SV.
I'm 3.5 years out of CS undergrad, successful in my niche, receive good reviews at work. Graduated top 10% of my class and was hired before I ever graduated.
I make 78k in a medium cost of living US city where a 3 bedroom 2 bath house costs $450,000 1 hour away from work. The same home costs $700,000 within 20-30min of work.
Something overlooked a little bit is student loan debt many American devs start with. I have $50k in student loan debt myself.
We make more than in Europe, but most of us aren't drowning in money like people from SV would make you think.
> you think we are talking about here for 60k in Amsterdam? Is that a senior Software Engineer? Or even an engineering lead (responsible for a bunch of other SEs)?
Yes, at most I'd say at that seniority level, that's why I'm questioning it. (300k is probably at a higher level AND with stocks, etc)
(Though I mentioned Berlin, not AMS, which has slightly higher salaries)
Well the question that might be cynical is: do they actually mean it?
Like saying, "oh at least you tried!"/"good for you!"/"you learning something right!"?, this is something I get.
No one ever asked, "What went wrong, what went right?" / "What did you learn, what would you do differently?" / "Next time you'll try something hit me up!" / "I have something I'm working on, check this out, are you interested?" / "We should talk more about this"
You may say, those are different types of persons, one shows support the other shows curiosity and drive - but in the case of the latter they actually care and are "invested" in your failure as well to the point they'll give up some of their time and attention to ask about it, so they can learn something from your experience as well.
What we lack in Europe aren't patting on the back, it's actually to value the experience of failure.
Having worked at both, the main difference between SV and Europe is "share your failures so that everybody can learn" vs "downplay your failures so that you look better".
Maybe related but as a contractor I've noticed that working with EU clients there's so much posturing, pretend professionalism, suit and tie kind of guys throwing around titles, red tape etc. US clients are way more casual and to the point.
Definitely not true in the UK, definitely not true in The Netherlands.
Not true among my Paris based friends, had dinner with some of the latter which included someone who was on their third startup and a few Sciences Po / X types who have the kinds of jobs you would expect and the latter were extremely interested in the what the former was up to and how the startup ecosystem worked. Definitely not a sense that they thought having tried and failed to start a tech company was somehow a bad mark - and realistically grande école types tend to be very status conscious so would have picked it up if it was there. I can't speak to what older people, people outside of Paris would think of it. I would guess much more conservative.
We're probably about the same age, so let me ask you this: have you ever heard or seen a European person (who failed a business he or she depended on) carrying his or her failure like a badge of honor?
In my experience with job interviews (from both sides of the table) people tend to be ashamed, or they assume you should be ashamed about it.
As for me personally, I like sharing both my failures and my successes, and receive a lot of positive feedback about this. But when I ask them to do the same, I usually get a "I wouldn't want to ruin my reputation.".
> We're probably about the same age, so let me ask you this: have you ever heard or seen a European person (who failed a business he or she depended on) carrying his or her failure like a badge of honor?
> What they are (require to be) ashamed of is tricking the system or running illegal businesses that lead to the aforementioned failure.
Are you trying to say that most startup failures are due to their illegal nature? If that's the case for majority of failed startups in Europe that you are familiar with, that's kind of telling (whether it is in regards to startups in Europe in general or just the European startups that you are personally familiar with, that's a different question).
I'm trying to say that people are not ashamed of failure in Europe and that the only kind of failure that is a shame is using illegal/unethical tactics.
In several European countries what Uber and Airbnb did to local markets is considered shameful.
Also the term disruption is considered a bad thing.
To put it in more simple terms for you: people are more important than profit.
That's why, generally speaking, quality of life is better than US average, despite lower average salaries.
Also Europe is not a monolith, so whoever talks about Europe as a single entity is probably wrong.
Barcelona, for example, has a very active startup scene and it's 10 times better than any city in the US.
There is also a tendency is the US to consider a success becoming a monopolist or a unicorn, that's not what many startups here aim for.
There is also a huge language barrier, Americans usually show no or little interest foe anything that is not in English.
It's highly probable you don't have frequent contacts with people speaking (only or mainly) French, Spanish, Danish, Hungarian, Italian , German, Dutch etc. etc. but most Europeans do or know someone that can work as a trait d'union.
there are many startups working in the green economy here that are doing great things, by working together instead of fighting each other.
You can't paint all of Europe with the same brush, and whilst most of Europe may be in the single market, they're not the "same" market. In my experience, there is a high variance amongst European countries (Eurozone or not) in risk-aversion vs risk-tolerance, which seems to be echoed in some studies/observations[1]. I've never really been able to see what the main factors that determine this may be -- I used to think it was correlated to how much each country participates in the global economy, but that would explain UK and Spain, but not Germany.
I also find it a bit narrow-minded to think of Europe as risk-averse simply by judging their attitudes towards tech investments. Spain (where I'm from) definitely appears to be one of the most risk-tolerant EU countries when you look at certain sectors and our foreign investments in infrastructure and other types of construction, but one of the most risk-averse when it comes to tech. If I were to speculate (and I stress, speculate), it seems to be influenced by the type of markets with capital that we have access to: the Middle East, Africa, and Latin America. This is also the case when you think of partially publicly funded projects that are quite risky -- especially in countries that are politically unstable like ours. A perfect example would be renewable energies, which would have been the great success story in Spain until new legislation practically killed any hopes of it being eventually profitable.
Germany, on the other hand, seems risk-averse _even_ within their own main domains (industrial engineering, automotive, etc). They also have a big global presence and prestige/reputation, but I have never lived or worked in Germany so I wouldn't even dare speculate why this is the case. I've often seen the finger pointed at bureaucracy, but other countries with similar levels of bureaucracy and hurdles don't seem to be as risk-averse. Different cultures, I reckon.
The UK (where I now live) on the other hand was one of the most risk-tolerant countries in the EU (until their departure) when you think of tech investments. The fact that they speak in English and have a strong services economy helps in that respect, I would guess. I'm definitely not an expert.
Interesting line of thought; another POV that emerged during a late-night discussion a while ago, was to look at the percentage of people that work in public service in each country.
We assumed that, the closer the percentage was to the median, the more risk-averse people would be (assuming the median represents some optimal size for the government).
We never validated the idea though; I'm quite curious to see how that would hold up after verification.
I used to think so as well, but someone pointed out to me that Germany has a similar % of public sector jobs as the USA, and Spain is not that much higher, and all seem to be shrinking. Belgium on the other hand seems to be stable at 21% (21.5% 2013, 21.1% 2019) so it would seem to fit the hypothesis :-). I still think that it's a contributing factor, but perhaps it's more of a symptom and less of a factor.
I suspect it’s a mistake to treat Europe as homogeneous in this respect. As a startup founder in the UK, this does not match my experience in any way at all.
My experience also correlates with this, raising in Europe and from YC.
The European ecosystem is focused on well-understood business models, and is less likely to fund something disruptive and novel. It's probably epitomised by the Samwer brothers' cloning American businesses like eBay.
If you want to build a well-understood Enterprise SaaS company, I think the European ecosystem will suite you fine.
If you want to try a crazy idea, like renting out Air beds to people in your living room, you're better off in SF.
Keep in mind a unified "European" VC and startup market doesn't really exists, it's dozens of smaller ones instead. Only a handful are large enough to support a world-class ecosystem (France, Germany, and the UK) and out of those only the UK is really culturally friendly towards startups.
> Also, European culture is slightly different: most people consider a startup failure as something bad that you drag along for the rest of your career.
This is a major issue in Japan too AFAIK. Working for a big corporation or the government is still considered superior to entrepreneurship, and failing at a company brings a lot of shame.
Without permission to fail, it's impossible to succeed. As Elon Musk put it: "we're gonna have to blow up some rockets."
I've wondered if the most significant innovation of the past 500 years and the one that led to our historic technological and economic explosion of progress wasn't just limited liability companies.
In the past to do anything big you had to either be already rich (vastly limiting the pool), find a patron (again a small pool), or borrow money. In the old days borrowing was basically loan sharking. You'd end in prison, dead, or at best shamed and broken for the rest of your life if you failed to repay with interest.
All that meant very few people could take risks, so very little innovation.
Limited liability allows vastly more people to take risks. Yes it does lead to abuse, fraud, and waste, but it also leads to a huge amount of innovation since people have permission to take risks and fail and then recover.
Failure at something like a startup still comes with costs. If you (the founder) are not a narcissist or a psychopath it will probably come with emotional costs like a feeling of failure and a feeling of having let people down. But it doesn't ruin your life, blackball you from your career, or land you in prison.
Let's not overlook that about 98% of US states have also been trying to replicate the success of California, with decidedly mixed results. And the successes are all connected to giant economies like New York or research clusters as in MA.
Founder from Berlin here.
€50k for 25% is really off-market, even if you are a first time founder (at least in Berlin, Paris, London and hopefully all across Europe).
And IMHO having worked in a startup (even if you aren‘t the founder) is seen as a BIG career plus if you join any corporate afterwards.
I would say we have a thriving eco-system across Europe. Not at the level of SV, but still many big and meaningful companies with global foot prints being built every year.
Also success means something different here for the most part, maybe as a result of what you said above. It's more of a 'business' than 'startup' and if you're profitable that means you have a successful business. I think that big acquisition exit/IPO is a more of a wish/dream rather than a goal here
I am an American founder that accidentally built a company in Europe.
I hired my first person there, and through the path of least resistance, most of our 45 person team is based in Europe.
I believe I am playing 'business' on easy mode compared to European founders.
As an American founder it's pretty easy for my US company to pay my European team as contractors.
European founders have to comply with European employment law.
In the country a lot of my team resides, here are the rules:
1. ~50% tax on W2 employees (we pay none)
2. Ability to take 1 year of maternity leave, available on day 1 of joining a company. Up to 2 years if there are complications.
3. 32 days of PTO standard for entry level roles
Here were my rules as an American founder / company hiring in Europe:
1. No employment tax because everyone is hired as a contractor
2. Today we have a 2 month paid policy after 2 years in our org. We're hoping to improve this as our company becomes more financially secure, but the liability at this stage of our organization is significant.
3. We offer 38 days of PTO today, but for the first year we didn't have an official PTO policy.
Building a startup in Europe as a European founder is very, very hard due to the above compliance requirements.
This sounds really odd to me (UK-based, previously was contracting) — if someone is hired as a contractor, normally your company would be engaging their limited company as some type of consultancy arrangement.
So you wouldn't have any maternity leave or paid time off at all. In fact, from the contractor's point-of-view, you'd want to run a mile from these things as if the revenue believed you were a de facto employee (since you're getting company benefits) your tax liability would balloon.
But see no reason that a European founder couldn't hire freelancers/contractors in the same way that your company does.
This sounds too good to be true. I don't know about other countries in Europe, but in The Netherlands it is definitely illegal to have a contractor work in employment conditions. I.e. you're not allowed to give a contractor set work hours, not allowed to specify how they work, not allowed to prevent them from outsourcing the work, etc. If you do those things, and the tax service finds out, or a "contractor" gets sick and decides to demand you pay them sick leave, you're in deep trouble.
The same in Germany. The people can be easily classified as bogus self-employed (scheinselbststaendig). The company would have to pay social security contributions retroactively up to 4 years. Furthermore, the 'contractors' could sue their way into employment.
Also, workarounds mentioned elsewhere, like employment as temp by utilizing intermediate staffing companies, became widely known in time also to government agencies. Most companies will fire/replace such staff after 18 month max for this reason.
In Spain if you hire full-time contractors long term they can be considered full-time employees by law. There are ways around this such as hiring through temp agencies, hiring part-time or rotating them. But trying to do “FTE as contractor” is risky.
As contractors, your employees are liable to pay those taxes themselves. Hopefully you’re paying them at least 50% above market rate, so there’s no problem.
If you’re hiring contractors long-term in Spain for over a certain amount of their time (~80%) for the long term you can be liable as a full-time employer and may be obligated to change their contracts to full-time. I know it’s the same in other European markets and I doubt there are any exemptions for non-EU employers whatsoever.
All other conditions you describe are the same for a European or Spanish company hiring contractors, as long as you are not meeting the conditions for full-time employment and therefore disguising FTEs as contractors.
I’m curious as to what countries you are operating in that allow these kind of exemptions compared to local EU entrepreneurs. IANAL but 99% sure these exemptions do not exist in Spain at least.
EDIT: This case study [1] by a Spanish law firm indeed claims that a company based outside the EU (UK post-Brexit) can be tried in Spain for false contractor relationships.
An European founder could do the same, hire only self-employed contractors.
However, e.g. in Germany, that's only possible if the contractors work independently and have more than one customer long-term.
I guess someone will notice eventually?
This is rather a counter criterion. Government finally found out several years ago, that there is a new non-significant class of well-earning people - IT contractors - that can be legally milked by abusing laws, created ostensibly to 'protect' the weak.
FYI since the laws in Europe are most likely similar to the laws of Canada on this, it can get your "contractors" into big trouble with their tax agency.
I know a lot of people do that (work as contractor but they are employees), but if you bother to read the tax code this is illegal. It takes one audit to be reclassfied and then you have to repay the taxes your employer would have paid. This can be retroactive for many years after employement has ended.
> As an American founder it's pretty easy for my US company to pay my European team as contractors.
if they are spending most of their contracting time at your job / are considered your subordinates, it's very very illegal at least in france (https://bpifrance-creation.fr/encyclopedie/micro-entreprise-...), and I'm very very tempted to report you to the relevant authorities.
> European founders have to comply with European employment law.
There's got to be a better way. By default or by design, the different rules in USA and EU both advantage larger companies, thwart smaller companies.
To encourage small businesses and new business formation, we must synthesize the good parts of USA's (former) entrepreneurial spirit and EU's labor protections.
Universal healthcare and German-style childcare would be huge boons for USA's startups and small businesses. Maybe reverse the decades long decline.
Something like UBI coupled with looser labor laws (easier to fire, layoff) could allow EU startups to be more nimble, more competitive.
While this is somewhat true, most of the European founders I know work around this by hiring freelance senior contractors and employing heavily subsidized juniors.
As a European founder you can do exactly the same. You can hire contractors in Europe and won't have to pay employer taxes, mandatory PTO...
I don't think there is any difference if your company is in the US or Europe. In both cases however you have to be careful that your contractors don't get reclassified as permanent employees if you hire them for too long (more than 2 years in a row and 40 hours a week is risky).
You're cheating the system, though. The system exists in order to support the way of life in these countries, by bringing your American employment attitudes to Europe you're not really building a company in Europe by any measure: you're building an American company. Your company is benefitting from the robust systems in Europe, without contributing. There are people you want to hire in Europe _because of people paying their share of taxes_. If you don't want to pay employment taxes, if you don't want to offer maternity leave... stick to America.
Personally, I think there is a strong argument to make for the value of America-style lax employment rules when it comes to startups, absolutely, but please don't bring those to Europe by gaming the system. Hiring people as contractors to avoid obligations is an age old way to game the system, and eventually you'll be caught and face penalties (unless you're smarter about it, so I guess my advice is actually: be smarter about it (don't announce it on HN for example!)).
I wouldn’t say he’s not contributing, I’d say he doesn’t have employees. Same would be true if he has his “team” on 1099 in the US.
Outside of any moral questions, the risk here is that the government may decide your group of happy startup contractors are in fact employees, and then you’re in for some massively distracting and expensive restructuring (at best) or legal sanctions and maybe losing your team (at worst).
So yeah, it’s easier, but that’s because it’s cheat mode, not because he’s American. You could use any offshore company for the same thing.
There are lots of laws over if your employee is a contractor or full-time. Many, _many_ companies butt heads with local labor boards who decide that a given employee is actually full-time and thus entitled to a bunch of different protections.
Many regulations either don't exist in Europe or are under-enforced. For instance, Germany did not outlaw insider trading until ~2003. There's a strong chance that an American hiring a contractor in, say, Romania will simply not be prosecutable while an American hiring a contractor in America will be. There's some legal term of art for this that I can't recall off-hand.
You have to admit though that maternity leave from day one which often comes with obligations like keeping the position open (so you have to fire someone who has already being doing the job for a year+ if the mother comes back) is a ridiculous requirement. Sure, it makes sense for a huge employer where those things are just cost of doing business and you can afford to hire enough people to cover for that. It absolutely kills small businesses though.
Fortunately people find ways around those laws and governments in developing countries don't care much but it puts you in position to fight the law from day one.
The culture in Europe needs to change if we want people trying their hands on small businesses more.
I own a small successful business. I will never hire any employees. That's why I avoid working with anyone in my country and will not open an office. Frankly I would prefer to close shop and enjoy the rest of my life in an unproductive way than to deal with the burden of government regulations when it comes to employing people.
Hiring someone just for them to go on maternity leave after 2 months and then coming back (or not, not allowed to ask when) in 1/1.5/2 years and me being forced to find replacement while keeping the position open? Seriously, for a company which would have at most several employees and where everyone has their distinct role?
The problem (and this extends to many policies in the US as well) is that it’s deceptively easy to offload the cost of welfare benefits to employers. Paid maternity leave is just welfare for new mothers. I’m not saying that’s a bad thing, but it is what it is. But paying someone not to work is welfare.
However the government handing out welfare checks is not very popular. Even taking welfare brings up images of government cheese. Often middle class people won’t avail themselves of these programs even if they qualify.
So from a policy perspective we solve this by making the employer administer the welfare program and call it an “employment benefit”. Now it goes from a source of shame to a marker of status. Benefits are something enjoyed by middle-class professionals.
This all works out fine for large companies, where the law of large numbers makes these costs statistically predictable and easy to hedge. But it’s a huge unmanageable risk for small business. If you’re in a four person startup and one person goes on paid maternity leave for a year, your company is pretty much dead.
Well, in Europe you don't pay the whole salary during the leave (details depend on the country but it's something like you pay for one month and then the government pays from social security fund) you just have obligations like keeping the position open.
This has many problems though anyway as it just offloads most of the financial burden but doesn't offload the organizational one. It also doesn't make any sense to make the employer responsible for maternity leave as it doesn't make sense to make them responsible for healthcare (which Europe gets right). If you're someone who wants to pay above market rates then you're a target as maternity leave depends on your salary. The problem is difficult because we need a system in which having children at young age isn't a career suicide. Maternity leave as implemented in Europe is definitely not it as the incentives are to first get to a decent salary and only then have children.
One idea which I think makes sense is to allow children to have % of their taxes to go to their parents directly. Allow children to opt out to punish especially shitty parents. This I think aligns the incentives pretty well (to have children while young, to take good care of them, to educate them etc.)
Since when is "the system" the thing that is supposed to win? To me, it seems more like the system is cheating the startup.
There's validity in working around or gaming systems so that a company has a chance of growing and thriving. The tactics used (contractors instead of employees, etc.) are perfectly legal. People are getting paid per an agreement, and they spend their income in their country/society, which disperses the benefits. A startup saddled with year (or two) long maternity leave and other such extreme requirements would make the risk too high.
These regulations create a regulatory capture situation where only large, established, or very well financed businesses can survive. Kudos to the agile and clever startups that find ways to make it, regardless. One should be on the side of the people, not the system.
I usually forgive Americans for not knowing this, but 'the system' is something we've built up together to help ourselves and organize ourselves. Unemployment is a statistically calculable fact, so we can plan for it.
That systems tend to start living their own lives is of course the challenge, because indeed the point of this system is not the system, but to help ourselves. Like democracy, it requires indefinite maintenance, upgrades and changes. But that does not mean it's bad, it means people are a hard problem.
As a sweeping generalisation: Europe has chosen to value more stable employment opportunities with lower potential upside over highly volatile employment opportunities with larger potential upside. America has chosen the opposite. You're speaking as if there's an absolute truth in which model is better, but as we're finding in this very thread, American people are coming to Europe to build businesses (and Europeans are going to America to do the reverse).
I won't rehash what brnt has said in their reply, but I will echo their sentiment: The System is me and my friends and my family and my co-workers working together to provide healthcare and education and security to each other. I pay taxes for that reason.
Does cheating the system just mean you disagree with it, or do you maintain that he's breaking the law? Or that regulators aren't aware of this practice? I'm not sure what cheating means here: usually it means breaking the rules, but that's not happening based on what he described.
What he's doing is not legal, and legally tax avoidance, in a lot of European countries.
What he's describing is known as a disguised employee/employment, and they or all their workers (probably their workers if they're operating as 'companies') might suddenly find themselves open for massive tax bills for unpaid employment taxes in their country.
On top of that, this setup is open for the disguised employees being able to sue the company for unpaid holiday + benefits.
Probably never get noticed at that scale though. And can't say for certain as he hasn't listed the country, but if this was happening in the UK, I'm 90% certain it'd be classified as tax avoidance in the UK, and all the 'employees' would be on the hook for something like 14% employer national insurance contributions. The big problem HMRC would have is that no-one's paying the employer NIC, and as his employees are officially the companies, they'd be on the hook for it.
Every country within Europe is different in some capacity so it's difficult to say with absolute certainty that he is breaking the law -- the language in my comment was vague because I'm mostly addressing the spirit of his behaviour, rather than the law. That said, certainly in my European country he would be open to issues with the tax authority if he were to attract their attention.
The United States is very permissive when it comes to employment, the majority of states could be described as "anything goes" (relative to Europe) and so dodging employment taxes is pretty much fair game... whereas in Europe a lot of regulation exist very specifically to address companies organising their business in this way. I'd be very surprised if he didn't face significant fines (I don't know of any examples of this behaviour leading to prison terms, but significant fines are very common and serve as a deterrent).
The 1 year parenting leave makes me think Norway? Or anything Scandinavian at least… here in the Netherlands it’s something like 16 weeks for women and 7 days for men? It was 2 days last year but it recently changed.
This is basically failure in European startup ecosystem that companies needs to go SF, but good for Y Combinator and SF that they can attract best talent.
It's not "European startup ecosystem", it's basically "European societies". Imagine how well would SV work if being involved in a bankrupt company (co-founder, major investor, C-suite) made banks refuse to talk to you again for 10-20 years. I believe that was the case in France. You wouldn't even be able to open a checking account, never mention any credit again.
I think it is set of different problems Southern Europe and France are almost hostile to entrepreneurship and startups. Nordics, Baltic and Benelux countries mostly nail culture and regulatory frameworks but small markets slows down starting and scaling business. Personally I don't know what is problem with Germany probably something to do with how German is organised around manufacturing.
In my experience the UK has a very simple and friendly system and, I believe, London has grown into an European centre for startups and funding. France makes things overly-complicated and costly for the sake of it, not just for entrepreneurs but for everyone, this is very puzzling (and I was born there!).
Wonder how Ireland will be affected due to their status as an English-speaking country with major business operations already there that's uniquely able to hire effortlessly from both the UK and EU.
AFAIK banks are legally required to open checking accounts on demand of any resident in Germany, no matter their background. But I am not sure, just a rumor.
Not just a rumor. If you speak the right incantations at the counter, invoking the relevant legal reference, a bank in Germay will be obliged to give you a "basic bank account" with no credit facilities of any kind. There's also nothing stopping them from making that bank account the least attractive bank account you've ever heard of by charging insanely high fees and prohibiting you from using the regular ATM network, restricting you to just a few machines in a restricted geographical area.
> If you speak the right incantations at the counter, invoking the relevant legal reference
What are these?
> There's also nothing stopping them from making that bank account the least attractive bank account you've ever heard of
Why would they want to? What do they actually risk?
> restricting you to just a few machines in a restricted geographical area.
Officially area-specific or just through the specific kind of machines accepting specific kind of cards being absent outside of it? I've heard of the unreasonably complicated system of types of cards in Germany: normal debit, "electronic cash" etc.
For the Netherlands. There is the concept of the 'basic bank account'. This is an agreement that safeguards that everyone can have at least 1 bank account. [1]
You can't open an account like this if you already have an account. You can't pick the bank either. You're obliged to go to your last bank for this type of account. The price is fixed at the same level as the normal accounts. You can even have this account if you're homeless and don't have an address. Typical requests are done via support organisations rather than yourself, but it is is possible to do it yourself as well.
At least in the Dutch situation I don't see them introducing deliberately unattractive pricing or conditions once you have the bank account. There is a burden to open one though.
That said, I don't think bankruptcy would usually result in being account-less. More likely, you can't get a credit card, mortgage or other consumer loans, which can be inconvenient. Personal bankruptcy (as opposed to an LLC imploding) also likely means a few years of handing over all your income above minimum wage to the government in exchange for nullifying your outstanding debt. (Note that the Netherlands mostly runs on debit cards, and that most people don't have a credit card).
> > If you speak the right incantations at the counter, invoking the relevant legal reference
> What are these?
"Basiskonto nach § 31 Zahlungskontengesetz" [1], and tell them that you are aware that the regulator BaFin has a specific process in place for complaints about banks who refuse an application for a basic account [2]
> > There's also nothing stopping them from making that bank account the least attractive bank account you've ever heard of
> Why would they want to? What do they actually risk?
My theory is that it has to do with outdated technology in the German banking sector that implies that it's actually impossible for them to make absolutely sure through technology that your account can't end up in overdraft.
> > restricting you to just a few machines in a restricted geographical area.
> Officially area-specific or just through the specific kind of machines accepting specific kind of cards being absent outside of it? I've heard of the unreasonably complicated system of types of cards in Germany: normal debit, "electronic cash" etc.
The reasons are a bit difficult. In Germany there is the "Sparkasse", which is a network of small banks local to municipalities and where the municipalities have large ownership stakes (so it's weirdly-state-owned). They are legally separate but share a backoffice. Last time I did research on this the situation was this: The Sparkasse-network has more than twice as many ATM-machines than all the other banks (like Commerzbank, Deutsche Bank, foreign banks) combined. A normal bank account at one of the branches of Sparkasse will give you access to their whole network. But a basic bank account will only give you access to the ATM machines by that specific branch, which ends up being highly restrictive geographically. If you get a normal bank account from, say, Commerzbank, you can use the entire network of non-Sparkasse-ATMs, i.e. use all Commerzbank-machines countrywide, plus all Deutsche Bank machines, etc. But if you get a basic account, they'll restrict you to just the machines by Commerzbank, which are few and far between, but, at least that would give you some semblance of country-wide coverage. ...long story short, life really sucks with a basic bank account, even if you don't want/need credit.
It's a pretty regular occurrence for the political PR machinery to try to get stories published that basically say that (thanks to some politician's doing) European region X is now going to be the next silicon valley. ...none of that ever actually filters through to the daily realities of a European entrepreneur. ...omg, the war stories I could tell, being an E.U. entrepreneur who was dumb enough for large stretches of time to believe the hype.
Not only is it not just hearsay: In some European countries it's even enshrined in law. For example in Austria, the leader of a company ("gewerberechtlicher Geschäftsführer"), including sole traderships, partnerships, and legal entities, cannot be a person who, within the past X years (can't remember what X is) has been in bankruptcy in any country in the world. The authorities check the relevant Austrian register before giving you a business permit. For a person who has not lived in Austria for that stretch of time, you have to bring proof from the countries you've lived in, that you're not in bankruptcy there either. For some countries, this can be pretty hard to prove, as the relevant registers may simply not exist there. I remember it being a major bureaucratic hurdle when I moved from the U.K. to Austria (being an Austrian native) to start a business there.
Norway even has a special term for someone who has failed in entrepeneurship multiple times -- "bankruptcy jockey".
You won't be banned from starting a business from a single bankruptcy, but if it happens multiple times and/or creditors end up losing significant money over it, you can be barred from starting a business for two years.
I don't think these rules often directly prohibit a promising entrepeneur from starting a business, but it's pretty obvious that the whole culture provides a strong chilling effect.
I understand being banned from <<starting a new business>> after failing repeatedly. A bit extreme, but ok, it makes sense a bit. But he was saying he was banned from <<getting a bank account>> due to that.
It is extremely unlikely that you won't be able to get a simple checking/deposit account at a commercial bank just because you went bankrupt.
I think he is confusing "interdit bancaire" and bankruptcy. If you end up being put in the interdit bancaire file, yeah life pretty much sucks and most bank will refuse to do business with you. But having a company that go bankrupt doesn't mean you will be put in the file. You usually need to do things like stop paying your loan to be put on this file.
I likely am. The idea to try a startup in France was very short lived for me. Every card was stacked against me (many particuarly against me/my ideas, not everything is a reflection on society), so I moved on after just a few conversations.
Considering the insane amount of funds France will literally gift you just for opening a startup there, I find that very surprising. You have to be good at paper pushing and speak the language however. That much is true.
Yeah, my French is not what it should have been and I contracted an allergy to the French bureaucracy. Quite a bit of the whole thing is on me, no denying that.
A good friend is doing it now and it's not like he's swimming in cash though.
Yeah, to do any business in France, your really need to speak French. The French bureaucracy is not that bad (when you compare it to some of its neighbour) but in the same vein, it will be impossible to deal with it if you don't have a good grasp of French.
France cares a lot about French and its honestly an issue many time (and I say this as a French person). Things are changing slowly, but anybody serious about moving / opening a business in France should be serious about learning French. You would be astonished by the number of engineer, investor, and in general any business person, who have an awful level in any other language than French...
I'm fairly sure you have the right to a bank account under French law, but banks have the right to refuse you as a client.
This means that if you get rejected as a client by enough banks you can go to the Banque de France and they will select a bank that is then obligated to provide you with an account.
I don't get why they'd refuse you a checking account, even if you were the founder or one (or several bankrupt) companies. Would they be worried you wouldn't pay their crummy fees? :-)
I don't think this is the case, in France or anywhere.
And I'm certain it's not the reason SV creates more startups. The real reason is that this is where startups were invented, so for historical reasons the concentration of capital and talent is extremely high.
What exactly do you think "startup" means? To me, the word just means a new small business. Such things have been around for centuries, before the USA even existed never mind SV. That's true even if you take startup to mean specifically those taking large outside capital with a goal to grow large quickly (which I don't think is necessary, a bootstrapped startup is still a startup IMO).
Exactly. If you live in a safe and secured society why would you want to do something risky like creating a startup. One of the biggest success for the EU startup scene was just copying what is done in California, avoiding the risk of trying out new ideas.
On the top of that, regulation in the EU is much worse than in the US. This does not help either.
People in European societies still feel need for some thrill. I think the problem is a bit different. Language and cultural barriers are still meaningful. I am a Czech and I know shit about selling to Romanians or Portuguese customers; even if I was able to pay for professional translation of my products AND customer support in 20-25 languages, my cultural ignorance would be still a significant hurdle.
USA and Anglosphere in general is HUGE. China is HUGE. The closest thing to that in the EU is DACH (Germany, Austria, Switzerland), about 100 million rich people speaking the same language.
But precisely Germany is a fairly technologically conservative country with median age close to 46, where people are much less keen on new technology than in, say, Estonia; ironically, the fact that older systems work reliably reduces the drive to adopt new ones.
And smaller markets like Estonian or Danish one will not provide you with as much growth opportunity.
If you're selling a technical solution, why would you even touch cultural differences? I bet you'd be successful if you could afford the extra costs of translation/marketing.
Cultural differences hugely affect the marketing, and in some cases the market; you couldn't sell a tipping management app to somewhere without a tipping culture, for example.
Well that is why Linux is successful around the planet. It really does not touch any soft cultural differences. Geeks and their needs are similar everywhere.
Something like a food delivery corp. on the other hand must know precisely what to expect from which holidays etc. There is a fairly successful Czech startup called Rohlík that expanded to Hungary, Austria and Germany, but every added country is a challenge.
Yep that same scary regulation that is intended to hinder businesses from selling me food with hydrogenated fats, overloaded with sugar or salt, that same regulation that forces auto manufacturers to not create exclusive overpriced repair consortiums for basic parts, and that generally makes life a bit less corporately tyrannical.
Shareholder value is only nice if you're a significant shareholder, and it is disproportionately nice to those shareholders at the cost of others, when lobbying overtakes regulation.
> If you live in a safe and secured society why would you want to do something risky like creating a startup
Safe and secure unlike... California? The founders of US startups are already in very advantageous positions in life. In fact that security helps with taking business risks which is the opposite of what you're claiming.
It seems to me that this article is saying exactly the opposite of what you say.
The article is about how Europeans, that live in that "safe and secured society", are creating more startups than before.
>>"On the top of that, regulation in the EU is much worse than in the US. This does not help either. "
If you check those start-ups you can see that most of them are joining Y-combinator but they stay in Europe. So, also the opposite of what you are implying.
EU regulation generally doesn't have "de minimis" exemptions. If you have something that takes a flat cost of €10k or €100k to comply with, that burdens small businesses much more than large businesses, and a startup is a small business in the beginning.
Theoretically if you want to build an electronic product and sell one (1) unit of it in the EU you need to give it the full works of CE compliance. I don't believe UL/FCC are quite so onerous? And certainly this doesn't apply to random items in unmarked packages from China.
So it seems it's not that clear cut that you need it (and it can be self assessed). But yeah, if it's an electronic device that plugs into the wall or connects to WiFi probably yes - or at least the modules that do that)
The difference isn't having a huge market with a more-or-less homogeneous culture on consumption and language, it is that Europe is a safe and secured society, completely different than fucking California.
Not sure what is your point here, you brush off a lot of the real nuances of the problem to throw an overgeneralising jab onto 27 different cultures...
Depends what you are looking for. If you are in your 20s / 30s you might want to have higher salary and less social safety. Later in your life this changes. Many Europeans (including myself) went to work in California for higher wages and less taxation. Some of us wanted to have family and moved back. Quality of life is subjective above a certain threshold.
No. European "companies" look to the US and see that you can lose billions of unlimited investor money for years with no repercussions and no negative consequences for the founders.
Now "successful" European startups want in on the money.
there is also a lot of money thrown in businesses in the form of EU subsidies. YC gives a miniscule amount of money ($125K), i believe european entrepreneurs can (and do) milk naive US VCs for a lot more than what YC offers.
The YC data is clear about one thing: if you remove the need to travel to the US , a lot more europeans flock to YC. We 've become a terribly sclerotic continent and it's very visible now. I believe things will get a lot better after we hit rock bottom.
> there is also a lot of money thrown in businesses in the form of EU subsidies.
And that money is mostly a complete waste. EU money comes with so many strings and baggage that you are either big enough and have the resources to deal with it (and thus you don't actually need it), or you are small and make it your entire business model to live off EU funds and not produce anything of value ever.
That's unfortunate, and also ironic - most of those strings weren't there initially; they were added because of "entrepreneurs" stealing the funds and producing nothing of value.
The root of the problem is that the EU funding system is just a bad way of going about funding innovation. The US private VC model is superior in every way.
How is it superior? I linked to a description of YC's top companies: they lose hundreds of millions of dollars a year.
Aren't successful companies supposed to, you know, earn money and turn a profit? Or is superiority is strictly in the amount of money thrown at unbelievably unprofitable companies?
To be fair, US model produces both. The same regulatory and cultural burden that makes EU an infertile ground for money-burning billion-dollar scams also makes it harder for decent companies to create useful innovations[0] in general.
I feel we could use a little more easy capital in double-digit million € range, but retain or even improve the friction above low triple-digit million €. Basically: experimentation is good. Unchecked growth from zero to multinational behemoth is not always so good.
There are two hard problems though:
1. At the lower end, it's very hard to distinguish a legit experimentation from a scam. We already have too many fly-by-night small businesses preying on the population. I'm not sure how to fuel more legit startups without making the latter problem worse - as we can tell from the EU grants, adding more strings tends to kill good businesses faster than bad ones.
2. At the upper end, big corporations are geopolitical weapons. Nations and blocs like EU are always in conflict with others; currently, it's mostly economical warfare. This means that any country or bloc tends to be happy if they can spawn a billion-dollar company.
--
[0] - Where by "useful innovation" I mean one that's ultimately yielding a net positive value for the society, and is not purely a business model innovation like it's common with so many hot tech companies these days.
First, you have to compare EU today with US of the 00s when there were actual new ideas in the market and profitable companies. The current US startup market may have been taken over by grubby marketers who market themselves as entrepreneurs, they may be buying their way to user growth, and may fail, but it doesnt matter. Because the big guys have cornered and monopolized every fundamental infrastructure , are already bringing in tons and tons of cash, and basically guarantee the cash flow towards that ecosystem ... forever. Whatever money is burnt in AWS ends up back in the same SV ecosystem. That's sustainable.
Now, take for example the EU's H2020 system that funds partnerships between academia and industry. There are a lot of fancy proposals in there, with fancy names and fancy-sounding tech. And most of them deliver exactly what they describe in the proposal. If you look closely, most of the projects are minimum and viable, but they are not products. And when the project ends, there isn't a push to continue the project if the partners don't want to, even the bureaucrat in charge of it may be a different person at that time. While on the other hand , a VC acts as a permanent point of reference who has long-term-interest and investment in seeing the idea bear fruit.
> The vast majority is fuelled by litrerally endless investor money with only two modes of operation: corner the market (that is, outlive other competitors who don't have such an unlimited amount of money) or get sold.
Yes that is the business model and business is good. As opposed to EU which is a wasteland where nothing grows. Lots of businesses are built to be sold to larger businesses. It makes sense and there is nothing wrong with this model. As for investing in money losing enterprises, so what? If investors are willing to do it let them.
> Yes that is the business model and business is good.
Not necessarily. A "wasteland where nothing grows" is obviously bad, but... there's a reason we don't let nature to optimize crops for growth, nor do we do it ourselves. We grow crops for food. We literally care about the fruits of their labor. And so is with businesses - the social value of a business is in the prosperity it creates for the people.
The SV growth model, at the extreme, is overfitting the "growth -> acquisition" path - often creating negative value for the society, by disrupting an existing market with an offering that's too good to be true, subsidized by infinite investor money, and then leaving a gaping void after burning out or getting acquired. This would be like a crop plant that first releases poison into the soil, killing competing crop species, then sucks out all nutrients and dies without producing edible fruit. It's not something you'd like to grow on your field either.
> Yes that is the business model and business is good. As opposed to EU which is a wasteland where nothing grows.
Endlessly burning through infinite cash isn't a good business model. And it ultimately results in a significantly worse wasteland than the perceived wasteland of Europe.
Where in Europe you have lots of companies in lots of different markets, in the US you have continuous price dumping that drives away any and all competition (unless that competition has more infinite money), and preys on people.
For example, the explosive growth of gig economy is the direct result of this "good business model". And who woulda thunk it, but predators like Doordash are predictably a "YC Top Company".
> Where in Europe you have lots of companies in lots of different markets
In Europe you have lots of companies in lots of limited local markets unable to grow out of them because they have no funding options available to them.
> The US private VC model is superior in every way.
You do realize that most of the innovation the US pride itself about was in fact directly funded by the state through DARPA, the NSF, NASA and military contracts: Fairchild Semiconductor, the internet, Google, Space X, Moderna...
The government isn't funding a lot of those things now. Also, Europe has access to the new technology that came out of the US government funding so it is irrelevant to bring it up. Europe has access to the internet, they have a space program, etc.
Actually I do think it's very relevant to point that most of the most valuable US innovations were state funded as a reply to someone asserting the absolute superiority of private VC funding. The USA is very interventionist for a country promoting free markets as close to a religion.
I am not entirely sure what this has to do with Europe however.
> there is also a lot of money thrown in businesses in the form of EU subsidies.
Show me any subsidy in the EU that supports a business losing 500 million dollars a year for 10 years.
> We 've become a terribly sclerotic continent
No. The US has become reckless with money, and the concept of a successful business has been entirely substituted by "but this unbelievably unprofitable company with no chance of ever earning money has an imaginary market cap of 50 billion dollars".
> that supports a business losing 500 million dollars a year for 10 years.
That assumes that those startups get investment from outside YC , which is not what i m talking about.
Also, the EU just approved a giant stimulus package which will be used to support a lot of failing companies, just take a look at the air carrier subsidies around the continent.
It's true that US is subsidizing unsustainable businesses, probably in the hopes that something good will come out of them regardless. But that doesnt change the fact europe is repelling entrepreneurs.
> That assumes that those startups get investment from outside YC
Yes, they do. And that's the main difference between the EU and the US. Especially with YC startups expect to get significant investments after the incubator.
> Also, the EU just approved a giant stimulus package which will be used to support a lot of failing companies
You do realize there have been two years of pandemic?
> But that doesnt change the fact europe is repelling entrepreneurs.
What's your definition of entrepreneurs? A company that always loses money "in the hopes that something good will come out of them"?
The EU is a complex multi-lingual multi-cultural market unlike the uniform US market flooded with unlimited investor money. All of the "successful" incubators, investors, startups would fail miserably here, outside their near-ideal conditions.
We have to prevent deflation so money is cheap, and the tech sector is one of the first in line to get it. We have it good folks, cash in while the music is playing.
If the headline had been "only 1% of Y Combinator startups are European", there would have also been a comment on how this was a failure of the European startup ecosystem ;)
The term "european" is meaningless.It's all just bunch of countries working under some framework.
As a european there's no shared success if one european company succeeds.And because of that there's no synergic effects that would help "european" companies to grow and improve.
There is some though; there are little to no restrictions for one country to use a service in another european country, or traveling to visit it. No currency conversion needed either.
Except when you need to transact literally anything outside of the SEPA system, and then you have conversations and bank fees and very little control over either.
Sorry, no. Source: American traveling around Europe right now with my American vaccination papers. Getting Yet Another PCR test tomorrow, thank you very much.
IMHO the main issue in Europe is the lack of a common market. So many different languages, cultures, and local regulations creates A LOT of fragmentation. If you’re in the US or China you have access to a massive pool of potential customers as soon as you release your product. In Europe that’s not the case, all your branding, marketing, or other content will have to be adapted to a specific language or culture. So instead of the EU dream of a EU market you have to take in account lot of small markets with their own specificities.
This is a fantastic innovation if it takes off and if the charges aren't prohibitive; it has the potential to obliterate predatory payday lending. In a world of free instant automatic electronic payments, there's no good reason to delay salary payments until the end of the month.
> it has the potential to obliterate predatory payday lending
Say you earn about $200 over expenses in a given month. Your car suffers a problem that requires $1000 to repair. This is 5 months of income, but you probably want to repair the car at the beginning of the 5 month period rather than the end.
How much of a difference will it make if your paycheck arrives daily rather than semimonthly?
The point is that it's for people that are living hand to mouth. They're not saving a cent, living constantly on the brink. For them it makes a huge difference to get paid a few days earlier.
But this is also why even free payday loans seem to me like a very bad long term idea - if you are living that close to the edge, how will you ever be able to get out of debt?
I don’t quite understand the benefit. Surely, if you have to take loans to get over the month, this won’t change anything as your overall income is still the same. I guess for unexpected expenses, you can bridge the gap one-time by borrowing from future-you.
Cashflow, the same as for busineses. If you don't have one months' spare cash as a "float", then you may have to resort to lending at the end of the month.
But again, this reduces next month’s income. So you’ll end up having the same problem every month. Unlike with companies, employed people’s income doesn’t vary between months (or maybe it does for some?).
Yes it’s a trap which is why a lot of people see it as predatory particularly as the interest rates are (used to be?) obscene. Payday lending companies can become a leech on poor people.
This looks a little different to the usual structure of payday lending but still has the issue you point out.
employed people’s income doesn’t vary between months.
As you mentioned for some it does (overtime etc.), but even if 'gross' income doesn't vary month to month, expenses can vary massively and so your total 'net' income can be very different month to month.
The solution to being poor is to have more money, yes.
(You're going to reply to this with "just cut expenses", to which I can pre-emptively reply that some of the people in this situation are already choosing between food and heating. I'm going to pre-emptively cite the link from the other branch of the thread, https://www.fca.org.uk/news/news-stories/tougher-rules-payda...
> We found some firms were using [continuous payment authority] as a debt collection method and that some borrowers therefore had difficulties paying for essentials such as food and heating.
Even if you assume that their income is entirely fixed, I don't think you believe that all of them live exactly as cheaply as they possibly can.
I'd say if you can possibly survive without the heating, then it's better to do that for a while than borrowing money and end up even more dependent on your salary, being a week away from ruin rather than a month.
In short, payday lending is a short term solution that make things worse in the long term, even when it is free of interest.
I wonder if you actually read what I wrote. I haven't written a single word of complaint about the poor. I am complaining about payday loans, I don't think it's a good idea, even when they are interest free. The long term effect is likely to be mostly harmful.
I haven't claimed to have a solution, what I am saying is that ideas that increase saving are better.
I did not saying anything like "the solution is to not live this close to the edge." That is the intended effect, not the path there.
But if I were to invest in a startup in this space it would be one that helped people save. Some random ideas that I think are all better than payday loans: gamifying micro saving, lowering food costs by selling simple staple foods in bulk, access to discounts on soon-to-perish food.
Also: financial literacy education. This is a problem even in well off countries, it's just that people are doing fine anyway because the bottom tier is still quite ok here.
You haven't been poor. There is nothing more obvious than that when someone's first suggestion is to turn off the heating, and their second one is to "gamify micro-saving". And you might be well-intentioned but your posts come across as incredibly arrogant because of that.
This isn't a gotcha, or some gatekeepy way of saying "you can't fix poor people's problems if you haven't been poor". But your first step would be to try to understand why a better access to earned wages is so important and impactful that it is, in fact, potentially worth giving up a bit of money for. Having access to cashflow is a problem you can face at any level of income. Surely you understand it? (I mean, you're suggesting "financial literacy education"; I can't imagine you don't understand how important this can be…)
For example right now, if you're poor and your situation calls for it, you might be taking a shittier job with worse pay just because it pays every two weeks instead of every four weeks. So having instant access to your wages may let you take a better job, and have a FAR GREATER IMPACT THAN SAVINGS.
The above services by the way aren't payday loans. Those are extremely short term highly predatory one-time loans bound entirely to the customer. Services such as the ones Cashflow and Revolut are working on are more akin to: "you've already worked this much, so you have access to this % of your salary already", and they're bound to the employer.
I'm not saying financial literacy wouldn't help, but fixing the perverse mechanisms that are happening when you're, as you said, close to the edge is what would have the most impact without requiring changes from the people themselves. Instant wages have a potential to kill the payday loan business and that's a big deal, even if it's not perfect.
I don't think I have ever claimed to have been poor. On the contrary I grew up in a a very well to do place. But that's irrelevant.
> So having instant access to your wages may let you take a better job, and have a FAR GREATER IMPACT THAN SAVINGS.
This statement is completely baffling. Clearly, if you had 2 weeks worth of savings you would not need to take "a shittier job with worse pay just because it pays every two weeks instead of every four weeks". Imagine if you had two months worth, or six.
These are definitely payday loans by the way, the salary is not "yours" until you've received it, which per the contract happens at the end of the month, or week or whatever. So by definition you are borrowing money, even if there is no interest.
I agree that it's very positive if this can kill off traditional, predatory pay day loans, but I don't agree that this is a long term solution. And honestly, I think it will only increase the need. If people start living week to week instead of month to month, they will be MORE likely to need payday loans.
If you take any poor person in Latin America, you seem to imply that their situation, where they are constantly 5 days away from starvation, is inevitable. Remember, we are not talking about people that can't work, these people can and do work, they just don't have any savings and live hand to mouth. I claim that in the vast majority of these cases, the situation is avoidable.
Just consider the mathematics of it. What would it take to be 30 days away from starvation instead of 5? It's enough to lower your expenses by 8% for a year. Or 1% for 8 years. Or working 8% more for 1 year. Or starting to work a few months earlier.
If you have your own family, well then clearly the situation was entirely avoidable. You could have waited a few months to start the family, that would have solved it.
Your comments are rooted in assumptions and an incorrect view of the low-income world, which makes a reasonable discussion impossible without preparing a whole lecture; and I don't have that patience for just a random internet commenter.
All I ask is you stop presuming you know how to fix this when you're so deeply, deeply unaware of what the problem even is.
As constructive as this is, perhaps you could elaborate on what the problem is that keeps millions of people in a situation where they earn _exactly_ as much as they need to survive, year in and year out?
Of course I can not expect a private lecture from you, being a mere random commenter, but perhaps you could point me to some of your existing lectures or writings that explain why I am so wrong?
According to your profile, you are a software developer in Switzerland that likes to figure skate. Maybe it's my prejudice, but it doesn't sound like you would have much personal experience of third world poverty either.
> As constructive as this is, perhaps you could elaborate on what the problem is that keeps millions of people in a situation where they earn _exactly_ as much as they need to survive, year in and year out?
This isn't the claim, and one reason it's difficult to have a conversation around this with you right now.
I'm not in Switzerland but I do like to figure skate. I'm also very well off nowadays. I was raised by divorced parents, spending some years in the middle-class world, and quite a few more in Greek poverty (ranging from mild to severe, and at one point back in France, inches from the street).
I managed to get to where I am today thanks to safety nets and various EU benefits (as well as some amazing blind luck). I'm under no illusion that I'm both greatly priviledged and extremely lucky. But I do have some relevant experience, yes.
Interesting, I didn't know payday lending was a thing in Spain.
Delaying salary payments serves two purposes: first, to benefit the employer by keeping your money in their account longer; and second, at least culturally, to force you into a budget cycle "for your own good." People accept these things culturally but there's no reason they should have to.
When I moved to Germany from the US I was a little shocked to discover that I would be paid at the end of the month and not every two weeks. They took the cyclical paternalism one step further, and of course also forced me to give my employer an interest-free credit line. It would be fun to have the leverage to challenge that, but I did not.
What do you think the ideal payment frequency would be?
For wage labor it seems like you should get paid daily at least, but then why not hourly? Might it even be motivational to see your net pay (after deductions of course) dropping into your account every hour, and you get a notification in some app?
For a salaried position I think I'd be quite happy getting paid by the week, especially if my actual salary were set on a weekly basis so I always got the same amount.
(The minimum granularity is probably that of your timesheet or timeclock, and then we get into how oppressive the surveillance involved in policing that can be, bathroom breaks, screen-watching software, etc.)
I don't know if those are the historical reasons, but I'd say the main reason now is that it simplifies book keeping. Just like even the most solvent companies don't pay their purchases right away, you pay on invoice and batch things.
> When I moved to Germany from the US I was a little shocked to discover that I would be paid at the end of the month and not every two weeks. They took the cyclical paternalism one step further
> In a world of free instant automatic electronic payments, there's no good reason to delay salary payments until the end of the month.
Salaries are usually paid in arrear simply because employers want you to deliver the work first then get paid. When you call a plumber do you prefer to pay upfront or only after he has fixed the leak?
Then, of course the number of payments adds accounting overhead for everyone, so monthly in arrear seems like a good compromise.
While I agree that it's a good innovation, it's fighting the symptoms of low wages and high cost; people living paycheck to paycheck. Wages should go up and cost of living should go down; people should be entitled to having financial reserves, to not be afraid of not making it to payday.
Israel does extremely well with startups and exits notwithstanding cultural differences (e.g. weekends are not the same with the rest of the western world). What are the big differences between what Europe does vs. what Israel does? Risk-aversion may be one aspect but I doubt its the only one. There are probably a whole lot of factors.
As a solo european with a secret startup Ive been working on for a couple of years ( Im semi retired young ) where should I apply for an assessment for possible seed? Is enrolling onto ycombinator still the best way?
It's definitely good to see a strong increase in entrepreneurship in Europe, though I do wonder whether the Y Combinator program can keep up its quality and value-add as they themselves scale up.
It's one thing to have weekly sessions with experienced leaders like PG and others, and a small enough cohort whereby you can swap stories and learn as you progress through the program. On an industrial scale though, you lose a lot of that intimacy and you have to default to cookie-cutter approaches. Learning via mentors originally, vs. learning in the classroom currently.
I know many founders use Y Combinator as a badge of merit to increase their chances of follow-on funding, but there is an interesting question of how much value-add it now adds to the original type of startup team (young, scrappy, more inexperience than product-market-fit and customers).
The weekly video sessions that StartupSchool offers are great. I participated in them during the first batch when they were led by YC alumns (I think now they're just self-organized), they basically just consist of people taking turns telling the group what they did last week and what they plan to do this week. In retrospect it was really great thing and helped me enormously to focus and make progress. Especially as a solo founder it's hard to keep focused as there's no one to "yell" at you if you're getting distracted, so having a group of peers that are in the same situation and that provide a bit of social pressure and encouragement was really great. Also, people would sometimes share stuff they struggle with, which also helped a lot to put things in perspective as startup life can get pretty grim, so it helps to laugh about failures with other people.
I'm wondering if this actually implies that Y-Combinator is willing to touch even with a 10-foot-pole companies incorporated in jurisdictions where company law works very differently from the U.S. For example in Germany & Austria, if a startup is organized as a GmbH ("Gesellschaft mit beschränkter Haftung"), regulations around transfer of shares and minority shareholder protections are a lot heavier than for U.S. corporations and AG ("Aktiengesellschaft") with freely-transferable shares come with a high regulatory burden in all kinds of areas.
My working hypothesis until obtaining information to the contrary is that the answer is "no", and that "European" in the article basically just means "London".
You can be from anywhere but your company has to be incorporated in United States, Canada, Singapore or the Cayman Islands. If you already have a GmbH and want to join YC you have to incorporate a parent company in one of those jurisdictions and make your existing company a subsidiary of that new parent company. YC will then invest and take a stake in the parent company rather than your 'real' company
That’s pretty cool. It’s also a testament to the lack of capital for new stuff in the EU, which is sad, but at least something is being done about it, and if it has to be foreign investment.
I will list some problems / challenges Europe has:
- different languages: even with simple SaaS you might need to do a demo.
- different cultures: marketing in Spain is different than in Germany, different in Poland, etc. so market is very fragmented. Even Germany is much more diverse than people think (the joke is: Balkan starts just north of Munich)
- much more complex laws
- recruitment is harder: candidates are much more conservative.
- cultural similarities: entrepreneurs are considered as a failure
I think it’s a sign of the times: the pandemic, the “everything is remote”… and of course the weak European ecosystem compared to the Americans’.
Really happy for all the European founders that made it.
I'm rooting for something like this too. As for the carbonfact and their focus on promoting eco brands, I'd like them to present an alternative metric if/when possible.
Measuring each individual product is complicated and doesn't have to reflect brand's entire emission output. If a company is 10% manufacturing and 90% marketing then the methodology used by carbonfact will be underreporting the emissions.
Some brands (inc. Nike) are already disclosing their total emission. Others might be forced to do so in a near future by regulators. Would it be possible to have a metric calculated simply as 'total emissions / units sold'?
There are cultural and political barriers that segment the European landscape like cracks in dry desert soil. From miserly jealousy to parochialism, to excessive (and in parts corrupt) bureaucracy, to very preliminary economic / financial / legal integration, to (justified) lack of trust between European states and long-held rivalries, its all here in abundance.
Maybe YC can see past all that malaise into a brighter European future where startups scale and change the world :-)
... or maybe its just funny money that is being spend on a deep out of the money option.
I wouldn't be surprised. Daniel Dines started UiPath in Romania but for it to become truly global, he had to move to NY and even incorporate the company there.
I don't want to insult Romania (and I actually am looking forward to an opportunity to visit it, there apparently are many spectacular places, nice people and delicious cuisine), but AFAIK it's rather far from the best places in the EU from the economic/social points of view, no surprise many people prefer to emigrate on a good opportunity. I would be more curious if founders still move to the US from Spain, Germany, Switzerland, Netherlands, Ireland etc.
If they want to do business in the US, they often do; the US market is very protective and isolationist like that, for some reason. An EU company doing business with an US based company is a lot easier.
Also, European culture is slightly different: most people consider a startup failure as something bad that you drag along for the rest of your career.
I've talked to some European VCs, and while they have big ambitions and are starting to gain momentum, it might take a while before the shift in the European mentality happens, and we end up with a thriving ecosystem. Some hubs (Switzerland and Berlin for example) seem to be doing quite good.
I also assume a big difference with the US is the fragmented market: different languages, cultural differences, legislative constraints, market demands, ... For example, in my experience high touch B2B sales are highly impacted by the language gap, in fact some countries (France, Spain, Italy, ...) are notoriously against working with people who don't speak their mother tongue. (On the bright side most of us Belgians do speak at least 3 languages, so it is still somewhat doable.)
As an alternative to VCs in Europe, you could look at some of the national and European subsidized tracks, although they tend to be mostly coupled to the trend-of-the-decade (sustainability is hot right now), and also require quite some effort to enter with no guarantees of success. (Disclaimer: it's on my to-do list, so no real experience with this.)
I would presume the combination of all of these factors results in people looking on other continents for better opportunities.
(I personally think Africa might offer huge opportunities in the coming decades, but that's for another time.)