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
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.)